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Thursday, Mar 28, 2024
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Doubling Down on Downtown’s Drawing Power

Property experts say a new city-authorized marketing district should give downtown San Diego office properties a boost, as the submarket looks to attract new industries, compete with neighborhoods to the north, and ward off stubborn vacancy trends of the past five years.

“It’s going to have a benefit for those office owners, but it’s also going to benefit those restaurants and retailers downtown,” said Bess Wakeman, executive vice president in the San Diego office of brokerage firm Jones Lang LaSalle. “Those added office workers will need places to have lunch, or run errands or buy things during the day.”

JLL handles leasing at 450 B St., the building also known as the Bank of America Tower. The building’s locally based landlord, BCL Inc., was among owners supporting formation of a commercial marketing district that includes 55 downtown buildings of at least 50,000 square feet.

Downtown San Diego Partnership

The district is being administered by the Downtown San Diego Partnership, and is intended to raise approximately $351,000 annually over a three-year period, with building owners assessed at a rate of 3.5 cents per square foot. Barring legal challenges, the district is expected to be up and running by year’s end, and building owners would likely vote in 2015 on whether to renew it.

Janelle Riella, vice president of public policy and communications for the partnership, said the assessment district was approved by a required majority of property owners, with 73 percent backing it in recent balloting.

Money raised will go toward programs to retain tenants and attract new businesses and industries, such as technology and other research-based sectors. There will be outreach programs in which building operators come together on ways to deal with downtown’s homeless problem, which has implications for the working environment; as well as the availability of parking, possibly by setting up shuttle services between buildings and outlying lots.

Riella said downtown office buildings will be marketed to recruit and retain companies that bring in skilled workers, especially younger employees who generally favor living and working in high-energy urban environments.

A ‘24-7 Lifestyle’

“We’re looking to attract that young talent that is drawn to a 24-7 lifestyle, and not geared to an 8-to-5 schedule,” Riella said. “They want to have access to transportation and nightlife and everything in the same area.”

Riella said elements of the local district, including outreach to building owners, were modeled on districts that have succeeded in other cities, including Denver, Long Beach and Los Angeles.

Downtown San Diego continues to deal with office vacancy rates that remain historically high, partly as a result of recent moves by companies, including law firms and financial service providers, relocating operations to places such as Carmel Valley and University Towne Center.

JLL recently reported that downtown’s direct office vacancy rate stood at 18.3 percent at the midpoint of 2012. That was down from 18.9 percent at the same point a year ago, but well above the 14.3 percent seen in mid-2007.

According to marketing district data from the downtown partnership, BCL’s projected annual assessment at 450 B St. is approximately in the middle of the pack, at $9,695 for the 277,000-square-foot property. Elsewhere, they will range from $1,751 for Wosk Enterprises’ 50,038-square-foot tower at 655 Broadway; to $19,579 at Irvine Co.’s 559,392-square-foot Symphony Towers at 750 B St.; and $19,612 at Trizec Properties’ 701 B St. tower, with 560,329 square feet.

“We support the commercial marketing district and see it as a way to further the gains downtown has seen attracting new businesses,” said Mike Lyster, spokesman for Irvine Co., the San Diego region’s largest office landlord.

Matt Carlson, a director in the San Diego office of brokerage firm Cushman & Wakefield, which represents owners of eight buildings in the marketing district, said it should help the downtown area build on a slew of recent new arrivals, including tech-oriented employers, mixed-use apartment projects, restaurants and stores.

“This comes at a perfect time for downtown,” Carlson said.

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