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Tuesday, Mar 21, 2023

Commercial Realtors Watching Waterfront

San Diego’s Barrio Logan remains a tight fit for the residents and businesses that have co-existed there for the past several decades, and a pair of measures on the June 3 city ballot will determine how tightly they continue to fit.

Local commercial real estate brokers say industrial tenants in Barrio Logan, especially those serving the region’s shipbuilders, face being squeezed further if city voters embrace the latest community plan update for the 1,000-acre neighborhood adjacent to downtown. The area is home to waterfront ship-manufacturing facilities of major defense contractors, led by General Dynamics NASSCO and BAE Systems. It is also home to several smaller companies that provide materials, supplies and services to those contractors, commingling since the 1940s with residents, schools, retail shops and restaurants.

Opponents of the community plan update — approved last year by the San Diego City Council by a party-line vote of 5-4, with Democrats in favor — gathered signatures to have voters decide its fate. Ballot Measure B relates to the plan update, and Measure C involves zoning changes enacted to carry out the plan, including reducing the amount of land in Barrio Logan designated for industrial uses from 230 acres to 170 acres.

A “yes” vote on either measure would uphold the City Council’s action.

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If the plan update and zoning changes survive, existing businesses on rezoned lots could remain where they are and expand up to 20 percent, with significant expansions requiring discretionary city permits. New tenants coming onto those lots in the future would have to conform to the new zoning.

The update would also raise certain development and operating permit fees from $10,737 to $11,986 per unit, with exceptions for certain kinds of residential development. Proponents of the plan update are counting on industrial development fees to fund about 68 percent of the $85 million cost to build 34 proposed city projects in the neighborhood, including parks, a fire station and transportation facilities.

The city would need to come up with a funding mechanism to finance the remainder of those costs.

The neighborhood in recent years has seen several improvements, including new affordable apartments and the completion of a mixed-use project known as Mercado del Barrio, anchored by a popular Northgate Gonzalez grocery store. Also in Barrio Logan, a new location of the Cesar E. Chavez Continuing Education Campus, overseen by San Diego Community College, is under construction.

Barrio Logan’s community plan was last updated in 1978, and proponents of upholding last year’s update say changes are needed to protect residents from potentially harmful exposure to industrial chemicals and pollutants.

Risk of ‘Making Things Worse’

Those pushing to undo the community plan update contend that the often traffic-clogged Interstate 5’s proximity to the neighborhood is a bigger long-term pollution threat than industry is, and that zoning restrictions will endanger jobs and other economic benefits generated by the shipbuilding industry.

“You’re never going to make everyone happy,” said Linda Greenberg, principal in the San Diego office of brokerage company Lee & Associates. “But you also have the risk of making things worse than they already are.”

Local brokers said military shipbuilders and their subcontractors already face considerable space constrictions under current zoning, especially when it comes to parking, docking spaces and delivery routes.

Roadsides along the shipbuilding waterfront, and throughout Barrio Logan, are packed with the vehicles of military personnel, contractors and shipbuilding employees who otherwise have nowhere else to park closer to work sites.

Assembling the necessary properties to build parking facilities — if owners wanted to sell — is daunting from a cost perspective, and many of those sites could also face added costs and delays for environmental cleanups, Greenberg said.

As a practical matter, shipbuilding subcontractors and related businesses would have few local relocation alternatives if they are squeezed out by rezoning. The major contractors, Colliers International Senior Vice President Shane Harmon said, generally need their supply and service vendors to be no more than five miles from local shipbuilding sites, in order to quickly address issues that arise during the workday.

“It’s very tough to compete if you are not located near the shipbuilders,” said Nick Price, senior associate in the San Diego office of Voit Real Estate Services. “Just being located three blocks closer than another company is going to be a big advantage in terms of response times.”

Waterfront-Adjacent Space Scarce

Outside Barrio Logan, most of the highly desirable workspaces for shipbuilding subcontractors are to the south in National City and Chula Vista. However, little space remains on

waterfront-adjacent industrial and office campuses in those cities.

Businesses that wanted to leave or avoid Barrio Logan would face tight market conditions in both locations. Price noted that Chula Vista’s hub for shipbuilding-related companies currently has a 4.8 percent vacancy rate, and a similar area of National City is event tighter, at 2.75 percent.

With low availabilities come rents in those neighborhoods that are on par with high-demand central San Diego submarkets like Miramar and Kearny Mesa — not feasible for many smaller companies that do business with military shipbuilders.

The Pentagon’s recent Pacific-focused approach to military readiness is among factors keeping San Diego a vital hub for shipbuilding. But the long-term upshot of further restrictions in Barrio Logan, brokers said, is that defense contractors and subcontractors will seek out other U.S. locations where land is more plentiful and favorable to their logistics, and where zoning is less restrictive.

“We will lose many jobs and businesses that work with the Navy because they won’t have the ability to locate in the area that accommodates them,” Price said. “Ships will be sent to other cities like Bremerton, Washington, in order to be built or repaired.”

Greenberg said there are other places where the military has established shipbuilding operations — in states such as Mississippi and Virginia — that might draw more shipbuilding and repair operations their way over the long term. A shipyard in Pascagoula, Mississippi, for instance, spans 800 water-adjacent acres with room for production expansion.

San Diego’s shipbuilding waterfront is essentially landlocked. Barrio Logan is bordered roughly by downtown’s East Village to the northwest, I-5 to the northeast and San Diego Bay to the southwest.

Much of the neighborhood’s industrial section runs along the northeastern border of Naval Station San Diego, while industrial and residential elements currently mingle throughout Barrio Logan.


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