Commercial broker Danny Fitzgerald’s firm has fielded more than a dozen offers for the space being vacated by the popular Croce’s restaurant in the heart of the Gaslamp Quarter. A new tenant could be announced in mid-September by the property’s landlord, the Keating Hotel. Many of those queries are from major national and global restaurant industry players.
It’s a sign of the times in the bustling historic quarter, where an already tight supply of retail space has grown even tighter this year, and rising rents have spurred a series of property acquisitions by local and out-of-town investors.
“When any space becomes available now, 10 guys are waiting in line to occupy it,” said Fitzgerald, an associate vice president in the downtown office of Cassidy Turley San Diego.
Local brokers and investors said retail property in the Gaslamp — a 16-block district spanning from Fourth to Sixth avenues near Horton Plaza — is well poised to take advantage of the boom in downtown apartments. Nearly 2,000 new apartments are under construction or in the pipeline, the bulk of them in the nearby East Village and Little Italy.
Those apartments will bring people needing places to eat, drink and socialize within walking distance. Future new development at nearby Westfield Horton Plaza and the Embarcadero, as well the planned expansion at San Diego Convention Center, are expected to bring even more visitors to the Gaslamp.
Increasing Property Values
Trends are already moving in favor of Gaslamp landlords. Fitzgerald noted that spaces that might have been leased for $3 or $4 per square foot two years ago are now typically renting for $5 to $7 per square foot. In purchase terms, prime properties that might have been acquired for $300 to $400 per square foot are now selling in the range of $600 to $1,000 per square foot.
The scenario is not lost on firms such as San Diego-based HP Investors LLC, led by industry veteran and company President Harki Parekh. The company in the past two years has acquired six downtown retail buildings, with an additional one under contract, within the Gaslamp Quarter and East Village.
The company’s most recent purchase was the Gaslamp building housing the Buca di Beppo restaurant on Sixth Avenue, which it acquired for $5.7 million.
“We are very positive on the downtown area,” said Sumeet Parekh, a principal at HP Investors. “We are not interested in flipping properties; we are really focused on long-term value in these types of urban centers.”