Civic leaders are gearing up for big changes at San Diego’s iconic Balboa Park as it nears its 2015 centennial. But developers are also at work on smaller, lower-profile commercial projects that they hope will transform some neighborhoods adjacent to the park into popular urban hubs.
Many are envisioned outside downtown’s hotter development corridors like East Village and Little Italy, aiming to transform just a small property or two at a time. For instance, Blokhaus Development, led by nationally known local architect Graham Downes, recently spent $5 million to acquire three Bankers Hill parcels, about a block away from Balboa Park.
The company plans an extensive renovation of the businesses currently in place at Fifth Avenue and Maple Street — The Britt Scripps Inn, Mandarin House restaurant and Evergreen Apartments, which will continue to operate for now — and there is also some empty land where Downes said the firm is considering building about 25 luxury apartments.
Downes has long been fascinated with Bankers Hill, where he resides and which he said epitomizes some of San Diego’s best midcentury, 1960s and 1970s commercial architecture. He is aiming to attract a sophisticated urban clientele to his company’s newly acquired properties near the western edge of Balboa Park, possibly by adding an upscale bar or bringing in adjacent elements like a bistro or marketplace.
As attention turns to Balboa Park’s centennial date, Downes said a renovation of that icon could help spur more interest in neighborhoods directly adjacent, though those areas likely will continue to be transformed in fits and starts in coming years.
Incremental Changes
“We’re not going to see a lot changed by one event — it’s not like the Olympics or anything,” he said, noting his emphasis remains on “old soul” neighborhoods that increasingly are attracting younger urban professionals to the downtown area.
Danny Fitzgerald, associate vice president in the Urban Strategies Group of brokerage firm Cassidy Turley San Diego, said he knows of at least 10 smaller-scale projects that have moved forward in the past 18 months, emphasizing apartments with ground-floor retail in neighborhoods including Bankers Hill, Mission Hills, Hillcrest, North Park, University Heights and Golden Hill.
In many cases, older buildings are being renovated to attract baby boomers and younger professionals increasingly drawn to relatively affordable apartments close to work and entertainment centers.
Fitzgerald said a number of infill apartment projects have been completed and successfully leased up in older established urban areas since the end of the recession, such as The Charmer, MXD and Centre Street Lofts. As a result, infill developers are “in a craze” to find available properties in neighborhoods with relatively affordable development costs, which help keep rents low.
‘Smaller Is Better’
Most of the newer projects are apartment focused, meaning developers have a wide array of funding sources among eager lenders. A bigger factor encouraging a “smaller is better” philosophy is parking.
Fitzgerald noted that some of the higher profile apartment projects in San Diego — with 100 to 300 units, in places like East Village and Little Italy — have had to comply with city rules requiring that surface parking spaces be matched with a corresponding amount of underground parking, which is costly to construct.
“The reality is it’s more a result of land economics — supply and demand — and park-adjacent property is some of the last great land left for housing and mixed-use projects at 30 to 70 units to the acre, without costly underground parking,” said Fitzgerald, whose firm represented Blokhaus in its acquisition.
A recent apartment investment report by the brokerage firm Marcus & Millichap noted that the Balboa Park area has one of San Diego County’s lowest vacancy rates, at 1.5 percent, and rents there have risen 3.3 percent in the past year.
Because of rising demand and limited new construction, researchers projected that the county’s overall apartment vacancy rate would stand at 2.7 percent by year’s end, among the lowest for major U.S. metro areas.