San Diego Redevelopment Cycle On Upswing

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SAN DIEGO-San Diego is experiencing a new and unprecedented redevelopment cycle in the Torrey Pines, UTC and Del Mar Heights submarkets. These three submarkets have the highest achieved rental rates in all of San Diego county and lead what is believed to be a future redevelopment market trend throughout central San Diego.

San Diego has a very limited supply of developable commercial land and as a result, developers are looking at second generation buildings as opportunities to capture high tech and biotech companies, research institutes, and service providers associated with these groups.

With the majority of my clients being high tech and biotech companies, these sectors are demanding newer, cutting-edge environments to conduct their research and development because they believe collaborative and efficient facilities lead to better scientific outcomes. Redevelopment firms are helping to meet that demand.

With approximately 1 million square feet of completed projects over the past 24 months, Alexandria Real Estate Equities has been the leader in San Diego with its redevelopment program. The San Diego Alexandria team has successfully attracted companies including Eli Lilly, Celgene, GNF (Novartis), and newer companies including Wellspring Biosciences and Calibr, a new research institute founded by world renowned scientist, Peter Schultz, to their high profile redevelopment projects. 

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Alexandria has also provided new facilities via redevelopment for industrial biotech companies including Verenium and Genomatica. All of its redevelopment projects have been re-using second-generation buildings and in most cases taking the building down to its shell before adding new curtain wall and new interior improvements. In most of its redevelopment projects, the firm has added amenities to include cafés, fitness centers, and conference facilities. As another example, last year I sold the former L-3 Communications San Diego headquarters facility in Torrey Pines to Alexandria, where they redeveloped and expanded the property to total 160,000 square feet. Alexandria is currently marketing the property to biotech companies and research institutes.

The Del Mar Heights submarket, which has the highest office rental rates in San Diego County, has seen the beginning of its redevelopment cycle with law firms leading the demand for these new environments. Del Mar Heights has the largest collection of intellectual property law firms which support the high tech and biotech communities in San Diego. Both Knobbe Martens and Latham & Watkins chose redeveloped buildings in Del Mar Heights. Coincidentally, Alexandria Real Estate Equities was the developer of the Knobbe Martens project. Cruzan Monroe is the developer of the new Latham & Watkins office building which is due to be completed in the first quarter of 2014.

The Latham & Watkins building is being built on a site where the existing 80s vintage building was completely demolished and a new 70,000-square-foot building is being built. The adjacent 55,000-square-foot building is receiving new curtain wall and all new interior improvements.

Jerry Keeney is principal of Avison Young, San Diego. The views expressed in this column are the author's own.