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Saturday, Jul 13, 2024

The Big Bang Theory

While apartments and hotels have gone up downtown at a comfortable pace, it remains an open question whether there will be enough new office buildings to meet downtown boosters’ hopes for a vibrant commercial center, especially in East Village’s 35-block I.D.E.A. District.

Developers and tenant representatives have said attracting companies to move downtown has been a struggle, which in turn makes it more difficult to finance office space. For years, many have said the area needs an anchor tenant, a major corporation that will move downtown, bringing smaller companies in its wake.

Sempra Energy recently built a new 16-story headquarters and The San Diego Union-Tribune plans to move downtown from Mission Valley, but those companies are not the mega-corporation backers believe will jump-start commercial interest. Instead, developers and downtown advocates are hoping a major research university, likely the University of California, San Diego, steps in as the needed anchor.

Pete Garcia, a veteran developer behind the IDEA1 project in the I.D.E.A. District, said his firm worked for more than a year to attract commercial interest, but found it difficult to pre-lease enough space in his project, which is going forward with 50,000 square feet of office space, half of what he initially envisioned.

“There’s an urgency aspect to this,” Garcia said. “The land downtown is getting gobbled up by residential and perhaps even by some project like a stadium. Once the land is gone, we’re cooked.”

Garcia and other IDEA1 backers wrote in 2014 that the single most important catalyst for East Village development was a major design and technology company establishing a headquarters there.

“The key to changing the perception of the district from blighted area to emerging employment cluster requires a visionary corporate leader,” they said.

Garcia is now looking at UC San Diego to lead a downtown charge, though he said it was not simply a result of striking out in the hunt for major corporate tenants. At the time, no major university had expressed interest, whereas UC San Diego is now considering a downtown expansion.

UC San Diego appears to be the only one of San Diego’s three research universities actively thinking about a downtown move. San Diego State University and the University of San Diego both said there are no current plans for expansion downtown. A UC San Diego spokesman said the school was exploring opportunities countywide, but associate vice chancellor of public programs and dean of UCSD Extension Mary Walshok said downtown specifically is being discussed by administrators.

“There’s a serious conversation at UCSD right now about how we might develop a more urban presence,” Walshok said. “Not just because it would be good for the city, but because it would be good for UCSD. Many of our students and younger faculty want to live in more urban environments, and there are interesting research questions that could be answered downtown, including urban design and housing.”

Walshok had mentioned the idea of a “co-laboratory” last summer that could be located in the I.D.E.A. District, but said that was just one of several options being discussed. Tight state budgets and limitations on land deals the city is able to make could complicate future plans.

University of California’s regents initially wanted to place the school downtown, according to Walshok, but were convinced by General Atomics and Scripps Institution of Oceanography to be close to them so professors could collaborate with private sector researchers.

Proponents of a downtown university point to San Diego’s ignominious distinction of being the only major metro without a major university presence in the city’s center. While Thomas Jefferson School of Law, San Diego City College and NewSchool of Architecture and Design are downtown, they’re not the research institutions believed to drive development.

“The idea of an anchor company may be an industrial economy concept, not a knowledge economy concept,” Walshock said. “The anchor institutions of the 21st Century may not be businesses. They may be universities, museums and cultural centers.”

It will likely be years before downtown office space has enough capacity to accommodate a large anchor, even if UC San Diego moves there. Jason Hughes, CEO of commercial tenant representation firm Hughes Marino, referred to Saleforce’s announced headquarters in downtown San Francisco, taking up 700,000 square feet in a 1.4 million square feet building. San Diego doesn’t even have a building right now with that much space in it, he said.

“I have a lot of clients that are excited about wanting to come to downtown and they want 30,000 feet and there aren’t any good options,” Hughes said. “You come with high expectation and you leave thinking it was sad.”

Robert Lankford’s five-block Makers Quarter development hopes to eventually have almost a million square feet of office space but he is starting with “bite-sized” buildings with 50,000 or 60,000 square feet. A major anchor is probably years away given developers’ focus on smaller buildings, he said.

Hughes acknowledged the “chicken and egg” problem of attracting commercial tenants without available inventory, just as it is hard to finance projects without committed tenants. But steady growth of residential offerings will eventually pressure companies to move downtown, even without a tech giant like Google setting up shop, he said. Shrinking office availability in Carmel Valley and UTC will also make downtown far more attractive.

“Everybody’s trying to find that silver bullet, the Qualcomm-type company to come downtown, whether it’s UCSD or a tech company from Northern California,” Hughes said. “We have never really had that huge catalyst. It’s always been homegrown.”

There is some hope, however, in the latest batch of proposed projects. Cisterra Developments, which was responsible for Sempra’s latest headquarters, is pushing for a Ritz Carlton hotel as part of a nearly 40-story building which will have more than 150,000 square feet of Class A office space.

Interest in commercial offerings has picked up in the past six months, according to Downtown San Diego Partnership CEO Kris Michell. The best bet for a corporate anchor could be one of downtown’s 111 startups getting acquired by a Silicon Valley firm, opposed to a new company moving here outright. Still, a university coming downtown is slightly more likely than a corporate anchor in the next five years, she said.

“The two issues are not mutually exclusive,” Michell said. “We go after both and whichever comes first, great.”


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