In Sign of the Times, Owners Court Clean Tech Tenants
New and Lavish Space is Being Offered Exclusively to Clean Technology and Renewable Power Companies
7/14/2008
Source: CoStar GroupFull CoStar Group Article
Much of the budding clean technology market relies on commercial buildings to deploy its technologies, but in a twist, some property owners and developers are creating a new real estate market that relies on clean technology.
Around the country, empty land parcels and outdated industrial parks are being primed as clean tech space -- vast parks that would cater to renewable power companies, clean technology startups and the makers of energy efficiency products.
Master plans for clean tech parks are popping up in cities such as Austin, Los Angeles, Mesa, AZ, and Annapolis, MD, and a handful of developments in New York and California already exist.
Though niche real estate markets are nothing new -- biotechnology space has emerged lately as a real estate force -- the clean tech sector was viewed until recently as too small and unbalanced to support dedicated real estate space.
One of the first parks to offer such space, the Saratoga Technology + Energy Park in Malta, NY, was met with skepticism when it debuted in 2001, said Mitchell Khosrova, a program manager for the New York State Energy Research and Development Authority (NYSERDA), which owns and operates the park.
The market for clean energy and environmental technology tenants was far too small to make the project successful, real estate groups told NYSERDA. Those groups also balked at a mandate that the park’s buildings be LEED certified, the sustainability designation that is now customary for many new facilities.
“We talked with some big commercial real estate people to build our first building and this is what we heard,” Khosrova said. “We hit those snags.”
But that is changing. The clean tech sector has surged this decade, growing annually at more than 30 percent, according to the research firm Clean Edge. Though investment is down lately, the sector now draws the most venture capital of any sector, according to data from Cleantech Group, a market research firm.
And that has meant a rise in the amount of space being set aside for clean tech companies. Statistics are difficult to come by, but at least three new parks comprising more than a thousand acres were announced in the past 60 days.
“Clean technology is the next industrial revolution. It will be the next wave of opportunity, ” said Randy Johnson, a former state lawmaker in Florida now involved in the Alternative Energy Park at Destiny, a proposed 500-acre complex in Central Florida.
That park, unveiled three weeks ago, will break ground in 2012 to serve as the backbone of Destiny, a new eco-city being planned by land developer Anthony V. Pugliese, III, on more than 41,000 acres along the Florida Turnpike, about an hour south of Orlando.
It will cater to solar energy, fuel cell and other alternative energy companies with up to 20 million square feet over the next several decades -- helping serve an “enormous pent-up demand” for clean tech space in Florida, said Johnson, who Pugliese named COO of Destiny.
“You have huge companies that are in a race for survival to retool to become more sustainable. And you have thousands of little businesses that are working out of their garage,” he said. “We need to support new ideas and help to incubate new business.”
Far from sunny Florida in New York’s Hudson Valley, a similar project has been underway for about three years.
Known as TechCity, the 2.5 million-square-foot industrial complex was purchased from IBM by Alan Ginsberg, a former commercial real estate broker, about 10 years ago. In 2005 Ginsberg reevaluated the property, which was losing money, and began sketching a plan to convert it into a hub for clean tech companies.
He was criticized. As he outlined his vision, he said, “all the east coast experts asked me the same thing: ‘Are you out of your mind? Are you crazy?’ ”
But as work proceeds -- obsolete buildings are being demolished and the property’s oil-burning central utility plant has been shuttered -- the decision appears to be paying off. Ginsberg is now signing letters of intent from clean technology companies that see the project’s potential, he said, and are attracted by easy commutes to New York City and Boston.
And like the Destiny park, TechCity will be powered by renewable energy (Ginsberg hopes to eventually take the property off the grid.) That is an important consideration for all clean tech parks, Johnson said.
“Tenants need to walk the walk if they’re in that business, not just talk the talk,” he said. “They ought not run their production line off of a coal fired power plant.”
Renewable power requirements, along with high-tech infrastructure demands, can be costly, which is one reason why more parks haven’t been built. The Destiny park, which will one day help generate power for the new city, will cost about $250 million, Johnson said, which is still just a fraction of Destiny’s overall budget.
In Austin, 12 new buildings at the Texas Clean Energy Park are projected to cost more than $100 million, according to project officials. Ginsberg declined to name costs for TechCity, but said his budget was “very significant.”
Yet, the high price-tags come with major economic benefits, the owners of clean tech space say. Destiny’s park, which was endorsed by Florida Governor Charlie Crist, will help lure new business to the state by providing academic and training resources for startup companies, according to Johnson.
The Saratoga Technology + Energy Park, which forms unique partnerships with its tenants to help them thrive, is helping put New York on the map as a clean tech destination. Manufacturers of efficient semiconductors, lithium ion batteries and wind turbine components, as well as several environmental technology nonprofits and Lockheed Martin’s energy efficiency group, are already in the park, and a new building will complete early next year.
“At NYSERDA, we know that research and development is economic development,” Khosrova said.
The park could create more than 1,000 regional jobs, according to its web site. Thousands of green-collar jobs are also predicted in Destiny as its park comes online. And at TechCity, Ginsberg is forecasting nearly 4,000 permanent green-collar jobs for the Hudson Valley region.
“We’re talking to businesses internationally,” Ginsberg said. “I’m a bold guy and I believe in what I’m doing. I’m spending lots of money and creating lots of jobs.”
###
