Office Investors See San Diego as a Value Play

Institutional office investors see San Diego as a value play, especially compared to other Southern California and West Coast office markets. SteelWave and funds managed by Angelo Gordo have acquired a 208,904-square-foot creative office and R&D facility in San Diego. San Diego’s office market has had a strong run for the last several quarters with rent growth and positive absorption.

“San Diego is a secondary market, however, it is seen as a value-play compared to core markets throughout the West. San Diego continues to enjoy very healthy job growth and rate growth,” Aric Starck, executive managing director at Cushman & Wakefield, tells GlobeSt.com. “It has very little new construction—only 2.7 % or 2.1 million square feet—of its existing base inventory. Office sales in San Diego should reach 3 Billion in 2018 with a large influx of foreign capital, which was approximately 20% in 2018.” Starck represented the seller in the SteelWave/ Angelo Gordo deal, along with Cushman & Wakefield executive managing director Rick Reeder.

While San Diego’s office market is growing, there is particularly strong demand for creative office product. SteelWave and Angelo Gordo plan to completely rebrand the campus, including the addition of a new full-service fitness center, a new bistro with indoor/outdoor seating, contemporary architecture, common areas with gaming and lounge areas, and multiple outdoor patios and workspaces. “There is unmet market demand for creative lifestyle office campuses,” says Starck. “This opportunity allows them to get a coastal project of scale in a land constrained market. San Diego is continuing to see organic growth, as well as the larger tech groups entering San Diego i.e. Google at Verge, Amazon at Campus in UTC, and Apple in UTC.”