Douglas Burnham, Founder of Envelope A+D explains the challenges and successes of his innovative work creating Proxy SF.

In early February I conducted a study tour for ULI – Mixed Use for the New Economy. Organized as a professional development class, this reprised the program held last June in Los Angeles.   And as the top investment market in the U.S., my backyard of San Francisco provided and eye opening and mind-blowing series of tours and presentations.  The comments I made in my new year’s letter about a tale of two cities were echoed by McFarlane Partners President Greg Vilkin, as he explained the flight of capital to quality cities (the ‘sexy six’ as he called it – can you name them?*) where everyone wants a piece of the action, even if it costs them dearly.  Who would have thought in 2011 we would see high profile deals trading at a 3 cap?

But the word bubble was mentioned many times (which is hard to comprehend, considering we are not that far from the hardest recession many of us have ever known), but it did feel that way.  Fantastic projects and deals were being constructed, and I heard there are 54 construction cranes in the sky in San Francisco.

Beyond the numbers, I was stunned at the level of innovation occurring throughout the city.  And while some of the challenges that have always faced ground-breaking design and development in the real estate industry still persist, there was good reason to be upbeat about what could happen in this next cycle.  Some of the key takeaway’s included:

The recession was a good thing

We saw two highly innovative projects that would not have existed had it not been for the recession.  Both Proxy SF and 5M are amazing new places and spaces that showcase all that is great about the new economy.  Both grew out of recognition by their sponsors, in the darkest days of the recession, that a conventional project path could not be financed, developed or leased.  In fact, Proxy grew out of the city and neighborhood’s desire to have ‘something’ to show for their hard years crafting a neighborhood plan, as every proposed project on the table froze and went away with the crash of 2008.  The passion, creativity, almost missionary zeal of Douglas Burnham of Envelope A+D made it happen and resulted in a lesson in ‘flexible urbanism’ (Douglas’ term).  Neither permanent nor glitzy, it does have a raw edginess and experimental quality that makes it both delightful and ever-changing.  The real lesson in how to do more with less?   Proxy SF creatively harnessed space, entrepreneurs and good design within public spaces.

On the other end of the spectrum was 5M – Forest City’s highly successful and chronicled adaptive use of the SF Chronicle’s old printing facility.  Retained by the Hearst Corporation, Forest City was asked to find a use for the space as the country slid into a recession.  While traditional leasing strategies and uses were evaporating, Forest City’s visionary team saw an opportunity to play out something they had been conceptualizing for a while and just needed an opportunity to try at scale.  What would happen if you took the collaborative, creative economy, fused it with the arts and entrepreneurial users, and mixed them into a space where the amenity package isn’t physical – it’s social?

Good Things Take Time (But do they really have to take THAT long?)

A number of the exceptional projects we saw – both completed or under construction – were prefaced with painful stories of drawn out public processes – innumerable meetings, unrealistic NIMBY’s extracting single agenda benefits, and cumbersome and balkanized permitting processes that added unnecessary costs and consumed time. The lesson for cities is if you want to create great projects quickly, you need to re-invent your processes and manage the public process in order to make it happen.

Other innovations we saw were AvalonBay’s new 185 unit apartment complex located in Hayes Valley.  A significant 4 acre site left over from the removal of a freeway that divided the neighborhood until 1998 presented an opportunity to introduce new development and housing into the regenerating neighborhood.  But how does a REIT with a big plate development model adapt and adjust to the fabric and grain of a neighborhood defined by 25’ frontage townhomes and smaller apartment buildings.  Build Inc., which won the right to develop the site before partnering with Avalon, took a creative (if not risky) approach by hiring three different architects to tackle the large site using a more fine grained approach to design.  Even though it could be argued that a talented single architect may have gotten there, Avalon acknowledged that every part of the building benefitted from having so many different hands in the process, and that each portion reflects a different approach to massing and materiality.  This is inherently the result of many voices that is more genuine than the pastiche that typically makes up ‘faux incremental’ design typically associated with big projects. The process was successful enough that Avalon has gone on to use it again in a new project located in Dogpatch.

Join me in Washington DC, June 9-11 as we repeat this program, looking at finer grained, urban infill mixed use projects. See the ULI program information here.

* San Francisco, Seattle, Los Angeles, New York, Washington D.C. and Miami.