Construction: Catellus, Lankford, JMI Among Firms Set to Build
A half-dozen new office building projects are on the drawing board for Downtown, setting the stage for the first major office space development in the city’s core since 1991.
Some of the projects are only speculative, but they provide early sketches of a Downtown ready to build again after a decade-long draught of new office space.
Despite an unsure economic future and the flattening of vacancy rates, those involved believe demand will be heavy , though probably not heavy enough to accommodate all of the proposed projects.
By the end of the year, construction cranes should be a part of the skyline, and new buildings are planned to open between 2003 and 2005.
On May 16, the Centre City Development Corp. approved design plans for One Santa Fe Place, a proposed 26-story, 530,000-square-foot office building on the north side of Broadway, between Pacific Highway and the Santa Fe Depot.
If completed, the tower would be the first high rise built Downtown since the One America Plaza in 1991.
One America Plaza’s completion marked the end of a whirlwind of construction Downtown.
From 1989 to 1991, six high rises sprouted in the area, burdening the market with 2.3 million square feet of commercial space.
This overzealous construction, combined with an economic tailspin and the savings and loan crisis, drove vacancy rates up to 24 percent Downtown.
Developers and planners hope to avoid a repeat of a decade ago.
“We are a city of excess,” said Peter Hall, CCDC president and COO. “It’s either feast or famine when it comes to Downtown development.”
Planned Projects
CCDC is actively encouraging more office building construction Downtown to compliment the burgeoning residential construction and as part of the growing vision of San Diego as a “24-hour” cosmopolitan city.
Besides One Santa Fe Place, there are five other office building projects being discussed for Downtown.
They include:
– A 26-story, 430,000-square-foot building by Lankford & Associates, Inc., on the southeast corner of Kettner Boulevard and Broadway. Jason Hughes, principal and co-founder of San Diego commercial real estate brokerage Irving Hughes, said one of his clients has already signed a letter of intent for 120,000 square feet and another is close to doing the same for 150,000 square feet , making the prospective building close to being 50 percent preleased.
Hughes said construction could begin as early as the end of the year and the building could be done by mid- to late 2004. (A separate, mixed-used development that Lankford is involved with could also add more than 100,000 square feet Downtown in less than three years.)
President and CEO Rob Lankford said it his company’s first venture Downtown in its 16 years in San Diego.
“We’re really focused on Downtown because of all the enthusiasm and excitement down there,” he said.
– Campus at the Park, an urban technology campus consisting of three mid-rise buildings totaling about 436,000 square feet of office space. The JMI Realty, Inc. project is on hold alongside the Padres ballpark.
– East Village Square, a mixed-use development by JMI featuring 350,000 square feet of office space. The development is also waiting for ballpark construction to resume.
Arrowhead Insurance and Cox Communications have already signed on for space.
– First National Bank Building, a rehabilitation of San Diego’s first-ever high rise, which is on the corner of Fifth Avenue and Broadway. The project is being undertaken by Santa Monica-based Watt Commercial Properties and features 100,000 square feet of office space.
Property manager Nadine Watt said the rehab will likely be approved by the San Diego City Council in July, and construction will begin this summer. The building will be ready by Feb. 1, she said.
No preleasing has been announced, but Watt said there is interest in more than 50 percent of the space.
– Two Santa Fe Place, the second phase of San Francisco-based Catellus Urban Development Corp.’s construction. The 20-story, 374,000-square-foot tower would stand adjacent to One Santa Fe Place.
Joel Mayne, vice president of San Diego leasing and development for Catellus said there is no time frame for the second tower.
“When the market can support it, we will go ahead and build it,” he said, adding that the site could possibly also be used for a hotel.
As for One Santa Fe Place, Mayne said the company is working on the building’s design and permits, as well as preleasing.
Catellus intends to have the building 50 percent subleased before it begins construction in the first quarter of 2002, though it hasn’t announced any preleasing yet. The tower would take two years to complete.
The Market
But Hughes, who said he does 70 percent of all tenant leasing Downtown, doubts the Catellus project will go forward any time within the next five years.
“The reality is, that building will not go forward without any preleasing,” he said. “The market won’t support a Catellus building and a Lankford building. Because the Lankford building is preleased, that’s the building that will get the financing.”
Lankford said he believes there can be room for both projects.
Mayne, the Catellus vice president, said the company wouldn’t break ground without having the building 50 percent preleased , something they hope to have done by the first quarter 2002.
He said the plot is one of the finest pieces of undeveloped, bayfront property on the West Coast and Catellus wouldn’t rush into a project if the market didn’t support it.
“We want to make sure when the timing is right, we are there and leading the charge,” Mayne said.
Hughes also cast doubt on the Campus at the Park development, saying that it will likely be switched to residential use barring the signing of a large tenant like Sun Microsystems.
“I don’t think the market is there for a suburban-style technology campus Downtown,” he said.
JMI director Joe LaBreche said there are no specific plans to use the land for anything other than office space. But, the company certainly looks at changing markets when evaluation projects, and a switch to residential is never ruled out, he said.
The planned office space from Campus at the Park is part of an agreement with the city calling for 600,000 square feet of office space to be built by JMI Realty, a subsidiary of JMI Inc., whose chairman is Padres owner John Moores.
However it shakes out, there is little worry of a return to the overbuilding that occurred a decade ago.
