I was asked to talk about innovative real estate. I really don't know what that means, but I understood it when I thought about it a little bit in the sense that as a real estate developer and business owner, I also own 10 restaurants — I know I'm crazy — some retail establishments and other variety of businesses. But my core is real estate. And I have to be a chess player (by) always trying to think ahead as to what is my next move. It's not going to be business as usual. It never has been. It won't be certainly moving forward. And how am I going to continue to keep my properties leased up? How am I going to be able to move forward through all the red tape and market conditions, which aren't the most favorable? And so I understood then the question: How are you going to address innovative real estate? And it really is designed how are we going to attract and keep in San Diego good quality workforce consumers? We looked at it from the millennial customer as our next phase. And we figured we had to re-identify what our customer base is.
I'm a baby boomer. I'm not this young, techy person. But I certainly understand because I have 700 employees. The majority of my workforce certainly falls within this millennial class. So kind of looking at it in a sense, allegedly this is the largest generation currently in the United States. The age group is between 19 and 36 years old. About 37 percent of the workforce today is considered in this category. Projection is perhaps that it goes to 75 percent of the workforce in 2025. There are stats about their average household income. But the real important thing for someone like me is, what does this mean for me in terms of business? And looking at their ethos as a category, what do they want? What means something to them? What do they focus on? And they focus on life experiences for the most part. Again, these are generalizations. But they focus on these life experiences rather than tangible assets necessarily. Another interesting point is that San Diego has one of the highest percentage of millennials.
Millennials in San Diego
What drives millennials to San Diego? Now you'll laugh at the affordable living because I've just heard everybody tell me this is the most non-affordable place to live. However, again we're really looking at the tech industry, the tech-driven millennial. And they are looking at areas that are considerably more expensive to live than San Diego. Northern California, every place in Northern California, the Bay Area, Palo Alto. You know, I'm doing a development project in a little place called Santa Rosa, in Sonoma (County). And we are really focusing on bringing these millennials from the city, San Francisco, and crossing over into Petaluma. We have some projects in Petaluma, which is the next city outside of Marin and then into Santa Rosa. And it's because we can supply a lot less-expensive housing for them than they can get anywhere else near the city. So comparatively speaking to Los Angeles or the Bay Area, for these type of innovative customers, consumers of this millennial class that's very tech-driven, we are considered somewhat affordable as a major tech hub.
So also there's our lifestyle. I don't have to tell you ... you just can't beat San Diego as a beautiful place to live for lifestyle. And it's very relaxed for being the ninth city in population. It's a very relaxed environment versus working in L.A. or New York or Chicago. So it really offers a lifestyle that lends itself very well to how the millennials are thinking. So it is a draw for specialized talent.
We talk about these tech companies moving to San Diego and the importance for us as to why that consumer base will do very well in our projects. And why we want to attract them. I had to add pet friendly, because all of my businesses are pet friendly. And the millennials — we've done some research — very much want to work with their dogs, want to have their dogs with them in restaurants and stores. So we try to cater to that in all of our businesses.
Force of industry changes
Looking at the lifestyle trends, you know, we always have heard live, work and play and it almost gets overused. But I think millennials really seek a work-life integration instead of a work-life balance. They want collaborative and flexible offices in terms of space. And other key words for them include growth, purpose, culture and perks.
The technological advances in real estate as an industry, obviously I don't really have to go into that because it's pretty apparent. We can get information, we being anybody online, through avenues such as Zillow or Trulia or any of these other mechanisms whereas in the past it would be very arduous for the common person to be able to get a lot of information about real estate. So certainly the tech-driven innovations of recent years have really helped in terms of data accessibility and online markets. And investor-to-borrower connectivity, I know that was one of the questions that had been asked. (And I was not tweeting answers at 2 in the morning because I'm just not that talented.) But how do investors and how as a developer do we find investors? Or get loans to be able to build the innovative projects we're attempting to do? And you know, the technology advancements in terms of connectivity between people like that has really made a significant difference.
Changes in the workplace, again the millennials, have forced the workplace to up their game in a big way. And what we have found looking at LinkedIn was rating certain major employers in terms of how they thought they were treating their employees. Pandora came in No. 16, and some of the perks that they were providing were getting rock climbers and vegan philosophers and giving their employees 40 hours of paid time off to volunteer.
McKinsey, which came in at No. 23, has a Take Time Program that offers five to 10 weeks each year for employees to pursue interests and passions. Box offers free lunch and weekly yoga classes. It goes on and on and on.
We believe that the boundaries between work, home and community and amenity-rich corporate campuses are really what's the wave of the future. We're involved in several projects right now locally that emphasize these amenity-rich corporate campuses so that there really is again no boundaries between work, home and community for the millennials.
Real estate trends
Real estate trends, you know, we talk about again the shared amenities. They want to be able to gather in places that they can enjoy in terms of eating and arts and social interaction. Younger generations often choose where they live before they consider their careers. So it's important that when we look at our real estate projects that again I'll talk a little bit more about the amenity-rich buildings. If it's smart buildings, mixed-use development. I agreed with Alan Gin when he said that really I don't think this millennial group necessarily on the whole wants to have that white picket fence and live in suburbia. They really enjoy being on the transit-oriented developments. Being part of community, having access to the arts and to restaurants and their living environment all right there. And again we talk about the redevelopment of communities driven by unified places to live, work, play, enjoy, relax and share.
So we've got some examples of local developments that really show how this works. The Village Mission Valley is not one of our projects. But it was a project built by the Irvine Company, and they repositioned old, outdated residential assets. And what they did is they added perks and they really designed this redo for the millennial group. They have a business center online. They have an on-site village market. They have an elegant clubhouse with access to Wi-Fi and a demonstration kitchen. They have a great room featuring craft beer, five resort-style pools, including three saltwater pools. It just goes on and on. Again amenity-rich corporate campuses and their living environment in a residential scale.
We talk about corporate campuses with hospitality services. One we're doing is a specific project called Patio Marketplace. And we are going to be building a fine facility in an area that is all corporate lab work. It's financial industry, it's over in the UTC area. But it's in a cluster of very densely office-populated structures that don't really have anywhere to eat unless you got in your car and you drove over to UTC mall, which can be a nightmare at lunchtime. So the developers approached us, because I own restaurants, and said we love your restaurants, would you add a very unique experience that we will pay for 100 percent, build it for you, and pay you to run it — and you can keep all the net profits. And I said, I really don't know, I've never been asked to do that before. But yeah, there's got to be a trick here somewhere.
When I walked into that building, they had a state-of-the-art fitness center. It's free to anybody who works in that building. And the issue is, these developers and these owners — they're all big institutional funds for the most part that own these buildings — realize they have to attract (big tenants). They need to attract these high-tech companies or these very influential biomed companies or whatever, that have the creative class, have the smartest and the best. And those folks demand a lot. They want a great place to eat. They want to have a little marketplace where they can do a grab and go. They want to have a state-of-the-art workout facility. So it was something that wasn't just a random occurrence when I got approached. Now we opened up a little version of it in the Aventine high rise in La Jolla, Patio Marketplace, and now we're being bombarded by these massive developers from up and down the state saying can you do one in our building? And from anywhere from this little 500 square feet of, really a coffee stand with some grab-and-go, to 10,000 square feet of an interactive public market with our restaurant in the center of it. And it's really changing how I'm going to look at doing business moving forward. It's just a total win-win.
You know we talk about the millennials. The folks that helped me put this together work for me, and they are millennials. So they're like, we're no longer seeking a party animal atmosphere when we're traveling. Sure, you're not. But they thought it was very important that I put that in. They want to stress that they want to fully immerse themselves in new cultures and feast on local cuisine. They are less likely to sit hunched over their hotel room desk while traveling for business or pleasure. That really is true. I remember when I traveled for business in my younger years a lot. And I was always hunched over my desk in my hotel room. And they don't do that anymore. They walk into a hotel where they can have Wi-Fi in the lobby. There's craft beer, there's some kind of entertainment, there's an arts component.
They really want to live and work right at the same time.
The Pendry Hotel is a new hotel that is opening up downtown. And it is a good example of this, they really read the market very well in terms of millennial. Again this is not one of my projects. But I very much respect it. And they really are adding a lot of amenities, not just your basic hotel lobby, bar with a gift shop and a restaurant. They're doing it right and making it very interactive. I mean they're doing things such as really high end to grab-and-go basic public markets to really high-end restaurants to an art gallery.
This is just what my company was really focused on originally was these urban mixed-use projects that responded to workplace flexibility. And convenient locations as these others have talked about, the transit-oriented development and so forth. A couple of our projects were the old state kind of projects. Now we realize that we need to move into more what's the next chess move? And the next chess move to us now, like I described, is with the amenity-rich areas.
Even our restaurants are really looking at what's the next step in terms of that with refined organic food. The emphasis is on sustainability, and really nice environments that people can bring their dogs or their kids to, but really more of a lifestyle than just your typical environment.
Same with the ERA Boutique Hotel, a development we are working on. It's going to be very similar to that unique range of amenities: unmatched service, arts, culture and entertainment. Again we are really reaching out to this millennial group.
So I think that in terms of innovative real estate we feel that, I don't know if it's so much innovation, but it's really trying to read what is happening in San Diego in terms of who is the next customer. And how do we reach out and get the type of businesses that can help San Diego sustain itself and grow? We do have a lot of lower-end paying jobs in the hospitality industry, which I'm a restaurant owner so I can tell you the majority of the folks that work for me are minimum wage. So we have to figure out things such as affordable housing, the Workforce Apprenticeship Programs and all of these other factors that we need to keep attracting the best and the brightest to our city, so that we can continue to grow, but it's going to be something that we have to constantly fuss with. We're really going to have to tweak it and continually ask the question to these customers: What is it you want in your real estate projects? What is it that you want in the businesses where you shop? And then I think San Diego can really read into that and will continue to do very well.
have forced changes
No boundaries with work, home and community
Proximity to make