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The California Drought Mandate – How to Plan

6/23/15

This year the State of California has mandated that properties cut water usage by at least 20 percent – a large undertaking for some companies that may have to make major overhauls to landscaping and water usage at their properties. Property owners, managers, tenants and landscapers need to develop and implement new watering strategies, as well as replace existing planting with drought resistant material and new “smart” irrigation systems, which reduce water consumption dramatically by linking up with weather satellites to identify efficient watering schedules, depending on the forecast. Other options to reduce water usage include simply reducing the turf where there are expansive areas of coverage.

Of course, the extent of renovation depends on the budget for each property, but one thing remains the same – plan ahead. Switching to drought tolerant material can be an expensive endeavor, even when incentives are available. But there are incentives that can prove advantageous, which vary by city and sometime include multiyear paybacks.

Prior planning also ensures the tenant and property owners are equipping themselves for the future, as the cost of water is expected to only increase over time, which will affect a building’s expenses, value and bottom-line in the long run. Putting a plan in motion to identify easy reductions and work toward reducing turf areas will be imperative for future compliance.

When consumption is reduced, this leads to a lower water bill, which typically benefits the tenants and has the potential to make the asset more appealing, since the common area maintenance (CAM) expenses would be less. Tenants are always concerned with these CAM expenses, and if the asset is cheaper due to lower expenses, everyone looks good in the end.

In office and full service gross leases, the owners take advantage of lower expenses because many pay all the CAM expenses for tenants. Most industrial leases are NET, and thus pass the property expenses directly to the tenants – in which case the lower the costs, the better the asset looks.


Griffin Cogorno is Director of Client Services at Unire Real Estate Group, a Southern California-based asset management company with an industrial and office portfolio in excess of 35 million sf. The Unire Group manages properties throughout the six-county Southern California region, as well as the Greater San Francisco Bay area, and Las Vegas, Nevada, and handles property, transaction and construction management. To learn more, please go to: http://www.uniregroup.com .









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