Vast Forward

Heavily populated, tech-savvy and growing, California’s VT market shows no signs of slowing down.

Third-generation elevator man Mike Shaw, field operations manager at Republic Elevator Co., roughly 8 mi. west of Santa Barbara, remembers getting his first elevator paycheck in 1971 from San Bernardino-based Oliver & Williams Elevator Co., where his father was vice president of operations. That same year, journalist Don Hoefler would unwittingly coin a now-famous phrase when he wrote a series on the semiconductor industry for Electronic News called “Silicon Valley USA.” Referring to what has become an almost US$3-trillion neighborhood just south of San Francisco, Silicon Valley is a 1,854-m² area that continues to drive business for all kinds of industries — including vertical transportation (VT) — thanks to companies like Apple and Google.

To provide one example, the City of Santa Clara in Silicon Valley is partnering with Related Cos. to create a 9.2-million ft² mixed-use development called Related Santa Clara. Although its 2021 groundbreaking was postponed by the COVID-19 pandemic, the project is still happening. It promises to bring offices, retail, residences, hotel rooms and a 30-acre park to 240 acres adjacent to Levi’s Stadium.

Rob Cuzzi and Mike Smith, president and CEO, respectively, of VT consultancy VDA, recently told your author Related Santa Clara will include “several hundred pieces” of VT equipment, no doubt bringing in a good number of industry players — from equipment manufacturers to suppliers. Because of the times in which we live, these could very well include companies that offer touchless and germicidal technologies. “The design of Related Santa Clara has actually changed several times in light of the pandemic,” Cuzzi said. “The project is still in flux because of COVID, and there are a lot of challenges involved in that.”

Beyond the uncertainty of the pandemic and COVID-19 protocols, VT players in California list a strict regulatory environment, scarcity of good labor, global supply shortages, rising materials costs and the requirement to build more robust VT systems due to much of the state being in a seismic zone among challenges. Still, their California business outlook is almost universally bright, thanks to an array of factors, including:

• Older buildings that are prime for modernization

• The upcoming 2028 Summer Olympics in Los Angeles

• Continued need for housing

• High land prices and continuing urbanization driving construction “up”

• Customers regarding themselves as “innovation leaders” eager to adopt the latest technology

According to Mitsubishi Electric Director of U.S. Operations Erik Moeller, who is based in Cypress, California, cities including L.A., San Diego and San Francisco are among those embracing the “smart tech” trend. California customers, he says, were among the first to adopt technologies like destination dispatch (DD), and they continue to find new and innovative ways to integrate it.

Twinky Chai, Otis senior director for Northern California, agrees, stating:

“Our customers in California have been early adopters of interactive technology that improves the rider experience. For example, we’ve sold many of our Compass® destination-dispatch systems. In addition, we are seeing increased interest in our eCall^TM app technology that allows passengers to call the elevator and log their destinations from their phones. We’re looking forward to introducing the latest version of this technology, eCall Pro, which can be integrated into a building’s existing tenant app.”

The pandemic resulted in a pause in activity in hospitality, entertainment and office projects as venues closed and many workers went remote, observes Marcus Burton, Otis senior director for Southern California. However, Burton says, business is starting to pick back up and company outlook for the next five-10 years is “optimistic.” Burton observes:

“Older buildings are prime for modernization, and that includes elevator upgrades. The 2028 Summer Olympics means further infrastructure investment, and the value of real estate is pushing growth and development vertical. Residential condominiums and apartments continue to be in high demand.”

A few relatively recent projects of which Otis is particularly proud are the Wilshire Grand Center in L.A. (ELEVATOR WORLD, September 2017), the Los Angeles International Airport (LAX) Midfield Satellite Concourse and the Chase Center indoor sports arena in San Francisco’s Mission District.

“Our façade-access offering thrives in California due to the unique requirements that [the California Division of Occupational Safety and Health] has promulgated related to worker safety.”

— Lerch Bates Vice President, West, Ken Dietz

Elevator and escalator manufacturers are hardly the only VT specialists reaping the bounty of business in California. Consultancy Lerch Bates, which opened its California office in L.A. in the early 1970s (one of its first expansions), planned the modernization or designed the VT systems serving many iconic structures in key cities, including the Wilshire Grand, says Ken Dietz, Lerch Bates West vice president. In L.A., it has worked on VT for the Lucas Museum of Narrative Art, SoFi Stadium (home of the National Football League’s L.A. Rams and L.A. Chargers), the Los Angeles County Museum of Art and contemporary art museum The Broad, in which Mitsubishi Electric U.S. also played a key role (p. ??). In San Francisco, Lerch Bates was involved in the VT design for the new George R. Moscone Convention Center and also partners with many of the city’s architecture firms for design work throughout Asia. “California,” Dietz says, “has always been a preeminent market for Lerch Bates.”

The state’s economy continues to thrive despite the pandemic, Dietz says, pointing to L.A., Silicon Valley, the San Francisco Bay Area and San Diego as “all actively involved in revitalization and growth.” The need for additional residential development, particularly in urban centers, is one of the main business drivers, he says.

Some of the challenges of doing business in California actually result in rewards for companies like Lerch Bates. Dietz says:

“The California regulatory environment requires firms doing business in the state to be engaged and willing to adapt to the unique requirements of the market, including enhanced expectations for safety and quality. As an example, our façade-access offering thrives in California due to the unique requirements that [the California Division of Occupational Safety and Health] has promulgated related to worker safety. Understanding the regulatory environment and aligning with our clients expectations are the hallmarks of all Lerch Bates offerings.”

California clients, Dietz says, distinguish themselves by “having a clear vision of their design expectations, which are holistic in that they are aligned with an environmentally and socially conscious worldview, along with aesthetics.”

Whether it’s TK Elevator bringing its first North American electric vehicle fleet car online in L.A. (EW, June 2021) or California office property managers rarely hesitating to install the latest pandemic-related bells and whistles, there is no question the state sets itself apart.

California clients distinguish themselves by “having a clear vision of their design expectations, which are holistic in that they are aligned with an environmentally and socially conscious worldview, along with aesthetics.”

— Dietz

Tom Ricci, managing principal, Development & Construction, at L.A.-based office property investor CoreTrust Capital Partners, LLC, shared with your author a story of contrasts between a property in the U.S. South and ones in California. At the property in the South, Ricci says, the manager of a Class-A office building went with the most rudimentary approach to public safety. He says:

“I walked into this building, which we used to own and is populated with blue-chip tenants, and in the elevator was a little stool in the corner with a wastepaper basket underneath it. There was a box of Kleenex on top and a sign that said, ‘Take a tissue, press the button, then throw the tissue in the trashcan below.’ There were also stickers on the floor directing people to stand a certain distance apart. That was their answer to making people feel comfortable in the workplace.”

In California, on the other hand, property managers rarely hesitate to install touchless technology, DD and needlepoint bipolar ionization (NPBI) elevator cab purification systems, of which Ricci is a strong proponent. They strive to put themselves ahead of the pack, Ricci says.

Along with the NPBI systems, CoreTrust has outfitted a 48-story office building in L.A. and four office buildings in Pasadena — the tallest of which is 15 stories — with UV-C wavelength radiation lamps in the ductwork, touchless technology and DD. Ricci elaborates:

“As for the NPBI systems, we felt it was an A-to-Z approach to deal with tenants’ concerns about coming back to the office. I think our office buildings are some of the safest places you can be. Still, for some reason, many people are a little shy about coming back to the office, even though they’ll go to huge sporting events and things like that. I’m not sure I understand that. . .but I think it has more to do with liking working from home and not having to commute rather than feeling like, ‘Oh my God, I’ve got to work from home to feel safe.’”

Long, Storied Histories

OEMs, suppliers and individuals have long, storied histories in California. Otis, for example, has a “rich history of firsts,” say Chai and Burton. In San Francisco, Otis:

• Provided equipment in 1870 for the first passenger elevator in the state at the Occidental Hotel (which was later destroyed in the earthquake and subsequent fire of 1906)

• Opened its first office in California at the turn of the 20th Century in the Mills Building on Montgomery Street

• Soon afterward, opened the first machine shop and first Otis factory at 1 Beach Street (Many of the installations from the factory are approaching 100 years old, and are still operational)

More recent entrants to the market, from small to large, show no signs of slowing down. Access Elevator & Electric Supply was established in Emeryville (between Oakland and Berkeley) in 1988 as a distributor of electrical components, General Manager Amber Butler says. Since 1994, the company has sold all major electrical components for the VT industry and recently began distributing elevator motors, pumps and other components. Out of the HVAC, plumbing and VT segments, Butler says, elevators are definitely the top business driver, with the busiest months of 2021 being September-December. Access aims to open a “few more locations in California” in the next few years. The company’s top challenge, she says, is finding qualified employees, followed by global materials shortages — in Access’s case, resin to make plastic.

Shaw, who has had stints as both a company owner and employee of the majors, was a project manager with Fujitec in the 1990s when City Lift built and installed the Fujitec elevators serving the Getty Museum in L.A. More recently, Shaw was with San Louis Obispo-based Republic Elevator Co. as part of the specialized team that modernized the 100-year-old clock tower elevator system at the Santa Barbara County Courthouse (EW, March 2016). That project implemented a machine-room-less (MRL) elevator system, which all involved felt was ideal for the job.

Hydraulic elevator systems, however, are going strong, according to Shaw. Although industry experts have, for years, projected the end of the hydraulic elevator, he says hydraulic business in California is as strong as ever and only growing.

As for geographic areas ripe for growth, Shaw points to the central California coast, which he says is underserved by the majors. He says:

“In the past three years, the few independents in the region have been absorbed by the majors, so there is a need for expansion in the area. The number of elevators registered with the California State Elevator Division is second only to Beijing, China. With so many units being more than 30 years old, the modernization market in California will be strong for quite some time to come. Finding qualified help seems to be the largest deterrent to extended growth.” 

“Our customers in California have been early adopters of interactive technology that improves the rider experience.”

— Twinky Chai, Otis senior director for Northern California

Expansions and M&A

Meanwhile, expansions and mergers and acquisitions (M&A) continue at a brisk pace throughout California. Mitsubishi Electric opened its second California office in San Francisco recently (EW, April 2021). (After entering the U.S. market with the Hotel Nikko job in San Francisco, Mitsubishi Electric laid down roots shortly thereafter in Cypress.) Cicero, Illinois-based Urban Elevator Service acquired Guardian Elevator Mechanical Services of San Diego in August 2021 (EW, October 2021). 3Phase Elevator, headquartered in Canton, Massachusetts, merged with Santa Fe Springs, California-headquartered Specialized Elevator Services early this year (p. ??), which followed SES opening an additional office in Sacramento in 2021 (EW, July 2021).

Industry veteran Shaw says the two major changes he’s seen in the VT industry over the years are the introduction of microprocessor technology beginning in the late 1970s and the consolidation of both majors and independents. Shaw says:

“The advent of the microprocessor has significantly changed our society, as well as our daily life. It has had the same effect on the elevator industry. The seasoned trouble-shooting elevator mechanic seems to have gone by the wayside, just as the lightbulb has been replaced by the LED. As a result of company consolidation, domestically, architects have far fewer elevator manufacturers to work with.”

Although manufacturers would beg to differ, Shaw also believes product variety and availability have declined significantly over the past 20 years, resulting in fewer products being available to end users. Further, he says, supply chain consolidation is having an adverse effect on independent contractors.

Meanwhile, the always-forward-thinking and environmentally conscious California has potentially big plans to revitalize the struggling Salton Sea area near Palm Springs. That’s due to the formerly thriving resort being home to vast reserves of lithium — the key component in electric and hybrid vehicle batteries. Gov. Gavin Newsome, who has set aside hundreds of millions of dollars out of the tens of billions in his proposed budget for climate-change projects, has referred to Salton Sea as “the Saudi Arabia of lithium.” In an op-ed piece for The Mercury News, Los Angeles Times writer George Skelton said lithium could be the area’s “economic salvation, providing hundreds and potentially thousands of good jobs.”

And while the lithium plants themselves might not be huge VT consumers, such an economic boom could mean more housing and mixed-use developments that do require VT.

References

[1] investopedia.com/terms/s/siliconvalley.asp

[2] Corey Protin, Matthew Stuart and Matt Weinberger “Animated Timeline Shows How Silicon Valley Became a $2.8 Trillion Neighborhood,” Tech Insider, updated December 18, 2020.

[3] en.wikipedia.org/wiki/Occidental_Hotel

[4] en.wikipedia.org/wiki/Emeryville,_California

[5] en.wikipedia.org/wiki/California

[6] laist.com/news/elevator-inspections-los-angeles

[7] Skelton, George. “Lithium Could Help Salton Sea and Fight Climate Change,” The Mercury News, January 21, 2022.