Hughes Marino News Feed

Putting Our Heroes Back to Work

Hughes Marino — Fri, 17 Feb 2012 08:00:57 +0000

San Diego has a proud military heritage and is home to the largest military and defense complex in the United States. Thousands of active-duty Navy and Marine Corps personnel are stationed here, and 250,000 more veterans call our county home. This group of veterans is a significant portion of the San Diego labor pool, and as a hiring employer, you can claim a significant tax credit if you add U.S. military veterans to your payroll before January 1, 2013.

On November 21, 2011, President Obama signed into law two federal tax credits designed to bring unemployed veterans back to work. These new tax credits were included in the American Jobs Act proposed by the President in September 2011, and they were included as work opportunity tax credits (WOTC) in the Vow to Hire Heroes Act of 2011. The act also expands the definition of “qualified veteran,” increases the maximum amount of allowable WOTC, and extends the availability of the credit to tax-exempt employers.

The first of these two tax credits is the Returning Heroes Tax Credit, offering a credit based on the length of time a veteran has been unemployed. A tax credit of up to $2,400 (40 percent of the first $6,000 in wages) is available when a newly-hired veteran has been unemployed for at least four weeks; a credit of up to $5,600 (40 percent of the first $14,000 in wages) is available when a newly-hired veteran has been unemployed for at least six months. This tax credit replaced the expired Recovery Act credit which had provided up to $2,400 for employers hiring a certain, more restricted class of unemployed veterans.

The second of these two tax credits in the Act is the Wounded Warrior Tax Credit, which provides a new tax credit up to $9,600 (40 percent of the first $24,000 in wages) for those employers who hire service-disabled veterans who have been unemployed for longer than six months. This credit is in addition to the existing Work Opportunity Tax Credit providing up to $4,800 for all employers who hire service-disabled veterans.

Above and beyond the type and amounts of each credit, there are three things you should know about these federal tax credits:

Employers may take the credits for any qualified veterans hired between November 22, 2011 and December 31, 2012, but they expire at the end of this year.
There is no time limit associated to when the veteran left the service.
Qualified tax exempt – 501 (c) – organizations may now claim a WOTC by hiring veterans.

At the state level, hiring credits are available through the California Enterprise Zone Program for hiring veterans – $37,440 or more in tax credits for each qualified employee hired earned over a five year period. The California Revenue & Taxation Code provides a state Hiring Credit for a business who employs a “qualified employee” within a designated Enterprise Zone.

While most people believe that an employee must live within an Enterprise Zone to be a “qualified employee,” this is not the case. You can claim the hiring credits even if your business is not located in an enterprise zone but your employees work in an enterprise zone.

An employee will qualify for the California Enterprise Zone hiring credit if, at the time of hire, the employee was:

A Vietnam-era veteran who served between 8/05/1964 to 5/07/1975
A recently separated veteran who has left the military within 48 months of their employment date
A service-connected disabled veteran

There is no limit to the number of veterans you can hire and still claim these federal and state tax credits.

By Brendan Foote and Matt Brogdon

Brendan Foote is senior vice president of Tax Credit Services at Hughes Marino, the largest San Diego commercial real estate company with brokers exclusively specializing in tenant representation for lease negotiations and building purchases. (619) 238-2111. Email: brendan@hughesmarino.com.

Matt Brogdon is the President of The Pathfinder Group. The Pathfinder Group is a San Diego-based national recruiting consulting firm and the leading advisor on military marketing and recruiting strategy. They partner with clients in all sectors and regions to identify their military outreach and recruiting needs, address their most critical challenges, and transform their businesses with veteran talent.

San Diego Leasing Update

Hughes Marino — Wed, 15 Feb 2012 08:00:26 +0000

San Diego’s commercial real estate market finished 2011 showing positive signs of a recovering market. Employment growth began to have an impact on occupancy rates for both the office and industrial sectors – as nearly 865,000 square feet of office, lab and industrial space was leased. The total net absorption for 2011 in San Diego was about 1,957,000 square feet. That, combined with the 2,134,000 square feet leased in the fourth quarter of 2010, reduced the total inventory by 8 percent over the past five quarters alone.

While every San Diego office submarket except for Downtown saw a drop in availability over the past two years, the most improved submarkets were Sorrento Mesa, the I-15 corridor, Del Mar Heights and Mission Valley. UTC, Carlsbad and Downtown ended the year with the highest office space availabilities in the county and continue to be where the best values can be found.

Downtown and Carlsbad both struggle with anemic leasing volume – averaging vacant space on the market of nearly 2.5 years a piece. There has been a mild recovery in Torrey Pines’ wet lab space, as the biotech sector shows signs of recovery and bio-fuel companies have demanded more wet lab space. As UTC Class A office shows signs of firming up in the near future, 2014 will be a tough year as LPL Financial relocates out of six buildings on the Towne Centre Drive corridor and into a new 417,000-square-foot, high-rise, build-to-suit building with Hines at La Jolla Commons in UTC. Del Mar Heights should see some recovery slowing in the next year when Bank of Internet moves out of 40,000 square feet in that market, while other tenants like Covario and Legend 3D consider value-oriented submarkets and move accordingly. Latham & Watkins will be also moving out of second-generation space, likely into a new build-to-suit opportunity that the firm is pursuing. Downtown’s new challenge is a lack of quality “cool” space to accommodate the surge in tech companies interested in locating there. Alternatively, San Diego companies are beginning to fully understand the value of being in Downtown’s California Enterprise Zone which, in many cases, offsets all of a company’s parking expenses.

This year will be another year of net absorption across all product types, as another 2 million square feet is likely to come off the market. This will also go down as a transitional year, where the pendulum starts to move toward the landlords’ favor.

Jason Hughes is president of Hughes Marino, the largest San Diego commercial real estate company with brokers exclusively specializing in tenant representation for lease negotiations and building purchases. (619) 238-2111. Email: jason@hughesmarino.com.

David Marino is principal and executive vice president of Hughes Marino, the largest San Diego commercial real estate company with brokers exclusively specializing in tenant representation for lease negotiations and building purchases. (619) 238-2111. Email: david@hughesmarino.com.

Jason Hughes Named San Diego Metro Movers to Watch in 2012

Hughes Marino — Tue, 14 Feb 2012 08:00:01 +0000

Hughes Marino congratulates president Jason Hughes for his award as a San Diego Metro Movers to Watch in 2012. The San Diego Metro Movers list recognizes twenty-five of San Diego’s leaders in industry and the community that will be “making news” in the next year. Hughes’s expertise, passion for real estate and commitment to the San Diego community has led Hughes Marino to become the leading commercial real estate company that exclusively represents tenants, as well as an advocate for San Diego business owners and the community at large.

David Marino Awarded ‘Broker of the Quarter’ by Irvine Company

Hughes Marino — Mon, 13 Feb 2012 08:00:34 +0000

Irvine Company Office Properties thanks David Marino of Hughes Marino for his help in successfully negotiating leases with BioLegend, Harbor BioSciences, Tobin Institute, Equipoint Financial Network and Nirvanix totaling approximately 90,000 square feet.

As a Principal and Executive Vice President of Hughes Marino, David is committed to representing tenants in their lease and purchase transactions of commercial space.

David specializes in high-value, time-critical and complex transactions for technology, life science and business service companies. He is an expert in the strategic planning, marketing assessment, financial analysis, business terms structuring and negotiations aspects of commercial real estate. Exclusively representing tenants since 1991, he has completed over 1,000 transactions comprised of over 13 million square feet.

David has clearly established himself in the top tier of the real estate brokerage profession. We thank him for his contributions and extend our wishes for continued success.

The Worst is Behind Us

Hughes Marino — Thu, 09 Feb 2012 16:16:59 +0000

One’s stand on an improving commercial real estate market all depends on where one sits. For tenants, an improving commercial market results in higher rents, fewer concessions and less flexibility. For a landlord, it results in higher income, less costs and more stability. But whether you are a winner or loser in an improved commercial real estate market, the fact is that 2012 will be a transitional year on the way to a more healthy commercial real estate market for property owners.

The commercial real estate market ended in 2011 with strong signs of a recovery in the making. In the fourth quarter, 865,000 square feet of office, lab and industrial space came off the market, making 2011′s net absorption 1.957 million square feet of total space. On the heels of the 2.134 million square feet that came off in fourth quarter 2010, a combined 8 percent of the total inventory of available space came off the market in the last five quarters combined.

Most Improved Markets

While every San Diego office submarket, except for Downtown, saw a drop in availability over the last two years, the most improved office submarkets were Sorrento Mesa, the I-15 corridor, Del Mar Heights and Mission Valley. UTC, Carlsbad and Downtown ended the year with the highest office space availabilities in the county and continue to be where the best value can be found. Downtown and Carlsbad both struggle with anemic leasing volume — averaging vacant space on the market of nearly 2.5 years apiece. There has been a mild recovery in Torrey Pines wet lab space, as the biotech sector shows signs of recovery, and bio-fuel companies have added to demand for wet lab space. As UTC Class A office shows signs of firming up in the near future, 2014 will be a tough year as LPL Financial relocates out of six buildings on the Towne Centre Drive corridor and into a new 417,000-square-foot high-rise build to suit building with Hines at La Jolla Commons in UTC. Del Mar Heights should see some recovery slowing in the next year as Bank of Internet moves out of 40,000 square feet in that market, and other Del Mar Heights tenants consider value-oriented submarkets, and make moves accordingly. Downtown’s new challenge is lack of quality “cool” space for a surge in tech-company interest in locating there; alternatively, San Diego companies are beginning to fully understand the value of being in Downtown’s “California Enterprise Zone” — which in many cases offsets all of a company’s parking expenses.

Landlords Will ‘Test the Ceiling’

2012 will be another year of net absorption across all product types, with likely another 2,000,000 square feet coming off the market. As such, we expect to see landlords “testing the ceiling” of how far they can push rents. We are already seeing landlords coming out with proposals offering less free rent, higher annual rent increases, and higher face rates. The transactions we did in 2010 where we negotiated at least a month free per year of lease term (many leases we closed with two months free per year of term), moving allowances, low annual rent increases, and termination rights will go down in history as the bottom of the commercial market in this last commercial real estate correction. 2011 was a year of modest firming, where face rates remained unchanged, but landlords began to eat away at free rent concessions and moving allowances. 2012 will go down as a transitional year, where the pendulum starts to move towards the landlords’ favor, and tenants that lock in long term leases now are going to look wise for many years to come.

Cause and Effect

On the surface, a more expensive commercial real estate market would seem to be bad news for tenants. However, we have to consider cause and effect. Rents rise when demand exceeds supply. Increased demand for space is being driven by increased revenues and profits of local businesses and related hiring in the San Diego region. Job growth is good for the economy, as people come off unemployment rolls and are converted to taxpayers again, and have the ability to consume goods and services and drive further economic growth. Increased demand for space is also driven by our rebounding capital markets that help create new companies, and allow existing ones to grow. Rent growth is a natural economic byproduct of an improving economy. As an asset class, commercial real estate is estimated to be worth $23 trillion according to Prudential Real Estate Investors, and a recovery in that asset class helps support our banking systems and general economic stability — a healthy and balanced commercial real estate sector is ultimately good news for all, and not just landlords.

Build a Better Future on the Waterfront

Hughes Marino — Tue, 07 Feb 2012 20:00:17 +0000

We like to talk about San Diego as a world-class city. To a certain extent, we have become a global metropolis, given our tourism amenities, a major port and naval presence, a revitalized and exciting central business district, our reputation as a international hub in the wireless technology industry, and home to UC San Diego.

These attributes were not easily acquired; they were the result of having an extraordinary vision and courageous dose of faith in our region, overcoming political complexities, and taking considerable financial risks.

We now have an opportunity to take a giant step to further equip our city to compete among other world centers. But, as with earlier feats, the proposal to build a football stadium, a sports arena and an expanded convention center along the San Diego waterfront, is a difficult task. It is also the most comprehensive means we have to provide the infrastructure necessary to heighten our city’s appeal. Additionally, these amenities would produce jobs and more revenue for businesses, which translate into more tax money for providing services.

The Big Ending
The plan for a sports entertainment district on the 100-acre site of the 10th Avenue Marine Terminal would combine the three critically needed amenities into one ambitious undertaking which would require more work and a longer waiting period than just building a stadium. But the end result would be well worth the efforts. The new stadium site would be far more spacious than the 15-acre bus-yard site now being studied in East Village, and would provide a comfortable home for our NFL franchise for the long term. A sports arena replaces the dreary 50-year-old complex in the Midway District and would give our city a highly marketable indoor venue for large-scale entertainment and sporting events, including the possibility of an NBA franchise. The expanded convention center would equip San Diego to compete for all conventions.

The Ship Is Out
This is not the first time the 10th Avenue industrial site has been discussed for potential development. Over the past decade, plans for a stadium on the site have been rebuffed on several occasions by labor, the San Diego Port Authority and other agencies who apparently thought its present use as a terminal for a couple hundred longshoremen to unload bananas and other imported goods is its best use. That’s going to be a harder case for opponents to make now with an expanded multifacility complex that will create thousands of construction and permanent jobs and stimulate additional development nearby that otherwise wouldn’t take place.

Aside from identifying the revenues for an estimated $1.5 billion project, the real challenges will be the complex regulatory and approval processes. To redevelop the site would require approvals from the port authority, the city, the county, the state Legislature, the state Lands Commission, the state Coastal Commission, and the U.S. Army Corps of Engineers.

To be sure, $1.5 billion is a boatload of money, but it is considerably lower than it would be for all three projects if undertaken one by one over several years.

As an urban community with diverse priorities and outlooks, we need to come together around a common vision, one that will create economic prosperity for all. Then, we must work to amass the resources, overcome the obstacles and make it a reality.

If we want to be a genuine world-class city, it will require nothing less.

Tenant Improvements: A Practical Guide for Estimating Project Cost

Hughes Marino — Mon, 06 Feb 2012 08:00:41 +0000

When executing a lease, most tenants will need to renovate an existing space. The scope of this work can range from new carpet and paint to the complete build-out of empty shell space. It is important to have a very clear idea of what it costs to design, permit and construct the new improvements for the new space. What may seem initially to be a simple remodel can grow in complexity and cost as unforeseen complications emerge. Underestimating your project’s cost in the initial stages forces you to come up with additional cash for the short fall or compromise on key project elements. Most of these headaches can be avoided with better and more complete information presented early in the project.

Here are some basic Tenant Improvement cost guidelines for typical space, including costs to design, permit and construct the improvements:

Carpet and paint for an existing unoccupied space: $5 – $7/sf
Carpet and paint for an existing occupied space: $8 – $10/sf
Minor remodel of an existing unoccupied space (50% or less): $15 – $25/sf
Major remodel of an existing space: $35 – $50/sf
New construction on a warm shell space (restrooms/lobbies already built): $50 – $65/sf
New construction on a cold shell space (no restrooms or lobby yet): $60 – $75/sf

These prices are for typical “Building Standard” improvements. Special requirements and high-end finishes will result in higher costs.

There is another category of expenses that tenants need to anticipate, referred to as Furniture, Fixtures and Equipment, or FF&E. Most landlords do not allow tenants to use the Tenant Improvement Allowance to pay for FF&E, so Tenants need to understand, budget and plan for these expenses.

Here are some basic FF&E cost guidelines for typical office tenants:

Office Furnishings: $0 – $35
Systems Furniture (Cubes): $1,500 – $5,000/cube
Cabling: $1 – 2.50/sf
Moving Costs: $1.00/sf and $350/cube

Because of the large variation in types of spaces and each tenant’s specific needs, it is best to enlist the assistance of a qualified project manager with a clear understanding of your specific requirements and project details. This information is then used to establish an appropriate tenant improvement allowance. Hughes Marino CM acts as the project manager from day one, developing space programs, project timelines, and preliminary budgets, as well as helping to evaluate each proposed new space and the requisite tenant improvement allowance for each property. Our team not only ensures that the client will have enough money to build out the desired space, but we help point out other potential hidden costs as well, such as deferred maintenance on existing equipment or required upgrades to the existing facility to meet current ADA or building code requirements. These items, and countless others, can add significant costs and delays to the project.

Before signing any lease, make sure you have a clear understanding of what it will cost to design, permit and construct your new space, and take a close look at the existing mechanical, electrical and plumbing equipment for out of date equipment or deferred maintenance issues. You should also inspect each property for ADA and building code deficiencies.

Having Hughes Marino CM on your side will ensure that you have the quality information required to make an informed decision about your new space.

Kirt Gilliland is division president of construction management and a principal of Hughes Marino, the largest San Diego commercial real estate company with brokers exclusively specializing in tenant representation for lease negotiations and building purchases. (619) 238-2111. Email: kirt@hughesmarino.com.

Tax Credit Services Update

Hughes Marino — Thu, 02 Feb 2012 08:00:08 +0000

Budget News

Governor Brown has already released his early budget proposals for fiscal year ending 2013. It seems like we just caught our breath from last year’s budget fiasco filled with partisan disagreement, heavy cuts and the stark realization that California’s economic and budgetary woes will require a long road to recovery. Last year, Brown went after both Redevelopment Agencies and Enterprise Zones. Brown’s proposal to eliminate Redevelopment passed and was recently upheld by a supportive California Supreme Court through the appeal process. Brown was unable to cut the California Enterprise Zone Program, and he struggled to get a vote to the floor. In his most recent budget proposal, released on January 5th, it seemed as though Brown was no longer seeking elimination of the 20+ year old program that fosters economic growth and reduces unemployment in targeted areas throughout the state. Brown simply states that “the Administration will propose legislation to reform the Enterprise Zone Program…” There is no mention as to what these reforms might be, but in the wake of economic recovery, many legislators are embracing the program as a tool for economic growth.

The Legislative Analyst’s Office is reporting that anticipated sales and income tax revenues will likely be $2 billion less than expected. The Finance Department sites volatility in capital gains revenues for the state. This shortfall could instigate additional proposed cuts as budget talks move forward.

Project Design Elements: Exposed Concrete Flooring

Hughes Marino — Tue, 31 Jan 2012 23:49:20 +0000

Exposed concrete flooring is a modern, trendy look that is gaining in popularity among our clients. When done properly, exposed and polished aggregate is a clean finish that adds distinctive character to a workspace. The use of exposed concrete flooring, and therefore the absence of carpeting or tile, also contributes to LEED certification.

However, exposing and treating the subsurface of an existing tile or carpet floor can be a costly and complicated process. In addition to the initial cost of removing the existing tile or carpet, there are a number of additional preparation costs that you may encounter once the subsurface is exposed in order to repair stains or cracks.

Even if the existing floor material does not need to be removed, you may still incur a number of costs associated with prepping and sealing the floor. To compare, tile installation begins at approximately $1.25 per square foot, and carpet installation begins at nearly $2.00 per square foot. Properly finished, exposed concrete can cost significantly more.

If you decide to use exposed concrete, there are several methods of converting existing concrete into aesthetically appealing exposed concrete.

Concrete Dyes

When using concrete dyes, it is important to consider that the chosen color tends to fade rapidly if the surface is exposed to sunlight or ultraviolet lighting. For this reason, the surface application of concrete dye is not recommended, as the tenant would experience ongoing maintenance and reapplication costs.

Polishing

This process adds a shine to an originally gray and dull concrete surface. Though the process may seem basic, it requires great expertise and the use of specialized disks to grind the surface to the desired degree of shine and smoothness. This technique is often times used instead of marble, granite, or tile, all of which can be costly additions to an interior space. Fire stations typically use polished concrete in their garages.

Sealing

Penetrating Sealer: This form of sealer acts from within the concrete, leaving the surface with minimal protection against staining and damages.
Topical Sealer: Initially, this method will protect against stains and chipping, because this seal creates a thick, plastic membrane over the surface. Over time the sealant will begin to wear away, causing the surface to be extremely vulnerable to staining, scratching, peeling, and chipping. This method requires reapplication.

Micro Topping

Micro topping is designed to restore and resurface existing concrete. It can be used on cured concrete to create a cosmetic or durable appeal that can be colored or acid stained.

Once the concrete has been decorated, you will be faced with ongoing maintenance to preserve the aesthetic appeal. Over time, concrete will almost always stain or crack – maintenance should be expected.

For example, if an employee spills a cup of coffee on the concrete, the cleanup is not as easy as if the spill were on a tile of VCT or a section of carpet. Though it is true that a concrete stain can be cleaned using a high powered steam cleaner, one must consider the cost of hiring a professional cleaner, which costs roughly $1,500 per stain. In contrast, a ten-year supply of over-the-counter carpet cleaner costs approximately $50.

Ultimately, the deciding factor depends on your vision versus your budget, as well as the space’s functionality. The three options mentioned above – tile, carpet and decorative concrete – offer very different appeals. In essence, choosing a floor design depends on what you need compared to what you want. As a disciplined business owner, maximizing long-term efficiency and effectiveness in all areas of your workspace will add value throughout the lifespan of your business.

Nik Bandak is project engineer at Hughes Marino CM, the largest San Diego commercial real estate company with brokers exclusively specializing in tenant representation for lease negotiations and building purchases. (619) 238-2111. Email: nik@hughesmarino.com.

How “Going Green” Can Improve Your Bottom Line: Energy Star Building Certification System

Hughes Marino — Wed, 25 Jan 2012 18:52:27 +0000

When evaluating buildings for potential lease or purchase you will come across two major “green building” certifications, the Environmental Protection Agency’s Energy Star Certification system and the United States Green Building Council’s Leadership in Energy and Environmental Design, or LEED, green building certification system. They are two very different, yet complimentary programs. LEED is a more comprehensive rating system that looks at a several aspects of the building process while Energy Star focuses specifically on energy usage. The other major difference is that the Energy Star tools and resources are offered at no cost to the building owners or managers who are encouraged to use the tools to track their energy performance regardless if the choose to attempt certification. Both rating systems are widely recognized as leaders in the promotion of sustainable design, construction and building operation practices.

You are probably more used to seeing the Energy Star label on appliances, not buildings. After the success of the Energy Star labeled products, which came to be recognized for their efficiency and quality, the program evolved to include entire buildings. Energy Star Certification for buildings, which has now been in use for more than a decade, is aimed specifically at reducing greenhouse gas emissions. The certification process uses a 1-100 scale. In order to achieve certification, a building must score 75 or higher, which means that it is more efficient than comparable building types. The Energy Star program automatically adjusts for differences in geography, building use and various operating conditions. It is estimated that an Energy Star building can have a 35 percent reduction in energy use.

Prior to submitting for certification, energy performance information is tracked online using the Energy Star Portfolio Manager by the building owner/manager. After it is determined that the building achieves a rating of 75 or above using the Portfolio Manager, the accuracy of the data needs to be validated and approved by a licensed professional. Only then can certification be achieved. Care should be taken if your desire is to sign a lease in a building that has achieved Energy Star certification. Certifications are awarded for a one year period after which the building owner is required to resubmit their documentation to the Environmental Protection Agency. It should be verified with the building owner if there is an intent to maintain the certification.

It is interesting to note that in 2010, San Diego ranked 20th in top cities with the most Energy Star Labeled buildings. In total, 83 buildings consisting of 13.4 million square feet were certified. It is estimated that this will represent a cost savings of $14.3 million dollars. Notable San Diego buildings include 101 West Broadway, 401 West A and the Hazard Center Office Tower which have each achieved Energy Star Certification for 7+ years.

Steven Gorup is project manager/LEED AP BD+C at Hughes Marino CM, the largest San Diego commercial real estate company with brokers exclusively specializing in tenant representation for lease negotiations and building purchases. (619) 238-2111. Email: steven@hughesmarino.com.