Residential Towers Proliferate in Downtown San Diego
Cresleigh plans to build a 37-story tower near Petco Park as 9 other Downtown towers go up.
High-rise apartment towers are springing up like mushrooms in Downtown San Diego, a red-hot market driven by the residential needs of a fast-growing life sciences sector that also is devouring lab space in the city.
The nine residential towers under construction in San Diego soon will be joined by a tenth: Cresleigh Homes is planning to build a 37-story apartment tower next to Petco Park, the San Diego Padres’ baseball stadium.
The San Francisco-based developer wants to build a 443-unit tower on a site on Island Avenue currently occupied by a Ballpark Self Storage facility. The tower, which early cost estimates pegged at $233M, will have two levels of underground parking.
The Cresleigh project would join a growing number of multifamily developers seeking high rental returns in San Diego, building towers across the Downtown from East Village to San Diego’s Little Italy.
Kevin Mulhern, a CBRE senior VP based in San Diego, told the San Diego Union-Tribune that developers pursuing apartment towers are driven by rent gains and strong Downtown job growth.
Mulhern told the newspaper the two areas in San Diego with rent levels high enough to support new residential towers are Downtown and the University City district, known to locals as College Town, which is close to the biotech hub emerging in Sorrento Valley.
Downtown is the primary option for new residential towers because there are few available sites suitable for a high-rise in University City, according to the CBRE exec.
The average monthly rent in San Diego rose more than 17% in 2021, hitting $2,441 at the end of the year, according to CBRE. In its Q4 report on the multifamily market in San Diego, CBRE said 13 of the city’s submarkets saw a vacancy rate of less than 1% at the end of 2021.
The life sciences sector, which now employs more than 70,000 workers in San Diego, has been soaking up nearly all of the available lab space in the city while it increases demand in the tight residential market.
According to CBRE’s Q1 2022 Life Sciences Market Overview, San Diego’s total lab exclusive inventory totaled more than 22M SF, with demand estimated at 1.6M SF. Vacancy across the whole market was 3.5%, a record low for the region. Core market vacancy was 2.7%, CBRE said.
Asking rents across the San Diego market for life sciences space surged to $6.44 per square foot in Q1 from $6.01 in Q4 2021. In the first quarter, leasing activity reached 1.54M SF, just under half the total leasing activity for all of 2021, the highest year on record, CBRE said.