Office Investors See San Diego as a Value Play
A joint venture between SteelWave and funds managed by Angelo Gordon is among a wave of investors bullish on the San Diego creative office market.
“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.”
The property is ideal for redevelopment into a lifestyle creative campus. The 13-acre, single-story campus was originally developed for Hughes Aircraft in the 1980s. “The project has a very interesting history,” says Starck. “It has very unique architecture and a site that will allow for an amenity rich campus with outdoor meeting areas, a bistro and a full service fitness center. We have seen a departure in demand for the traditional office buildings as tenants prefer the single level campuses with higher ceilings and open creative floor plates.”
The property is located in Carlsbad, which has a strong presence of biotech and life science companies. “The Carlsbad market hosts over 8 million square feet of biotech and life science space with over 3 million square feet of life science space,” adds Starck. “Virtually all of the existing life science space is currently occupied providing a unique opportunity for this new development. Life science and R&D tenants are now demanding the amenity rich environments where they can recruit and retain the top talent.”