SAN DIEGO—San Diego makes a strong case for Amazon locating its second headquarters in East Otay Mesa, but even without it, companies will be drawn to this submarket, Chesnut Properties' founder and principal Lee Chesnut told RealShare San Diego attendees Wednesday. During the panel session “The Future of San Diego CRE,” Chesnut said San Diego has answered Amazon's RFP for a second headquarters with a proposal for locating it in South County's Eastern Otay Mesa submarket, which he called “the next mega region for CRE.”

Moderator Brandon Sudweeks, president of Coldwell Banker Commercial SC, said San Diego is pushing for higher density and asked the panelists about the region's challenges in achieving this. Cybele Thompson, director of real estate assets for the City of San Diego, said among the goals of the Housing SD plan are to improve affordability, create density, produce a housing-inventory report and realize community-plan updates. She added that regulation relief to speed up the development process and reduce development fees in areas that need housing is key, along with a more streamlined permitting process, and that the city is working on a middle-income density program to help those in the 80%-AMI category. “There's a shifting attitude toward density and mixed-use versus slow growth,” which had previously been popular, she said.

Sudweeks pressed her on the challenges to density, and Thompson said NIMBYism is a major roadblock. However, “It takes strength on the part of local politicians and elected officials to stand up to communities” and point out the ways that density and development help communities,” and this is beginning to happen, she said.

Sudweeks asked developer Chesnut about the Amazon HQ2, saying having it here would be “outstanding,” but what are San Diego's chances of winning the RFP? “One in 238,” Chesnut joked, since the latter is the total number of headquarters proposals that cities across the country have made to the retail giant. “But, 237 proposals will lose. We probably will lose, but [development like what Amazon would need] is perfectly aligned with what we're trying to do.” Chesnut said his firm already has 3 million square feet in entitlements to create the “right product for the area,” and whether Amazon accepts the proposal or not, there will be an appetite for it. “Illumina will run out of space” and we will see major leases for this type of product. “Even if we lose HQ2, we will win with new product in South County.”

Sudweeks asked about the state-of-the-art Millenia Office—part of the master-planned community Millenia in Chula Vista—which Chesnut's company is developing—and how successful it would be without Amazon. “As soon as we're out of the ground, leadership companies will see it and show interest,” said Chesnut. “It will be successful because we're bringing the right things to the market. These companies want to change the world for good, and it includes how they occupy space. Live/work/play is desired here.” Chesnut added that companies are looking at real estate differently than they used to, desiring to bring employees into a dynamic place and spending billions of dollars on powerful facilities in walkable areas.

Sudweeks asked Adam Robinson, founder and president of RAF Pacifica Group, about the unique new product his company is offering—which the firm has trademarked Creative Industrial—and what types of tenants are coming into it. “People want a different workplace than in the past,” said Robinson, describing the private exterior space, connecting bridges, balconies, fire pits and bocce-ball courts that are featured in the projects the firm is developing in areas of North County. Chesnut commented that indoor and outdoor workspaces are very important to these companies, and bridges and walkways are an integral part of his firm's proposed design for HQ2.

Robinson added that for companies that are attracted to this space, “it's better to pay a little more in rent than to lose employees.” Sudweeks noted that RAF Pacifica is building these properties on spec and asked why. “We believe in our product and that we are experts in this market. We had to take risk.”

During the Q&A period at the end of the session, the developers on the panel were asked what tenants want in design and amenities today, and Robinson said, “They know they want something, but they don't know what.” For example, outdoor workspaces are huge, “but it's sunny in San Diego, so they need to be covered.” They want reclaimed-water features so they have the water sounds around them outside. “We're borrowing from multifamily projects,” he added.

Chesnut said horizontal orientation to megasize floorplates and outdoor connectors to promote wellness through an active lifestyle are key, as well as beautiful stairways near elevators to encourage use. Sudweeks, whose company works with medical-office buildings, said in that sector there has been a shift to large buildings with all the services within the building, and they are designed to minimize steps and keep doctors and nurses central to the activity. “Medical is changing in a major way.”

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