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Friday, Sep 22, 2023

East Village Growth Stronger Than Ever


The East Village commercial real estate market is going strong, although there’s been a pause in new projects opening as developers catch up on projects that were slowed in 2020 and 2021 due to COVID.

A critical project that’s seen as a key element to the neighborhood’s maturation is the East Village Green, a $79.6 million park project that started construction in August with a completion date of early 2025.

Built by Barnhart-Reese Construction, the 4.1-acre East Village Green will include a 13,657 square-foot community center, an underground parking garage, a children’s playground, an outdoor stage, dog parks, a water fountain that children can play in, and a game area.

The site is bounded by 13th, 15th, and G streets, bracketing 14th Street and includes two historic homes that will be refurbished and moved.

Still in the works and widely anticipated is the 5.25-acre Tailgate Park, renamed East Village Quarter.

Darcy Miramontes
Managing Director
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The $1.5 billion project by the Padres, Tishman Speyer, and Ascendant Capital Partners is to start construction in July 2024 and take more than 10 years to complete, under the developers’ agreements with the city.

It will include 1,710 residential units, 50,000 square feet of office and retail space, and a 1.3-acre public park.

“That’s going to be a huge game changer because it’s so large,” said Darcy Miramontes, managing director of JLL.

Gary London
Senior Principal
London Moeder Advisors

Of special interest but still in its early stages is a plan by Cresleigh Homes for a 37-story apartment tower on Island Avenue between 6th and 7th avenues that would have 443 apartments.

With only 52 parking spaces, some see Cresleigh’s East Village project as a test of whether big projects geared almost entirely to mass transit will work.

“That’s going to be a transformational experiment on whether parking is needed downtown,” said Gary London, who consulted on the project as a senior principal with London Moeder Advisors.

“That’s going to be a big unknown whether apartment buildings going forward can accommodate less parking,” London said. “My guess is a lot of the tenants are going to have cars and park in the nearby structures.”

Among key East Village projects seen as a sign of the neighborhood’s changing nature is Radian, a 22-story mixed-use project under construction at 659 Ninth Ave.

Built by Cisterra Development, Radian will have 214 apartments above the historic Farkas Store Fixtures Building and will include a Target department store.


Living Downtown

Among East Village’s most ardent advocates is Betsy Brennan, CEO and president of the Downtown San Diego Partnership.

Betsy Brennan
CEO and President
Downtown San Diego Partnership

“We have 6,500 homes in the pipeline, all differing kinds – affordable, luxury condominiums for sale and rent – then we have a few office projects under review or construction,” Brennan said. “There’s a lot of opportunity in East Village, even beyond the 6,500 homes that are in the pipeline.”

Brennan said that East Village Green is among the more significant projects to start construction of late.

“East Village Green has been a priority open space project for East Village and downtown for 15 years,” Brennan said. “Many of the properties right around East Village Green have been built with the intent of having that open space for people to enjoy.”

Brennan also said that hotels planned for East Village would invigorate the neighborhood, along with the Cresleigh Homes project and East Village Green.

Joshua Ohl
Director of Market Analytics

The redevelopment of the former campus of Thomas Jefferson School of Law into a life science project dubbed Genesis also gives another peek into the future of East Village, Brennan said.

Joshua Ohl, director of market analytics for the CoStar Group, said that East Village and Little Italy are the two neighborhoods where most of the activity is downtown.

Apartment construction and leasing has been particularly strong.

Ohl said that apartment vacancy rates have dropped to about 5% in East Village after reaching double digits during the worst of the COVID-19 pandemic.

“Living downtown is what everybody wants to do, perhaps more so that working or leasing space,” Ohl said. “We’re just seeing sort of if you build it, they will come and that’s certainly happening in East Village.”


Bouncing Back

Rachel Parsons, senior managing director of Berkadia, said that East Village “is probably healthier and stronger than it’s ever been.
“We’ve seen really positive rental appreciation, so the apartment market has stabilized,” Parsons said.

Rachel Parsons
Senior Managing Director

The catch is that land to build on is getting harder to find in East Village.

“There aren’t that many sites in East Village that aren’t spoken for,” Parsons said.

Helping to enliven East Village post-COVID is the opening of several new restaurants around Petco Park, and with that comes renewed interest in living in East Village and other downtown neighborhoods, said Miramontes of JLL.

“When you start to see things like that in a submarket, it’s great for the submarket, it’s great for development,” Miramontes said.

Miramontes said that East Village and the rest of downtown has bounced back nicely from the downturn brought on by COVID.

“During COVID, there was sort of a flight to the suburbs across the U.S. San Diego was probably like that to a lesser extent than some other urban areas,” Miramontes said. “In the post COVID era, there is a renewed interest in urban centers and markets across the U.S. and that certainly is true in San Diego.”

East Village in particular “has been performing well,” Miramontes said.

A project that Miramontes said she’s waiting to see is what Kilroy Realty does with the 2.3-acre former Salvation Army site at 1335 Broadway and 901 Park Blvd.

Kilroy bought the property in 2019 with the intent of building a mixed-use project on the site.

“Kilroy is a great company to do it. They have a similar development in Little Italy,” Miramontes said. “That is a huge block of land in East Village.”


Silver Lining

Economist Alan Nevin, director of market research for The Vertex Companies, said that “there’s an enormous amount going up and more to come.”

Alan Nevin
Director of Market Research
The Vertex Companies

Nevin said that there’s been a slowdown in projects actually breaking ground in East Village but he wouldn’t read too much into it.

“With a lot of them, it’s just a matter of getting through the permitting procedures. It’s becoming increasingly difficult to get permits out of the downtown San Diego building department. They’re 25% short of employees,” Nevin said. “There’s also the problem of getting supplies. That’s getting a little better but it’s still very difficult. Almost everything comes from overseas.”

Derek Hulse
Managing Director
Cushman & Wakefield

Nevin said that he’s counted 20 apartment projects planned for East Village, adding that “most of them are 20 to 30 stories or more.”

Derek Hulse, managing director of Cushman & Wakefield, said residential development “seems like a silver lining in East Village.”

“It’s certainly what I would describe as an emerging area in downtown San Diego,” Hulse said. “It’s kind of like the meat packing district of New York. It had a tough life, a different life in the past and is taking on something newer and better now.”


Maturing Market

Prior to the pandemic, East Village was seen as a likely site for new office development downtown, but the pandemic pretty much put an end to new office construction and leasing.

Hulse said there are signs that the office market in East Village may be recovering ever-so-slowly, with interest in leasing office space starting to resume.

“We’re starting to see some more activity as a result of the neighborhood in general being infilled and cleaned up a bit,” Hulse said. “There are some parts of it that have been a little tough but as new people move into the neighborhood and new housing is developed and more people-friendly amenities like parks are developed, the whole environment is better.”

Kevin Mulhern
Senior Vice President

Kevin Mulhern, a senior vice president with CBRE, said that he’s seen no hesitancy among developers and investors “to continue to develop deals down there.

“I think everybody is pretty bullish on San Diego in general and downtown specifically,” Mulhern said. “We’re all collectively waiting for things to happen on the employment side with some of the life science deals,” adding that “everybody is still very optimistic that that will happen.”

Like Brennan, Mulhern said that the East Village Green is critical to the neighborhood’s continued development.

“It’s going to clean up a number of blocks, critical blocks out there. It’s also going to provide a really focal point community amenity,” Mulhern said. “It’s really going to change the character of that area.”

Mulhern said East Village “is going to continue to evolve and take on its own unique personality.”

“The East Village is a teenager right now. The East Village is kind of in adolescence and it’s trying to figure out what it wants to be,” Mulhern said.

Demographically, East Village has attracted younger renters – 18 to 35-year-olds – compared to Little Italy, Bankers, Hill or Cortez Hill, Mulhern said, adding that he expects the demographics of East Village to gradually edge up to become more like its neighbors.


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