Jim Andersen, President of  NMS Properties, Inc. in his address to NAIOP-U in Santa  Monica provided a sharp contrast on apartment renovation versus Jerry Fink of the Bascom Group in a previous presentation.  Bascom does mostly suburban apartments,while NMS specializes in urban apartments primarily in Santa Monica. When renovating a suburban apartment building, Jerry Fink of Bascom advocates focusing on exterior improvements first (curb appeal)  and installing common area  amenities.  Paint the building, improve the landscape, upgrade the signage.  Then put in the amenities:  tot lot, movie theater, gym, club room, roof deck, pool, spa, fire pit.  In urban areas, we call these apartment buildings: Mc W Apartments.  Bascom’s concept is that apartment dwellers do not want to leave the building at night and on weekends.  The apartment complex becomes a self contained fortress city where all the residents needs are met.   

NMS designs apartments for the young urban dweller,

Olympic Studio Living Room

who especially wants to enjoy the amenties of the city and surrounding neighborhood.  These dwellers are less likely to have a car and want to work and play near where they live.  NMS spends most of its time thinking about designing the interiors for efficiency, quality, and style and less time on exteriors.  NMS provides higher interior finishes and does not provide nearly as many common area amenities as Bascom.  Where Bascom provides a vinyl wood looking floor, NMS would provide an engineered wood floor or high quality wood like laminate floor.  NMS’s client appreciates style and quality.  Other finishes include stainless steel appliances, in-suite washer dryers, stone counter-tops, custom designer solid wood,  cabinets, and high end lighting.

NMS  reviews every inch of space with excruciating deal to make sure no space is wasted and to produce smaller unit sizes than its suburban counterparts.  A hallways may house the kitchen, dining table, and desk.   To reduce the impact of its smaller size spaces, NMS tries to provide a higher ceiling.

Young urban dwellers use their apartments as  crash pads and spend more time at work or utilizing urban amenities.  When they eat at home, it is likely to be prepared food and  in front of the television. NMS urban tenants work close by and have less furniture.

The new growing young urban dweller has different preferences than its suburban counterpart This demographic group demands a different apartment development and renovation strategy.

A recent article in the San Francisco Business  Journal announces the successful conversion and lease up of a marble clad mid rise to creative office.

Hot tech firms take space at renovated 550 Kearny – San Francisco Business Times.

Why did the owners of this building convert and market itself as creative office?  Because that is the space that is leasing and selling.  As many parts of the economy grow slowly and even  shrink–new media and technology continues to grow.  New media and technology desire creative office.  In many cities–office owners and architects are spending hours at the drawing board trying to figure out how to position their properties as creative office.  550 Kearny was neither in the best area for tech or was the best building for a conversion.  It was, though,  a poured in place concrete building with decent ceiling height.  But most important–it was in the middle of a city going through another technology industry boom.  These buildings are known as soft creative: conventional offices converted to creative by exposing their natural structural elements.  Typically, creative office buildings are converted warehouses that have the ceiling height, windows, and structural elements of more traditional creative office.

Creative office is one of few office products with a growing demand, and all owners want on to this life boat.  However, eventually, the number of conversions could capsize the boat.  After the dot com bust,  owners converted  many of these soft conversion back into traditional office space (at $50 to $60 a turn–ouch!).

Growth of west side start-ups engaged in producing video content for the web, is fueling absorption of office space, housing, and retail.  Numerous video web content companies have sprouted from Silicon Beach to Hollywood, through Playa Vista and Culver City.  The successful monetization of this industry will determine whether this burgeoning field continues to grow. So far, You Tube has experienced some initial success of selling ads on its You Tube channel. Now it starts experimenting with charging for premium channels.  For those in Westside Real Estate–let’s keep our fingers crossed.  You can read more about this below.

YouTube begins paid subscription pilot | Internet & Media – CNET News.

This article from the Wall Street Journal reports on the shift of bright graduates leaving for or opting out Wall Street finance and hedge funds jobs for jobs at technology start ups.

Late Shift: Foosball Over Finance – WSJ.com.

This shift also explains the shifting fortunes in the real estate industry.  Certain cities which are attracting technology companies are doing well while others are doing poorly.  In San Francisco, rents in the City’s financial center, the North Financial District, are starting to lag those in the City’s tech center, the South of Market District (SOMA).  The article reports that New York has successful offset job losses in finance with job gains in technology.  Office brokers continue to report demand from technology start ups and continued downsizing from banks, major corporate users, and service firms.

The shift is translating into where the movers and shakers want to live.

Perhaps, this shift from financial engineering to social and enterprise engineering will result in increased productivity and in the end a bigger pie for everyone.

This  monetization for an emerging original-video-content-for-the-web start up is a shot in the arm that the Westside office market needs.  New start-up original content companies have spurred growth of employment and office absorption on the West-side of Los Angeles. Now DreamWorks is paying $33 million to buy one of these start-ups.  This investment shows that the big boys now think this movement is real.  This trend may result in additional funding for these start-ups, more start-ups, and more West-side creative office absorption.  Anecdotal reports of success have come from other ventures, including You Tube’s new studios in Playa Vista.   A review of Crunchbase shows about $3.5 million of venture investment in Awesmeness TV, so there is probably some pay day in the $33 million for the founders and their investors.  Read about the acquisition below.

DreamWorks Animation Agrees To Pay $33M+ For AwesomenessTV – Deadline.com.

Developers are building many apartments  in Los Angeles for Gen Ys.  Generally, these apartments are multi-story high density smaller units in walkable urban areas. The developers load the building with hip amenities –gyms, do it yourself bike repair, roof pools with fire pits, water features and cabanas.  See article for example.

http://articles.latimes.com/2012/dec/15/business/la-fi-mo-gen-y-apartments-20121214

However, not every Gen Y is alike.  Some Gen Ys will prefer to live in more intimate low rise urban and walkable environments (or in Los Angeles — everything in a very short commute).  Some Gen Ys will desire the character of many of Los Angeles’ older apartments but still desire contemporary interior features and conveniences. Despite how walkable a neighborhood is–in Los Angeles–parking is still very very important.   Unlike the Mc W Apartments being built, some Gen Ys will cherish a less dense environment and the luxury these units afford for private outdoor space.  With more single households–also satisfying Fido (thank you for the mini yard) will fit into the housing decision.  We are renovating these older low rise properties into creative mutli-family to appeal to the young creatives,