San Diego Running Out of Land
The Aztecs in the NCAA Tourney isn't the only thing to crow about. From the mountains and the sea to Mexico, this county is running low on land, which means tighter markets ahead. (And closer fences for your backyard homerun derby.)
Colliers SVP David Santistevan, who specializes in land sales for apartment, condo, and single-family subdivision development, says it's a feeding frenzy. Homebuilders are positioning themselves to have inventory over the next few years, and it's difficult without large tracts of land or master-planned communities being produced. This run "could very well gobble up most of the future housing supply. After that, we're definitely going urban infill--it's going to be all about density." Expect to see a new wave of condo and townhome development. We'll be taking a look at the entire San Diego State of the Market on March 26 at the Hilton San Diego Bayfront. (We'll be taking a look at the entire San Diego State of the Market on March 26 at the Hilton San Diego Bayfront.)
And what about office? Among San Diego County's submarkets, the top performers are Del Mar Heights, Sorrento Mesa (largely driven by Qualcomm), and UTC, CBRE SVP Jeb Bakke tells us. Other markets, like Kearny Mesa and Mission Valley, are getting healthier, too, and rental rates are rising. Declining vacancy in well-located Class-A product has prompted repositioning of B and C buildings to make them more competitive. Where will sites for new office construction come from? Redevelopment of older buildings is the name of the game.
Some projects to keep an eye on: The Irvine Co has said it likely will start a third building at La Jolla Center in UTC, joining two existing ones (above). In addition, Sempra's 330k SF corporate HQ broke ground in the East Village. Others include Kilroy projects in Sorrento Mesa and Del Mar. According to CBRE, Downtown rents are slowly rising and the pendulum should start swinging back to the landlords of Class-A high-rises this year. In addition, mid-rise buildings in vibrant, mixed-use neighborhoods (think Little Italy and the East Village) will attract office tenants with younger employees. (Let the adults have Big Italy.)
In addition, Sudberry Properties and MedImpact are planning 125k SF of Class-A office space at The Watermark, a non-residential mixed-use town square development that also will include a business hotel, market, small theater, shops, and restaurants. And Cypress Office Properties and TriGate Capital, which recently bought Scripps Corporate Plaza (above) on the I-15 Corridor, plan significant renovations to the three-building complex, adding more parking and collaborative space.
David Santistevan, along with colleagues Gunder Creager and Ciara Layne-Trujillo sold just under 29 acres in Pacific Highland Ranch to Taylor Morrison Homes for $34M-plus. Residential building permits in the county are on the rise. They're projected to hit 6,000 multifamily units and 3,100 single-family units this year, versus 5,690 and 2,565 units, respectively, in 2013. (Fact: If the home you buy is built on one of those red lines, all your water will taste like strawberry.)
On the retail side, Terramar Retail Centers opened The Headquarters, its $40M renovation of the Old Police HQ next to Seaport Village. With restaurants like Eddie V's and Pizzeria Mozza from celeb chefs Mario Batali and Nancy Silverton, it's at the forefront of a new retail trend: having great restaurants including fine dining as anchors.
Quick reminder: we'll be hosting our first annual Bisnow San Diego State of the Market on March 26 at the Hilton San Diego Bayfront. The event will feature top players like Doug Wilson, Biomed Realty's Alan Gold, Terramar's Steve Bowers, OliverMcMillan's Paul Buss, Dealy Development's Perry Dealy, and AVRP's Doug Austin. Sign up before it's too late.