Things Will Be Great When You

If 2006 proved to be a year of heavy lifting in downtown San Diego, 2007 is being heralded as a time for planners to start lightening up.

The head cheerleader is Nancy Graham, president of the Centre City Development Corp., which oversees downtown projects for the city.

“When you work in the public sector, you can’t always predict timing, but this year, we were doing a lot of reacting,” she said during an interview in December. “We have been working on how to get to the next big step. We are really excited and ready to roll out in 2007. We want to deal with the fun stuff.”

The just-completed year delivered some major achievements in downtown San Diego. Among them was the approval of the Community Plan Update, and the landmark 99-year lease agreement between the U.S. Navy and Manchester financial Group for the $1.2 billion redevelopment of the Navy Broadway Complex , a project that will be taking shape throughout 2007.

The community plan establishes a framework for development in the next 25 years designed to guide land-use decisions and adapt to changing markets, according to the CCDC.

The NBC project, which will be renamed Pacific Gateway, is expected to include a new Navy headquarters building, office and retail space, hotels, public attractions, 3,000 underground parking spaces, and more than 5 acres of open space.

Improving transportation and parking downtown will remain a major concern, according to the CCDC, with some relief offered in the C Street Master Plan now in the works. The plan is designed to revitalize the C Street corridor from India Street to Park Boulevard, with trolley, transit and infrastructure investments, improved vehicular and pedestrian circulation, redevelopment opportunities and public art.

The North Embarcadero Visionary Plan, designed to transform downtown’s Western waterfront into a series of public spaces, along a 100-foot-wide waterside esplanade, also will be a major focus in 2007.

Big Picture

“Next year, we are really going to be focusing on the big picture , parks, the North Embarcadero, quality of life things,” said Graham.

Among her plans is to bring in some “world-class park designers” to help develop the green areas of downtown, whose community plan calls for more than 50 acres of open space to be added to the existing 75 acres by 2030.

“We have a wonderful opportunity to use our parks and public spaces to make people excited about living here,” said Graham. “Those are the things that will stitch all of downtown together and bring the quality of life dramatically up, so that people will really see it.”

Sherm Harmer, co-founder of San Diego-based Urban Housing Partners Inc., a real estate development firm, and a major downtown booster, agreed.

“Builders, bankers and business leaders are pretty happy that we are focusing on improving the quality of life downtown,” he said.

Harmer also would like to unite all of the arts venues downtown under one umbrella, and provide marketing support for them.

One such venue that will be in the spotlight in 2007 is the $25 million restoration of the historic Balboa Theatre now under way. Scheduled to reopen in December, it will feature local, national and international performers, as well as host community, corporate and convention gatherings.

Another quality of life issue , spurred by the growing popularity of living downtown , is education. While there are no plans to build more schools downtown, a magnet school is a possibility, said Graham. Beyond that, she said, “We want to get more involved in existing schools, like Washington Elementary, focusing on what we can do to make great schools.”

Living Downtown

While many builders are still reluctant to start new projects in this softening market, Harmer said that he isn’t worried.

“We feel very comfortable,” he said. “We think the market will start to pick up in January, February and March. We should see a pretty much normal market by next summer, when there is a reasonable balance of inventory and demand.”

The downtown area sports a population of some 30,000 people and is projected to have 90,000 residents by 2030.

Meanwhile, the softening of San Diego’s red-hot residential real estate market has cast a chill on potential buyers, who are waiting on the sidelines, he said.

“A lot of people want an insurance policy when they buy today, that they’re not overpaying,” said Harmer. “The level of incentives being offered are higher than they have been in 10 years.”

But this is not the time to sit on the fence, he said.

The number of homes sold in San Diego County dipped by more than 24 percent in November compared with last year, while the median price sank by almost 7 percent to $482,000, according to a DataQuick Information Systems report issued Dec. 13.

Smart Money

Jason Luker, director of development services for London Group Realty Advisors Inc. in San Diego, observed that downtown is “coming into its own.”

“Even if the market fades and prices drop, downtown, in the long run, still is going to be an attractive place to live,” said Luker, whose firm provides real estate consulting services. “There is a lot of smart money in downtown and it’s there for the long term.”

A major player in the smart money game has been Douglas Wilson, chairman and chief executive officer of San Diego-based Douglas Wilson Cos. Among its downtown projects are the $160 million Symphony Towers, the $60 million Parkloft condo project, and the Mark, a $155 million, 33-story, mixed-use development in the heart of San Diego’s East Village.

“I believe in the power of redevelopment in downtown,” he said. “It’s a long-term process, and very, very healthy.”

Wilson, whose company offers real estate and development services to financial institutions, law firms and state and federal courts, considers the softening market of late 2006 “a cleansing process.”

“It weeded out projects that perhaps should never have been built in the first place,” he said. “In any cycle, a lot of people pile on late. They don’t have the discipline to control and manage their projects. Those people will go away.”

Wilson has high hopes for 2007.

“There won’t be a great amount of inventory available,” he said. “But if costs are more contained, we can start another resurgence. A lot of new projects have not gone forward, because there is a huge cost increase on the construction side, and lenders have become less supportive of financing these projects. But real estate still has been selling, but perhaps at a slower pace.”

According to the Producer Price Index, the cost of construction materials rose 6.5 percent from October 2005 to October 2006.

Bill Nichol, chief operating officer of Intracorp Cos.’ San Diego/Hawaii region, expects to see a more robust market in downtown in the coming year, and into the next.