Santa Fe, Broadway Will Be First Class A Buildings in Downtown in a Decade
Two developers are in a race of sorts to build the first Class A office tower in Downtown San Diego in more than a decade.
The most publicized project so far is by San Francisco-based Catellus Urban Development. Plans for One Santa Fe Place, at Broadway and Pacific Highway, have received the city’s approval. So far, no leases have been signed.
Meanwhile, on the southeast corner of Broadway and Kettner Boulevard, one letter of intent has been signed for about one-fourth of Broadway 655, and another lease may be completed soon with San Diego-based developer Lankford & Associates Inc.
That 460,000-square-foot, 26-story office tower project will come before the City Council for approval of its conceptual design and the development agreement Sept. 11.
Pam Hamilton, senior vice president of the Center City Development Corp., explained Lankford & Associates will acquire portions of the site and lease it back from the Wosk family, which already owns 20,000 square feet of the 76,000-square-foot site.
Joel Mayne, vice president of leasing and development for Catellus’ San Diego operations, said his company has had a development agreement with the city since 1993. Catellus has been refining its plans for Santa Fe Place since then.
Railroad Land
Catellus Development Corp. was formed in 1984 as the real estate arm of Santa Fe Pacific Railroad. The urban development group handles the redevelopment of Santa Fe Pacific’s urban properties, which includes the Santa Fe Depot and surrounding parcels.
The Santa Fe Depot will continue to serve as a downtown transit hub. The CCDC is in negotiations with the San Diego Museum of Contemporary Art to lease the depot’s baggage building to the north.
In addition to the Santa Fe Depot buildings, Catellus’ 15-acre site will accommodate One Santa Fe Place, with four underground levels of parking.
Also, Two Santa Fe Place is planned across Broadway from the first office tower. The smaller second office tower could be developed as a hotel instead, Mayne said.
Bosa Development Corp. of Canada plans to build two condominium buildings and plans to break ground on the first tower in the fall, completing the building in the fall of 2003.
The site could also accommodate a 1.2-million-square-foot technology campus, or other types of development, Mayne said. “When built out, (the site) could have a value of $1 billion, with 7,000 people in the living and working population,” he said.
Downtown Revitalization
Mayne said Catellus envisions Santa Fe Place as part of Downtown’s revitalization, bringing both housing and employers to the area.
Catellus is in the process of finalizing design plans and putting together its construction documents for One Santa Fe Place. The developer expects to have its construction permits and be ready to break ground by the first quarter of 2002 on the 26-story, 530,000-square-foot office tower.
“We’re in our leasing effort to pre-lease at least 50 percent of One Santa Fe Place to get financing for the project,” Mayne said.
Catellus is still working out its lease rates, but for now, monthly rates are being quoted at $3.25 to $3.50 per square foot, according to Mayne. Currently, lease rates Downtown top out at $3 per square foot.
The economic slowdown in 2001 has impacted leasing at One Santa Fe Place.
“The good news is the technology and other sectors that really suffered hasn’t hurt Downtown,” Mayne said.
While there is a need for office space Downtown, demand is lacking while major prospective tenants postpone their decisions as they gauge the impact of the economy on their operations, he said.
However, Mayne added, “Demand is filling up developments from the late ’80s and as a result, rents are pushing up enough to justify new development.”
Downtown Vacancy Rate
According to Jason Hughes, a principal at San Diego-based tenant representation firm Irving Hughes, the vacancy rate Downtown is 4 percent and lease rates range between $2 and $3 per square foot.
Catellus is courting traditional Downtown clients, such as law firms, government agencies and finance companies. But, Mayne said, he is also in discussions with “new blood” , technology firms and corporations outside of San Diego.
Lankford & Associates has been courting at least one attorney for its building. The developer has a commitment from law firm Milberg Weiss Bershad Hynes & Lerach LLP for 113,000 square feet on the 21st through 26th floors of Broadway 655.
Stacey Lankford, director of special projects, said a second commitment is expected to be announced soon for more than 100,000 square feet.
The office tower is expected to cost $150 million. According to Stacey Lankford, construction is likely to begin in May and last for two years.
Office And Retail Space
The 26-story office tower will also include 6,000 square feet of retail, 6,000 square feet of restaurant space and 750 above- and below-ground parking spaces. Lankford & Associates is not disclosing its lease rates.
A separate 16,000-square-foot residential building is planned on the E Street side of the property behind the office tower’s parking ramp, in line with neighboring Koll Center.
Robert Lankford, president and CEO of Lankford & Associates, said, “I think the first high-rise Class A office building in more than a decade is truly a part of the new renaissance in Downtown San Diego that has been evidenced in so many ways, mainly through the new residential projects.”
Hughes, whose firm has been involved in negotiations for space at Broadway 655, acknowledged that 4 percent vacancy is low. But, he said, Lankford & Associates has its building 65 percent pre-leased and Catellus does not. He added, “The market will not support both.”
