Crowded Area Could Be Candidate for Redevelopment
Hoping the market will eventually embrace 40,000 more square feet of office and lab space, Chris Loughridge and his partners are planning to build on a piece of vacant, private land wedged between Interstate 805 and Sorrento Valley Road.
Several hundred yards to the southeast, across the highway, some 273,000 square feet of brand-spanking new, Class A office space has risen in a pair of six-story towers.
One tower at the Sorrento South Corporate Center now has a statistically significant sign of life on its ground floor: Starbucks Corp. has hung out its shingle.
Sorrento Mesa and Sorrento Valley , San Diego’s prime spots for technology businesses , are creeping toward build-out.
These adjacent communities have only a few vacant parcels. Depending on the pace of the economy, build-out could be complete within the next 24 months, estimated Gary London, principal with the San Diego-based London Group Realty Advisors, Inc.
These unidentical twins , newer, more expansive Sorrento Mesa and older, linear Sorrento Valley , may even be headed for redevelopment, if a few land-use experts are right.
Granted, the economic downturn has freed up significant leasable space in recent months.
San Diego’s North City region, which includes Sorrento Valley, Sorrento Mesa and surrounding neighborhoods, had a 7.4 percent commercial vacancy rate during the second quarter of 2001, said Nathan Moeder, a London Group research associate. That compares to a vacancy rate of 2.8 percent at the end of 2000, and 1 percent at this time last year, he said.
Leasing is stagnant elsewhere, too.
– Site Sought For New Tech Park
Acting on a commission from the San Diego Regional Economic Development Corp., London’s company released a study this spring on where San Diego County might put its next technology park. Possible sites ranged from Santee to Otay Mesa to the old Carlsbad Raceway.
Since the study came out, no area has emerged as the top candidate for the park.
“The market is on sabbatical right now,” London said last week. “Nobody’s expanding.”
To be sure, Sorrento Valley and Sorrento Mesa are coming off a building boom.
Between 1995 and 2000, some 314 acres of employment lands in the city’s Mira Mesa planning area were put to use, according to a different study , an employment lands inventory , published by the Economic Development Corp. in November.
The Mira Mesa planning area has commercial land on Sorrento Mesa, as well as more established commercial neighborhoods along Miramar Road.
During the same years , 1995 to 2000 , some 287 acres of employment lands in the Torrey Pines planning area were put into use, according to the inventory. Those lands are primarily in Sorrento Valley.
London said the principal attraction of Sorrento Valley and Sorrento Mesa is its proximity to UCSD and the presence of technology innovators like Qualcomm Inc. , as well as its proximity to “dynamic” residential areas like La Jolla, Carmel Valley and Mira Mesa.
San Diego is “underzoned” for industrial land, said Sanford Goodkin, another local observer of the real estate scene. That places demand on spots such as Sorrento Valley and Sorrento Mesa.
– Survival Strategies
– Survival Strategies
With the neighborhoods getting crowded, commercial tenants in those North City neighborhoods have hit on three strategies to survive, said Erik Bruvold, a vice president with the EDC.
Those strategies are:
o Go vertical. Companies elect to put more floors on their buildings. The towers at Qualcomm headquarters are a case in point. They have seven stories.
o Get closer. Some companies elect to put more people into their existing workspace, Bruvold said, applying strategies like making cubicles smaller.
o Go elsewhere. Communications chipmaker Applied Micro Circuits Corp. seems to be following that strategy. Though its contractors are putting together a new building on Sequence Drive near its Sorrento Mesa headquarters, AMCC also recently bought 31 acres of land in the South Poway Business Park.
The London Group’s Moeder said builders will likely respond to demand by taking the first route and building upward.
New construction on Sorrento Mesa or Sorrento Valley will likely incorporate three or four floors, he predicted.
Meanwhile, the ’60s-era buildings in Sorrento Valley are showing their age. At least one developer has torn one down to start anew.
Older buildings have other problems too. In some cases, the spaces were developed for multiple tenants, so they have multiple entrances and lack flexibility, Bruvold said.
London thinks there will be many such building replacements over the next decade, and Sorrento Valley may soon resemble Sorrento Mesa.
“There are a lot of developers nosing around in that market,” he said.
Goodkin , who as principal of Sanford R. Goodkin & Associates tackles real estate and organizational problems , sees opportunities to redevelop both Sorrento Valley and Sorrento Mesa, and increase density there.
An experienced developer might find a “sleeper opportunity” in those neighborhoods, he said.
Goodkin added Sorrento Valley and Sorrento Mesa could even be ripe for a redevelopment agency.
Think of a northern counterpart to San Diego’s Centre City Development Corp. Boston and Miami Beach have successfully approached its redevelopment projects this way, he said.
Goodkin said such an agency could look at the big picture of future development, coordinate land use and provide advanced planning for the region.
Such overall planning offers what Goodkin called “discipline,” or predictability. Investors, builders and developers welcome such predictability, he said, as it helps them figure out whether doing work in a particular area will pay.
Back along Sorrento Valley Road, Loughridge and his development partners have a large sign up on their vacant lot. They are trying to drum up interest in their future building.
San Diego City Hall has given the plans conceptual, if not outright approval, Loughridge said. But since the land is in the coastal zone, the partnership needs an OK from the state Coastal Commission.
Loughridge admits he worries that the Bay Area’s real estate woes may migrate south to San Diego.
But long-term, he said, he’s hoping a two-story biotech/general office building with 40,000 square feet will be a fruitful investment.
