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San Diego's Downtown Land Rush

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Downtown land rush

A rivalry is forming between office and residential developers competing for precious sites


San Diego's skyline has filled with new condominium towers but no new office buildings. Some worry that there won't be any land left when the office market rebounds.

By Mike Freeman


December 21, 2003

San Diego's skyline glows bright these days with the lights of new condominium towers, the result of a residential building spree that's unprecedented downtown.

But amid this condo success, an uneasy rivalry is festering between upstart, aggressive residential builders and more conventional office developers.

The condo market downtown has been so hot that residential builders are gobbling up prime real estate, paying top dollar to landowners. Meanwhile, office developers are on the sidelines because of weak demand from tenants and the high cost of constructing new commercial towers.

The disparity has led some commercial developers to fear there won't be any prime sites left by the time the residential market cools.

"It's almost like we're heading toward becoming a new suburb, where we have everyone leaving downtown to go to work in Sorrento Mesa and University City," said John Casey, a broker with Burnham Real Estate Services who sits on a downtown planning advisory group.

Not everyone thinks the residential building boom downtown threatens to alter the office landscape. Boston, Chicago, San Francisco and other vibrant downtowns thrive in part because people live in the core and want to work near their homes, said Steven Laposa, a real estate economist with PriceWaterhouseCoopers. He thinks the surge in residential building will help commercial developers in the long run.

"Do you want to be downtown Dallas, where you look down the street at 6 o'clock at night and it's dead?" he said. "The office is more dependent on people living down there as well as working there."

Still, office builders say the run-up in land prices recently, sparked by residential demand, is making an already difficult office climate more challenging.

"The residential market is so robust, you will have multiple players interested in paying the asking price or above the asking price," said Todd

Anson of Cisterra Partners, which is seeking tenants for a proposed 14-story office building near the Padres' new ballpark downtown. "That puts a lot of pressure on office developers."

While development regulations downtown prohibit offices on land zoned for residential use, they allow both residential and office projects on land zoned for commercial use

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I definately think that they need to reserve some space for office buildings. Downtown San Diego doesn't need to be another residential suburb, which is what it will become if they don't reserve some lots for large office buildings.

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When they want office sites they will find space. They still find it in Boston and NY, where the density is alreay very high. This might give them an incentive for tall builidngs outside the height restricted area.

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Actually all of downtown is restricted to the 500 foot height limit :(. It really limits the skyline. The FAA won't even lift the restriction over the southern area of downtown that planes don't fly over in because the planes might need to fly over that way in case of an emergency.

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