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San Diego Office Market Draws New York Investment Firm

A New York real estate investment firm has acquired a Kearny Mesa office building as its entry into the San Diego County market where it says more acquisitions are planned.

Sason bought Chesapeake Corporate Center, 9555 Chesapeake Drive, with plans to make significant renovations, said Joshua Sason, a principal of the firm.

The company didn’t disclose how much it paid for the property, but said $1.5 million in renovations are planned.

“We’ve been looking at San Diego for the better part of the last year-and-a-half,” Sason said. “We believe in San Diego and are continuing to look at growing our presence in the market with future acquisitions of properties where we can create best in-class environments that embody the future of work.”

 

Modernizing Planned

Renovations planned for the Kearny Mesa property include changes to the façade, new landscaping, a new roof, creating indoor/outdoor work area off the building’s three lobbies, updated elevators, lighting and other mechanical systems.

The architect, L7 Studio Architects, is based in UTC.

“The bones are particularly attractive with this building. The glass façade is something we enjoy,” Sason said. “We’re going to modernize and update the façade. We’re going to create these outdoor patio spaces off the building lobbies. We’re completely renovating and modernizing each of the lobbies.”

Part of the building, renamed Canvas, is leased but Sason is remodeling a 17,000-square-foot suite and a 3,000-square-foot suite.

“San Diego and specifically the Kearny Mesa submarket is attractive because of the sustained tenant demand and the unparalleled level of amenities and connectivity afforded by the location,” Sason said. “At Canvas, we’re targeting forward-thinking companies who value design-forward indoor and outdoor workspaces and overall wellness.”

Traditional Tenants Displaced

Part of the appeal of the San Diego office market stems indirectly from the influx and expansion of life science and biotech firms.

Property owners catering to the life science market have been rapidly converting traditional office space to life science labs and research space, which commands higher rent.

“This significant influx of life science in Sorrento Valley and Sorrento Mesa has been displacing traditional office tenants from these submarkets,” Sason said.

“Kearny Mesa really sets up perfectly for that sort of transitional element.”

Richard Gonor, executive vice president of JLL in San Diego, said that traditional office tenants are looking for new locations.

Gonor said that submarkets like Kearny Mesa, Scripps Ranch, Mission Valley, among others, “are primed to see increased tenant demand for office space.”

“There’s a lot of tenants that are getting displaced now, not only in Sorrento Valley, but in other submarkets,” Gonor said, adding that some building owners are offering incentives to companies to move out before leases expire so the space they occupy can be converted for life science.

“That’s putting more activity out there into the (office) market,” Gonor said. “Sason sees an opportunity to come into San Diego and provide products in attractive areas where they can reposition buildings to create the kind of creative office product these tenants are looking for.”

Added to that, Gonor said that the market for traditional office tenants has improved remarkably.

“In 2020, it was extremely quiet. Unless a tenant had to do something, your typical office tenants were kicking the can down the road and waiting to see what was going to transpire,” Gonor said. “What we’re seeing is that more companies are starting to require workers to come back, at least part time.”

Gonor and Tony Russell, a managing director of JLL in San Diego, represent Sason in leasing.

Strategy

Cresa, a commercial real estate brokerage, reported that office leasing at the end of 2021 had reached its highest level since the pandemic began.

“More than 7.8 million square feet of space was leased, with levels approaching recent historical averages,” according to Cresa. “The fourth quarter of 2021 surpassed 2 million square feet of lease transactions.”

Heading into 2022, Cresa projected that “steady gains throughout the office market will continue to rise.”

Sason’s strategy since it was founded in 2009 has been to focus on office investments, primarily in Sunbelt cities, and the firm saw no reason to change strategies when COVID hit.

“We launched the strategy around office prior to COVID. We actually accelerated acquisition activity throughout COVID,” Sason said. “We’re quite pleased with the direction of our acquisitions.”

Sason

Founded: 2009

Principals: Ari Sason, Joshua Sason, David Rottenberg

Headquarters: New York

Business: Real Estate Investment Firm

Employees: 10

Website: www.sasonorg.com

Contact: 347-270-8814

Notable: Sason is a family owned business that invests across real estate asset classes thematically, with a focus on emerging US markets and a preference for special situations.

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