San Diego Business Journal

Not much has happened at the site of the former Robinsons-May building since it was torn down more than a year ago to make way for a new downtown public square park at Horton Plaza.

But the project now appears to be heading forward, after the San Diego City Council recently approved a bigger budget for the project, which is now at $17.7 million. City officials now anticipate a November construction start and year-end 2015 completion for the long-planned park, being built next-door to the Westfield Horton Plaza shopping center.

The city’s downtown project oversight agency, Civic San Diego, requested the adjustment — from the original budget of roughly $12.8 million — to cover construction and related contingency costs that have risen since the project was initially approved in 2012. The project expenditure now goes to state officials for formal approval, since the money comes from what was formerly the local community redevelopment agency, part of a program the state abolished in 2012.

San Diego officials recently awarded a construction contract of about $14.5 million to Echo Pacific Construction Inc. of Escondido, after receiving eight competitive bids for the project, according to a Civic San Diego staff report.

The city is building the park, which is on city-owned property, but is sharing some related costs for improvements in the vicinity with mall operator Westfield Group.

As part of the original approval process, Westfield Group demolished the former Robinsons-May building and transferred ownership of the land to the city. Westfield has agreed to maintain the new park for 25 years, and will be programming about 200 events annually for the venue, including concerts, festivals and holiday celebrations.

The park itself will also have retail and food pavilions operated by Westfield, with tenants still to be announced.

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Sunroad Hotel Project on Hold: Plans by locally based developer Sunroad Enterprises for a new 175-room hotel at Harbor Island have been delayed, while the Port of San Diego and the California Coastal Commission work out ways to provide more affordable hospitality options along the waterfront.

According to a California Coastal Commission staff report, the commission is asking the port district to adjust its long-term master plans for the eastern portion of Harbor Island — calling long-term for development of 500 hotel rooms — to require that a minimum of one-third, or 166, of those rooms be designated as “lower-cost overnight accommodations.”

Still to be worked out is what price would be considered low cost for the area and how the port district would enforce a pricing standard. Port officials noted in their recent response to the Coastal Commission that current planning standards do not give the port district authority to fix room rates for proposed hotel projects.

In the meantime, the port district said it is withdrawing its pending application with the Coastal Commission so that it can amend its master development plan regarding hotels on Harbor Island. For now, this means that Sunroad’s planned $30 million hotel project, recently approved by the port district, is on hold.

The project includes a four-story hotel with a fitness center, common areas and about 8,000 square feet of meeting space, with plans to demolish a locker building and parking lot near Sunroad’s existing marina building at the site. There would also be enhanced public access within East Harbor Island, with an extended pedestrian promenade and new landscaping, benches and signage.

Branding for the hotel has not been finalized, but Sunroad has estimated that room rates would average about $180 per night.

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Prime Retail Space Tough to Find: San Diego County’s ever-tight retail real estate market keeps getting tighter, thanks largely to very limited new construction of shopping centers in high-demand markets.

The region’s retail vacancy rate was 4.22 percent at the end of the second quarter, down from 4.38 percent in the prior quarter and the lowest vacancy seen in five years, Voit Real Estate Services recently reported.

The local retail vacancy rate was 5.2 percent at the midpoint of 2011, 5.3 percent at the same point of 2012 and 4.6 percent at the halfway mark in 2013, according to CoStar Group.

Voit noted that the average asking lease rate for retail space in the second quarter was up 1.14 percent from a year ago, at $1.78 per square foot.

“Thus far in the recovery, quality properties have been able to keep overall asking rental rates stable, but demand remains soft for marginal product,” the Voit report said. “As job creation continues and consumer confidence stabilizes, the retail market will continue to improve.”

Researchers noted that more than half of the local region’s largest retail property sale and lease transactions during the second quarter took place in the north-central part of the county. Big deals included the $12.5 million purchase of a 70,000-square foot retail center on Miramar Road by HP Investors LLC and Winslow Investments Ltd., and the leasing of a 23,720-square-foot space in La Jolla by movie theater operator Boffo Cinemas.

Send commercial real estate and development news of general local interest to Lou Hirsh via email at lhirsh@sdbj.com. He can be reached at 858-277-8904.