SAN DIEGO | Boom Rundown, Vol. 2

[Prahaboheme]

Many SD biotechs have been acquired by big pharma recently and offices have been shutdown. 2023-2025 is a particularly bad outlook.

[FromSD]

Originally Posted by mello

I thought this whole thing was built for Biotech and had companies ready to move in that is why this RADD company paid for such expensive land to build this space on. Don't tell me this project doesn't have tenants for all the office and lab space The retail is one thing but if this is going to be an empty white elephant biotech project good grief... There was an article in the UT about Biotech in the County being at a 14% vacancy rate and there is still tons of space in the pipeline that is UC and will be ready this year or by next summer.

I'm not in the commercial real estate industry, but it's seemed for a long time that Downtown San Diego has lagged as a job center for the region. The Downtown skyline has grown dramatically in the last 20 years, but the growth has been almost exclusively high rise condos and apartments. When was the last commercial skyscraper topped out Downtown? The new Sempra headquarters a few years back? And even that building isn't particularly tall. And it was added to the skyline only after Sempra moved out of their old asbestos-ridden headquarters on Ash Street (which was all of 50 years old).

So I'm inclined to give the IQHQ/RaDD folks credit for at least trying to make something happen for Downtown as a bio-tech hub. If they had tenants lined up in 2019, its quite possible that those prospects evaporated. I imagine that 5 years is a very long time in commercial real estate, especially in an industry as dynamic as bio-tech.

As far as Downtown being a job center, it doesn't help that the City seems hell-bent on dispersing employees from Downtown to more suburban locations. The City wants to move employees from the City Operations Building to Mission Valley because that building has exceeded its useful life due to shoddy maintenance practices. This is another building that is barely 50 years old. Downtown has the best public transit connections in the entire county--by far. Employees working in Mission Valley will be much less likely to take public transit, even if MV does have one trolley line. So much for the City's commitment to meeting its very ambitious carbon emissions reduction goals.

[Andy-4-SD]

Originally Posted by FromSD

I'm not in the commercial real estate industry, but it's seemed for a long time that Downtown San Diego has lagged as a job center for the region. The Downtown skyline has grown dramatically in the last 20 years, but the growth has been almost exclusively high rise condos and apartments. When was the last commercial skyscraper topped out Downtown? The new Sempra headquarters a few years back? And even that building isn't particularly tall. And it was added to the skyline only after Sempra moved out of their old asbestos-ridden headquarters on Ash Street (which was all of 50 years old).

So I'm inclined to give the IQHQ/RaDD folks credit for at least trying to make something happen for Downtown as a bio-tech hub. If they had tenants lined up in 2019, its quite possible that those prospects evaporated. I imagine that 5 years is a very long time in commercial real estate, especially in an industry as dynamic as bio-tech.

As far as Downtown being a job center, it doesn't help that the City seems hell-bent on dispersing employees from Downtown to more suburban locations. The City wants to move employees from the City Operations Building to Mission Valley because that building has exceeded its useful life due to shoddy maintenance practices. This is another building that is barely 50 years old. Downtown has the best public transit connections in the entire country--by far. Employees working in Mission Valley will be much less likely to take public transit, even if MV does have one trolley line. So much for the City's commitment to meeting its very ambitious carbon emissions reduction goals.

All your executives live in La Jolla, Del Mar, etc... They'd rather not make the commute downtown.

But I think the bigger issue with downtown is the homeless. If they eliminate the homeless, downtown San Diego will boom as both a residential hub and job center. Until then, vacancy rates will remain much higher downtown than other job centers such as UTC.

From an investment perspective, it's tough to get financing for office right now - Particularly in downtown where the vacancy rate is well north of 20%.

IQHQ is a fantastic project for the area. Hope to see it do well. Given the location, I think it'll lease once the biotech market gets back going again.

[eburress]

It's the type of industries present in San Diego that has much more influence over Downtown's position as a job center than the homeless. Downtown was already not a job center before the current homeless crisis.

[mello]

It has now been a full 2 years that Alexandria has had that old center shuttered and fenced off across the street from UTC on Genessee. That is a massive and embarrassing eyesore to have across from your trolley terminus and a super luxury mall. Do you think the City is pressuring the developer to change to residential if the biotech and hotel component doesn't pencil out with these "high/completely normal by historical standards" interest rates.

The demand for housing is massive in UTC area with all of the children of the CCP elites going to school at UCSD and willing to pay through the nose to be close to campus.

[Thatguyoverwhere]

Originally Posted by Andy-4-SD

Interest rates are making it tough. Construction is going to be down across the board likely for the next few years... Not going to see a ton of change until either borrowing costs come down or rents come up enough for deals to make sense again. Unfortunately, with rates staying higher for longer, it's more likely than not to be the latter.

Ugh, yeah that'd be unfortunate. I'm just praying that isn't how this plays out, because rents in SD in particular are already at a deal-breaking point for a good chunk of the population and any further upswing could very well trigger demand destruction/exodus, which is precisely the reason why affordable housing is desperately needed.

[DTthomas]

IQHQ has a new site for their RaDD development downtown. Not much content yet but there is a nice video of the finished product. I'm surprised they haven't announced any of the retail tenants yet as some are already putting up signage.

My opinion so far, the ground levels are very nice, but the buildings are boring.

http://thisisradd.com/

[SamFlood]

Whatever Happened to the Campus at Horton Plaza? Also they've fenced off the park which should be left as is.

[Thatguyoverwhere]

Originally Posted by SamFlood

Whatever Happened to the Campus at Horton Plaza? Also they've fenced off the park which should be left as is.

I've been wondering about this too. I think the most recent estimate was that it should be opening this summer. From the website it's hard to tell what the actual status is, though they make it sound like it should be ready to open and at least the retail portion is fully leased out.

[Streamliner]

The Campus at Horton is going to have the same problems every new office building downtown is having. There's just not a demand right now. For RaDD, it seems weird since the site is picture-perfect, but biotech wants to be where they already are (near UCSD).

Speaking of which:

Few signs of life at life science city on San Diego Bay
The 1.7 million-square-foot Research and Development District from San Diego-based life science real estate developer IQHQ is not only expanding substantially the glut of available space downtown but also dragging down its lender in the process.
https://www.sandiegouniontribune.com...san-diego-bay/

The pioneering project that promised to make downtown San Diego the new center of gravity for scientific advances is fast approaching completion and the sobering reality that the market is as stubborn as ever.
Instead of making a splashy debut, the 1.7 million-square-foot Research and Development District (RaDD) from San Diego-based life science real estate developer IQHQ is not only expanding substantially the glut of available space downtown but also dragging down its lender in the process.
“RaDD has been in development for more than four years and we believe 0 percent of the 1.7 million square feet is leased,” Citi analyst Benjamin Gerlinger wrote in a May 29 research note downgrading the stock of the project’s publicly traded lender, Bank OZK.

“The concept of bringing life science downtown, at this point, is kind of (dead on arrival),” said real estate analyst Gary London, a principal of local firm London Moeder Advisors. “That was kind of a pipe dream. It might have been real if the market stayed as it was during the height of COVID, when life science companies were prospering and expanding. In a post-COVID environment, there is compression in that industry … and it certainly suggests that the idea of geographically relocating or expanding to a new cluster area, from North City to downtown, is not going to happen.”

More than 29 percent of downtown office space is vacant, said Joshua Ohl, who is the senior director of market analytics for real estate tracker CoStar. It is the highest vacancy rate that CoStar has recorded in more than two decades.
The vacancy rate doesn’t reflect under-construction projects, including RaDD and the Campus at Horton. When considering those developments, 36.5 percent of downtown office space is available for lease, Ohl said.
And, when biotechs do sign big leases, they continue to show a singular preference for the established cluster. For instance, Pfizer earlier this year inked a 15-year lease for 230,000 square feet of space at a new research campus in Torrey Hills.

[FromSD]

That was an uncharacteristically downbeat article from the UT. I'm not saying that it was off-base, but usually that paper is a bit more optimistic in its coverage of San Diego real estate.

One advantage Downtown San Diego has over North City/Sorrento Valley is its freeway and transit connections. I-5 has already been widened from the Merge up to Oceanside. And the trolley now makes it up to UTC (but not any further north). Are there any realistic plans to improve transit and freeway access in that area any further? La Jolla and Del Mar execs may find it more convenient to drive to Sorrento Valley than Downtown, but how much longer will that be the case as traffic in that area builds with no expansion in roads or transit? Even today I would say its easier to get to Downtown from most of La Jolla because there is a direct ramp from La Jolla Parkway to the 5 South (but not to the 5 North). But even more important are all the other lower-paid workers who live in the South Bay and have jobs in North City/Sorrento Valley. They are the commuters who load up the North 805 in the morning and the South 805 in the afternoon. Working Downtown would be much more convenient for them.

Bio-tech, and technology in general, typically favor suburban locations, so it's maybe not surprising that there hasn't been a rush to take up that new space Downtown. For the economic health of Downtown, it sure would be nice if something happens to make that change.

[JerellO]

The RaDd site is such a great location.. not only do you have multiple freeway access, but the trolley lines a block away and our international airport 3 miles north. Also the convention center is just down the street. Beautiful views of the bay, walkability to restaurants and bars downtown. Parks and museums across the street.

[FoldingBoxes]

Originally Posted by JerellO

The RaDd site is such a great location..

To me, ultimately, some or most of that site will be military contractors, because of the Navy headquarters there. I imagine that right now the square footage is too expensive for many of them, but having a place across the street, over time, is going to be worth it for somebody.

Getting to that space is a pain from north of the 8 if you already have space in the Golden Triangle. But if some HQ Boss (Qualcomm? Someone Else?) wants to make a STATEMENT with their company name in the side of a building, it's the best location in San Diego.

You can see how far Manchester has fallen, though, with the last parking lot in the whole site being the "coming in summer 2024" jewel-in-the-crown Manchester hotel that looks like it's never going to get built at this point.

[TimeToBuild]

https://webmaps.sandiego.gov/portal/...34d7559e5a4d98


New Development Map just dropped

[Thatguyoverwhere]

Originally Posted by JerellO

The RaDd site is such a great location.. not only do you have multiple freeway access, but the trolley lines a block away and our international airport 3 miles north. Also the convention center is just down the street. Beautiful views of the bay, walkability to restaurants and bars downtown. Parks and museums across the street.

As someone who was recently laid off from a local biotech company, I can say the industry is definitely in an anti-expansion mindset right now, especially when it comes to real estate. However, things are bound to ramp back up sooner or later, at which point I could see this property becoming the new "flagship" office for one of the large biotech companies. Otherwise, this is still prime office space in an unbeatable location, and I'd have to assume it won't be long before someone leases it out.

[Jhanson312]

Originally Posted by Thatguyoverwhere

As someone who was recently laid off from a local biotech company, I can say the industry is definitely in an anti-expansion mindset right now, especially when it comes to real estate. However, things are bound to ramp back up sooner or later, at which point I could see this property becoming the new "flagship" office for one of the large biotech companies. Otherwise, this is still prime office space in an unbeatable location, and I'd have to assume it won't be long before someone leases it out.

Until then, this development should be branded as a landmark retail destination “with some office space”. It’s in great location with high foot traffic. I think it has the potential to outshine Seaport Village if they lease some cool tenants.

[DTSDguy]

Originally Posted by Jhanson312

Until then, this development should be branded as a landmark retail destination “with some office space”. It’s in great location with high foot traffic. I think it has the potential to outshine Seaport Village if they lease some cool tenants.

Two confirmed retail tenants: Rivian EV showroom and The Shade Store(high end blinds/window shades) along with Eve, an 8000 sq ft event hall.

The rumored tenants are Javier's Mexican restaurant, Equinox Fitness, a brewery and a small scale grocer.

Hopefully they land some big names and make an announcement soon. Horton Plaza has made a few retail tenant announcements

[bgrapes]

Great to hear about those retailers coming to RaDD!

Greystar 1st and Beech is going up quickly – view from Beech St:


1st and Beech – looking south from Cedar St down 1st


Reminder of what 1st and Beech will be:


Also noticed Kettner Crossing going up in Little Italy:


This will be 8 stories of affordable units:

[Streamliner]

Thanks for providing the 1st and Beech rendering. I always forget which of these are which. That'll be a good addition to the area. That area just south of the 5 has a lot of potential.

Nice to see that Kettner project coming along. Such an oddly shaped lot, but I'm glad it'll block that ugly parking garage wall.

[Jhanson312]

An update was given on the Seaport San Diego Development.

'“Right now we are going through the environmental review process, and this takes several years because we have to go through a lot of different government agencies to make sure they go through the approval process,” said Castaneda."

Its going to be quite awhile before our waterfront transforms but I'm becoming increasingly optimistic.

http://https://fox5sandiego.com/news/local-news/community-gives-input-on-future-of-waterfront-at-seaport-village/