Summit Pointe, a 20,95-acre creative office property in San Diego, has traded hands for $68.4 million. The property is has a four-story, 146,626-square-foot office building and entitlements for an additional 175,000 square feet of office space. It was 68% leased at the time of the sale.
Located at 10641 Scripps Summit Ct., the property is a unique find. The seller, Newport National Corp., recently completed a multi-million renovation to modernize the existing office building with a focus on creating an employee experience with Zen Botanical Gardens, an outdoor amphitheater, kitchen area, shaded seating and an indoor/outdoor fitness center. In addition, the development potential creates strong upside at the property. Newport National Corp. completed the building renovations to support the second phase of development. Newport National Corp. acquired the site in 2017 for $31.4 million from HD Supply affiliate Maintenance Warehouse.
Rick Reeder and Brad Tecca of Cushman & Wakefield represented Newport National Corp. in the deal with Jay Alexander and Tim Olson of JLL and Chris Williams of CBRE advising the seller on leasing. The unnamed buyer was self represented. According to Reeder, this property offered the tenant a stable long-term investment with limited risk.
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While this deal offered the buyer significant upside, the local office market is struggling following the pandemic. The office vacancy rate hit a nine-year high in 2020. Marcus & Millichap research shows the office vacancy rate in San Diego is 16.1%, a 380 basis point increase from 2019. The class-A vacancy rate is even higher at 20.8%. Marcus & Millichap expects the rate to continue to grow another 140 basis points this year to 17.1%, the highest rate since 2009.
While this is alarming, most of the vacancy is located in Downtown San Diego. The CDB already has a 26.2% vacancy rate, and the new construction will increase the stock by 2.3%. In addition, another 750,000-square-foot project is schedule to come to market in 2022.
Despite the high availability of space, there are a few bright spots helping to keep San Diego's office market stable. The life science, medical office and tech industries have all experienced growth in the last year. A report earlier this year from CBRE ranked San Diego in the top 10 nationally for tech leasing activity. The same was true in other markets. Overall, tech leasing accounted for 17% of total office leases last year.
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Kelsi Maree Borland
