SAN DIEGO— The San Diego lodging market – and specifically downtown – will continue to experience healthy growth, according to current research by Hospitality Real Estate Counselors.

The work was done by Mike Armstrong, Steve Strenk and other professional's in the firm's San Diego office.

“The San Diego economy is firing on all cylinders and the downtown hotel market is cruising at full speed, with year-to-date occupancies at an all-time high,” said Armstrong, a principal at Hospitality Real Real Estate Counselors (HREC). “The prospects for downtown are healthy, in spite of the new supply coming on line this year and next. The Airport expansion and the upcoming expansion of the San Diego Convention Center will contribute to further growth in visitation and demand for hotel rooms. Whether you are buying, building or renovating a hotel, there has never been a better time to invest in downtown San Diego.”

Key Indicators: San Diego Hotel Market Continues Upward Trend

RevPAR Soars: Downtown San Diego RevPAR reaches +$170 YTD, up over 8.4% year over year according to the July PKF Report;
Rooms with a View: San Diego Bay area hotels outperform all San Diego submarkets in rate with average daily rate exceeding $275 YTD;
Hotel Investments:
- Hotel Z sold in July 2015 for $33.5 million ($350,000/key). Pineapple Hospitality is the new owner of the 96-room recently opened hotel.
- The Residence Inn Downtown/Gaslamp Quarter sold in February for $90M ($375,000/key). Chatham Lodging Trust purchased the 240 room on a 7.6% cap rate.

Hot Topics Affecting San Diego Downtown Hotels

New Hotel Supply: According to Smith Travel Research, there are nearly 2,300 new rooms are under construction in San Diego area. That's only 4% of existing supply;
San Diego Convention Center Impact: The 2.6 million square foot Convention Center had a $1.33 billion economic impact in FY 2014, with events generating more than 800,000 room nights per year;
- Phase III of the convention center expansion will add one million square feet of improvements making the convention center the largest contiguous event space on the West Coast.
- Approximately 850,000 guests are forecasted to attend approximately 66 events by year end 2015.
- Tourism is San Diego's 3rd largest revenue generator behind manufacturing and military.
San Diego Chargers' Future Stadium Plans: The City of San Diego has robustly supported the Chargers future in San Diego by proposing a $1.1 billion new stadium;
- Mayor Kevin Faulconer announced the city will hold a Dec. 15th election to seek voter approval to build new stadium in Mission Valley. A completely new Environmental report was requested Friday, September 25th.
It's a Homerun!: San Diego Padres' Petco Park has produced an average annual rate of return of nearly 8% (exceeding projected 1.7%), completely revitalizing the 24-block Ballpark District of downtown.
San Diego Airport Development: Terminal 1 to undergo $2.2B replacement transforming the 18 gate terminal into a 28 gate terminal; also adding a 1,750-space parking structure.
Notable New Hotels Coming to Downtown San Diego:
- 90-room Courtyard by Marriott Gaslamp Quarter opening October 2015
- 317-room Pendry Hotel (Montage) opening Summer 2016
- 96-room Hotel Z (formerly Holiday Inn Express ) opened June 2015
- 203-room Homewood Suites & 160-room Hilton Garden Inn Little Italy opening early 2016
- 253-room SpringHill Suites and 147-room Residence Inn Love Field early 2016
North Embarcadero Visionary Plan: The multi-phased redevelopment of downtown San Diego Waterfront could bring new hotel developments in coming years, along with an esplanade showcasing art amongst tree groves, open spaces and +400 hotel rooms.
Military: San Diego is home to the largest concentration of military in the world (60% of the ships in the US Pacific Fleet), contributing over $20 billion to the regional economy.
Biotech: San Diego's biotech industry doubled leasing activity in San Diego to 1.1 million in the first half of 2015 creating more and more jobs adding a robust base to San Diego's thriving economy.

HREC (www.hrec.com) is the nation's leading lodging and gaming real estate advisory firm specializing in property sales, mortgage brokerage, equity/JV structuring, consulting (market studies and appraisals), and litigation support. With offices throughout North America, HREC is distinguished by unwavering commitment to client service and success through its team approach, intellectual capital and hotel/casino specialization.

Instant Insights /

Report: San Diego Poised for Continued Hospitality Growth

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