Insight

San Diego development is building up, not out

October 23, 2013


By SAMANTHA HENRY
, The Daily Transcript

Once-overlooked properties are now the center of the action as developers build up instead of out.

Properties that were overlooked in the 1970s, ’80s and ’90s may have been passed over because they were too difficult, too small, opposed by neighbors or had entitlement or hazardous waste issues, said Gary London, president of The London Group Realty Advisors. The focus has shifted back to those properties for good reason, he said.

“The development industry that preceded the Great Recession doesn’t exist anymore,” London said. “Those guys that built … homes mostly are gone. Those who are left are building sort of their own suburban infill projects.

“The people that are really at the center of where the action is are the people … who are taking a look at these properties that were once overlooked, and they said to accommodate the population and the growth that’s projected for San Diego … we have to look at these properties again and we have to figure out new, innovative ways to develop them. And that means what has happened since the Great Recession is a certain renaissance of new companies filled with people with new skills and new kinds of ambitions.”

Panelists discussed projects in the works that seek to accommodate those needs at an event Wednesday hosted by San Diego State University’s Corky McMillin Center for Real Estate.

Robert Little, vice president of development for Kilroy Realty, explained how its One Paseo project in Carmel Valley will serve the marketplace, which is looking for collaborative-lifestyle-driven workplaces with an emphasis on LEED and sustainability. One Paseo is on 23 acres and is designed to have three land uses: retail, office and residential.

The design features a Main Street environment with residential and a cinema over the shops on Main Street. Little said the project creates an “authentic heart of the community,” which he said is lacking in that area. Discretionary income leaves the area because there aren’t enough amenities there, Little said. He added that he believes the combined uses will benefit each other.

The project has faced some controversy with residents in the area opposing it, claiming it will increase traffic. Little said it adds trips to the system but in a mixed-use format, which ebbs and flows differently than a single-use property.

Little said that through the process the company tried to improve and rethink the plan to address concerned citizens, but “you can never make everybody happy.”

The tension from any project comes from the change it creates, London said. From a market perspective, London said the project is a “no-brainer” and may serve as a model for allowing people to live, work and shop in a community.

Richard Paul Buss, president of OliverMcMillan, also faces residents’ complaints with a property in Hazard Center in Mission Valley. The property was built in the 1980s and is “ripe for a re-do,” Buss said. The project is designed to have more than 450 residential units in row homes and two tall residential buildings.

“This kind of infill is good for our city. That doesn’t mean it’s easily accepted by those in low-rise condos,” Buss said.

The project is waiting for a tunnel to be built under the trolley pass to access Fashion Valley, Buss said, and doesn’t expect to break ground for two to three years due to marketplace issues, adding that the primary issue is that approvals are tight.

Marco Sessa, senior vice president of Sudberry Properties, said the company’s Civita project in Mission Valley has 1,500 units in various phases of development. The project looks to satisfy those who want the orderly nature of a master plan but the urban feel, Sessa said.

Younger people want to live in urban, not suburban, areas, Buss said.

Two large groups of buyers and tenants at Civita are 25- to 35-year-olds with kids younger than 5, and a 55-and-older group.

Similarly, Little said, One Paseo hopes to provide more housing and price point options to those who don’t live in Carmel Valley because of the cost. He said there are many locals who “love the idea of downtown” and the walkability aspect, but don’t want to leave their community or network to move to downtown.

Mixed use can become “mixed-up use” when too much is stacked in one area, Buss said. London added that the goal is to create a community where the uses complement each other.

London said some of the richest people he knows are people who never sell. Sessa said Sudberry plans to own its rental projects indefinitely.
Little said One Paseo maximized its flexibility to be sold off in pieces, but there is a long-term hold strategy and intent to hold all pieces. Buss said the company intends to hold about half of the project.