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Saturday, Jul 13, 2024

Hotels, Retail, Amenities Increasingly Part of Office Development

The future of San Diego County’s office park development — and redevelopment — could be a continued blurring of the lines traditionally separating offices from hotel, retail and other types of commercial projects.

At a recent NAIOP-hosted forum in Carmel Valley, some of the local region’s largest developers pointed to combinations that could include office tower entrance areas that look more like hotel lobbies, and work campuses with amenities like fitness centers and restaurants.

At least one office campus in University Towne Center — La Jolla Commons, where a new tower leased by LPL Financial recently opened — could get an actual hotel as part of its future third phase of development, said Paul Twardowski, senior managing director for developer Hines.

While planning remains in the works, office tenants are increasingly seeking places where they can host clients and customers in town, and hotels are beginning to be incorporated into office campuses nationwide, Twardowski said.

Plans of several developers reflect the desire of today’s workers and entrepreneurs — especially those of the younger Millennial generation — to work in walk-friendly settings that put multiple amenities nearby and minimize their time spent stuck in traffic. That approach has already proven to be a big local driver of life-science industry tenant activity, said Dan Ryan, senior vice president with Alexandria Real Estate Equities Inc.

“You need to focus on what people will want in the future,” said Mike McNerney, senior vice president at Lowe Enterprises, which recently began work on the mixed-use IDEA1 in East Village, slated to have office, retail and other commercial elements. “People don’t want to be in their cars as much as they used to.”

Dennis Cruzan, whose Del Mar-based Cruzan owns DiamondView Tower in East Village, among other local properties, encouraged his colleagues on the panel to press forward with their urban-style, mixed-use concepts, on the grounds that consumer demand will be there by the time the projects are completed several years down the road.

Making the projects pencil out, however, is complicated for developers, as some types of construction are harder to obtain financing for than others. While apartments are having no problems getting loans or capital investments, speculative office construction remains a no-go for many financers, so getting projects pre-leased is crucial for most developers.

A big challenge for San Diego, developers said, is enticing more large technology-oriented companies to have their main offices in urban-oriented settings like downtown, which in turn would encourage smaller firms to follow suit and create a clustering effect. That has already been happening for several years in places like San Francisco, Denver and Seattle.

Downtown San Diego’s new-business hub in coming years, experts said, will continue to shift from the Broadway corridor to East Village, reflecting the influence of younger workers.

Rob Lankford, who heads Lankford & Associates Inc., said his company’s mixed-use project underway in East Village, called Makers Quarter, has been designed in response to “a new way of living — of urban living,” favored by those young workers over suburban office campuses.

The gathering was presented by the San Diego chapter of NAIOP, the Commercial Real Estate Development Association, formerly known as the National Association of Industrial and Office Properties.

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Grocery Game Gets New Player: Global discount grocer Aldi, which is based in Germany with more than 1,300 U.S. stores, will likely be the next major player to enter San Diego County’s crowded food retail arena.

As part of a California tax-credit program geared toward creating new jobs in the state, Aldi has agreed to set up a regional headquarters and a large distribution center in Moreno Valley in Riverside County.

According to an agreement filed with the Governor’s Office of Business and Economic Development, also known as Go-Biz, Aldi will open about 30 California retail stores in 2015, though exact locations haven’t been announced. Seven will be opened in former California Enterprise Zones, with nine in federally designated “food deserts” — communities with few or no places to buy affordable fresh items — in San Diego, Los Angeles, Riverside and San Bernardino counties.

California last year abolished its community-focused enterprise zone program, replacing it with California Competes, under which companies apply for limited tax credits in exchange for creating new jobs in the state. Aldi will receive $700,000 in tax credits if it creates 182 jobs, paying a minimum annual salary of $25,000, by 2018.

Aldi stores generally are small, no-frills locations — averaging about 15,000 square feet — where packaged foods are often displayed stacked on pallets and customers bag their own groceries.

Aldi was started in 1913 and operates more than 9,000 stores globally. It is also the parent company of Monrovia-based specialty grocer Trader Joe’s, which has 13 stores in the local region and another set to open next year in Pacific Highlands Ranch.

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.


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