East Village Neighborhood Development ‘Booming’

East Village has hit a bit of a pause when it comes to new construction, although many ongoing projects continue unabated and city officials said that the neighborhood is booming from their perspective based on the number of projects that they’re reviewing.

A recently enacted city ban on homeless encampments is seen by many as a much-needed catalyst for future development in the East Village.

“We’re all crossing our fingers that the city’s new homeless policy will clean up the streets, which, if successful, will enliven the street scene in East Village,” said economist Gary London, senior principal of London Moeder Advisors.

“That’s really a big deal,” Darcy Miramontes, a managing director of JLL said of the encampment ban.

The proliferation of encampments in downtown generally, and in East Village in particular, “has been an issue for years,” Miramontes said, adding that, “It’s prevented some assets from reaching their potential. If they can prevent homeless encampments and get ahold of that issue, I think it will be a huge amenity for downtown and East Village.”

David Maxwell, a principal at Urban Property Group, said that he’s already seeing a change.

“There’s just fewer people on the streets in front of storefronts,” Maxwell said. “It feels to me that it’s getting better. I can see it because I’m downtown every day.”

Similarly, Chuck Reiter, a senior vice president of CBRE, said that with the encampment ban, “Things are heading in the right direction.”

“I don’t know if excited is the word, but we’re just eager to see a solution and progress and I think the City of San Diego is doing a great job,” Reiter said. “It’s slow and steady steps to help get a solution in place and help out with the East Village.”

Harrington Heights

Ironically, one of the latest projects set to break ground in East Village is a $140 million affordable housing project by Chelsea Investment Corp. – Harrington Heights – that will provide permanent housing to homeless veterans and others.

The 15-story project at 1320 Broadway will have 273 apartments, 224 of which will be studio apartments with 22 one-bedroom apartments and 27 two-bedroom apartments.

“It has definitely been a labor of love to bring this project to life,” said James Rock, development executive at Chelsea Investment. “It’s a really great location for this project. The East Village Green that’s going in is within very close walking distance.”

The apartments in Harrington Heights will be set aside for people with annual incomes ranging from 25% to 50% of the area median income.

The city is providing the 19,000 square-foot site and $10 million to go toward the project, Rock said.

Funding sources include the California Department of Housing, and Citibank.  Social services and case management for tenants will come from the Alpha Project.

“The site was selected by the city as an area that they would like to develop,” Rock said, adding that it was a vacant lot that the city had used for construction storage.

“It’s been a high priority project. It’s going to be a beautiful building and it’s going to be around for a long time to serve the residents.”

Construction is scheduled to start within three months and finish in late 2025, Rock said.

‘Forward-Thinking Developments’

Betsy Brennan, president and CEO of the Downtown San Diego Partnership, counts East Village as an ongoing success story for downtown.

“The East Village continues to attract forward-thinking development to the downtown market,” Brennan said, citing the completion of the Radian apartment project by Cisterra as an example.

The 22-story tower at 675 Ninth Ave. has 241 apartments and will include the first downtown Target store.

The apartments have already started leasing and the 36,000-square-foot Target store is slated to open in early 2024.

“Downtown’s low vacancy rate of 7.2%, driven up slightly by some of those recent deliveries in East Village and other neighborhoods, reflects the ongoing resiliency of our residential market and serves as a marker for our hope that this neighborhood will continue to be a hotspot location for the workforce of downtown’s emerging industries,” Brennan said.

City officials concur with Brennan’s assessment.

“In the East Village, there are five developments currently under construction, with a total of approximately 1,500 residential units, 135 hotel rooms, and 31,500 square-feet of retail,” said Brian Schoenfisch, deputy director of the Urban Division of the Development Services Department.

“Further, there are currently seven new developments with building permit applications under review, with a total of over 1,700 residential units, and 600 hotel rooms,” Schoenfisch said. “In addition to all of the development permit activity, the city has been busy with significant investments in infrastructure within the East Village neighborhood, including East Village Green, which will be downtown’s largest park.”

Also in the works is North Central Square Park, a half-acre park along C Street between 8th and 9th Avenue.

“It is important that we continue to create places like East Village Green, and North Central Square Park, as well as the network of pedestrian-oriented greenway streets,” Schoenfisch said. “These people-oriented spaces help promote a healthy urban environment, which is important given the post-pandemic role that downtowns are now playing in becoming the place that many people are going to conduct their remote work and interact with others.”

Under construction by Barnhart-Reese Construction, the $79.6 million East Village Green bounded by 13th, 15th, and G streets, is on schedule for completion in June 2025, said Doug Barnhart, chairman of Barnhart-Reese Construction.

“Everything is really tracking along, really, really good,” Barnhart said. “The foundations are in for the parking structure, which is a big part of the project.”

The 4.1-acre park will include a two-story underground parking garage with 176 spaces.

Retail Improving

The planned opening of the Target store in the Radian comes at a time when commercial retail activity is picking up in East Village and elsewhere downtown, said Maxwell of Urban Property Group.

“We’ve got about 18 leases signed downtown,” Maxwell said, and nearly half of them have been in East Village.

“We’re seeing a lot of activity in the Marina District and East Village,” Maxwell said, adding that excitement over the Padres is drawing people to the neighborhood.

“You’re just seeing more bodies compared to last year,” Maxwell said.

Reiter of CBRE, said that interest in East Village is growing among companies looking to relocate to San Diego or expand.

“East Village has an edgy, tech vibe that a lot of firms are looking for. It’s known as a walkable, vibrant community,” Reiter said. “It’s the vibe around Petco. It’s the walkable amenities, it’s the vibrancy with the residents, all the people.”

Reiter said that he’s been approached by architectural firms, engineering companies, law firms, and software companies about leasing property in East Village.

“We just need to land a few in the East Village and get some momentum,” Reiter said.

Miramontes of JLL said that “from an investment perspective, East Village remains a market where investors are looking at (new) development as well as existing product.”

Still, Miramontes said that the residential market in the East Village and elsewhere in the immediate future is going to be slow with activity plateauing.

“The hope is that we get to that plateau and that plateau doesn’t last too long before interest rates come down,” Miramontes said. “It depends on macro-economic factors, are we headed into a recession? It doesn’t appear to be.”

Once interest rates decline, Miramontes said that she’s confident that activity will pick up, especially in the multifamily housing market.

“San Diego’s multifamily market still has strong fundamentals. We have low supply and high occupancy,” Miramontes said.

Moving Downtown

London said that high interest rates and high construction costs have meant that some projects in the East Village and elsewhere have been put on pause.

Most of those that are coming out of the ground were financed when interest rates were lower, London said.

“I don’t see the situation changing dramatically over the next year. I think we’re talking 24 to 36 months for recovery,” London said.

Joining London in presenting a cautious outlook is Alan Nevin, director of economic research at Gafcon, Inc.

“There are a large number of projects wanting to move forward. When the interest rates come down, they’ll move forward,” Nevin said. “I’m betting it’s probably a year or two years away.”

Joshua Ohl, senior director of market analysis at CoStar Group San Diego, said that he’s seen a definite slowdown in East Village housing construction starts compared to the heady days of 2021 when new construction cranes seemed to be popping up everywhere.

“Household formation is down, it’s a little bit sluggish” Ohl said.

Still, Ohl said that housing demand in East Village “is still pretty steady compared to other areas of the market because there’s more inventory.”

“People want new apartments and they’re moving downtown,” Ohl said. Looking forward, Ohl said demand will likely be “relatively modest.”