Why So Few Builds in Rancho Sante Fe?

SAN DIEGO—Locally based developer Newport Pacific Inc. has begun construction on Palma de la Reina at 5525 Cancha de Golf, at the corner of Villa de la Valle and at the entrance to Morgan Run Resort & Golf Club in the exclusive and affluent Rancho Santa Fe submarket of San Diego. The development will include approximately 21,050 square feet of class-A commercial office, approximately 10,360 square feet of retail space and 54 residential suites, which will be available for lease by the end of the year. 

The commercial center, which is expected to be completed by the end of 2015, is located on the last undeveloped commercial parcel in Rancho Santa Fe and is the first new commercial-center construction in the area in 10 years. We sat down with Patrick McNamara, VP of Newport Pacific, for an exclusive look at this submarket.

GlobeSt.com: Aside from the recession, why has commercial construction been so quiet in the Rancho Santa Fe submarket for the last decade?

McNamara: Commercial construction has been nonexistent in Rancho Santa Fe because there is a lack of developable land and a strict approval process. Palma de la Reina is located on the last developable commercial parcel in Rancho Santa Fe, which Newport Pacific has owned for more than 50 years, beginning when they first developed the Whispering Palms community. With the lack of developable land, new construction and large blocks of office space, the conditions were ideal to begin development of the project.

GlobeSt.com: What types of tenants are attracted to this region?

McNamara: Tenants attracted to this area are usually smaller professional firms, specialty medical offices and retail. Typically, these tenants are already located in surrounding communities and are looking to move to the Rancho Santa Fe area, which has a certain prestige for locating a business, and to be close to clients, patients and customers who live nearby. Palma de la Reina has received interest from those types of community-serving tenants as well as from national Fortune 500 companies.

GlobeSt.com: How are vacancy and rental rates trending in this submarket?

McNamara: The office vacancy rate is approximately 7%, and retail vacancy is less than 2% in Rancho Santa Fe. These low vacancy rates and lack of large blocks of space make a project like Palma de la Reina very attractive. These low vacancy rates are also pushing rental rates upward in this submarket.

GlobeSt.com: What else should our readers know about the Rancho Santa Fe submarket?

McNamara: Rancho Santa Fe is one of the most affluent communities in the US. It's located just minutes from Del Mar and less than 30 minutes from Downtown San Diego, which provides ideal opportunities for smaller office and retail tenants.