Developers Antsy to Construct Downtown Office Buildings

Developers Antsy to Construct Downtown Office Buildings



With the Market Flat, Tenants Are Taking a Wait-and-See Attitude

BY MANDY JACKSON

San Diego-based JMI Realty and Cisterra Partners need to get plans for East Village Square approved soon or the project may lose its one and only signed tenant.






Office vacancy in Downtown San Diego is climbing, rents are flat, and companies are holding off on decisions to move or expand.






As of April 1, Class A office space Downtown had a 10.1 percent vacancy rate, up from 8.8 percent at the end of last year, and 6.2 percent at the end of 2001, according to Maryland-based CoStar Group, a real estate research firm.






The average Class A rental rate was $2.41 per square foot per month, up only 4 cents from the end of last year, and only 7 cents above the 2001 average.






Like other developers, JMI and Cisterra would need signed leases for half of East Village Square’s 178,000-square-foot office building before it can get financing.






According to John Kratzer, president and CEO of JMI, locally based Arrowhead General Insurance Agency has signed a lease for 60,000 square feet of office space , an agreement that will dissolve in May if plans for the development are not finalized.






“The situation with Arrowhead has a finite life on it,” Kratzer said. “If this thing gets derailed, even for a month at this point, it’s not going to happen, or at least it’s not going to happen with Arrowhead.”






Office space dominated earlier versions of East Village Square. Because of Downtown’s flat office market, Kratzer said the original 400,000- to 500,000-square-foot office proposal would not work anymore.






Tim Cowden, a senior vice president at Colliers International, specializes in the Downtown office market.






“There is a predominant attitude amongst prospective tenants to wait until the war is over and the economy and stock market turn up,” Cowden said.






San Francisco-based Catellus Urban Development is holding off on its plans to build a 26-story, 530,000-square-foot office tower in Downtown.






Bill Scott, senior vice president in Catellus’ San Diego office, said, “We have a building that has a CCDC permit that awaits a market.”






One Santa Fe Place is several blocks from the East Village Square in Downtown’s Columbia district.






Catellus is still looking at its options for other types of development. To date, the developer has sold three parcels from its 15 acres along Pacific Highway to Bosa Development for condo towers.






“We don’t expect to have anything under construction in the next 12 to 24 months,” Scott said.






If the office building in East Village Square is built, it could be the first such structure in Downtown San Diego since One America Plaza opened in 1991.






Dark Horse






San Diego-based Lankford