Behind Imperial Beach's Big Comeback

SAN DIEGO—Multifamily sales-price growth in the Imperial Beach submarket of San Diego grew 79% between 2012 and 2015, and the vacancy rate is below 2%, DTZ broker and leasing agent Will Creagan tells GlobeSt.com. Creagan believes that the Navy Special Warfare Command's expansion in IB and the 4,000 jobs that are coming with it will cause coastal properties to rise in value. He has several transaction s in the works and recently invested in a 28-unit apartment complex with the intent of renovating it and seeing rents rise significantly as a result. We chatted exclusively with Creagan about this submarket and the changes he sees happening there.

GlobeSt.com: What makes Imperial Beach a prime market for expansion?

Creagan: The vacancy rate down there in 2011 was 4.6%, and the vacancy rate that was posted in 2015 was 1.94%—that's ridiculously low. IB reaches over the I-5 freeway, and as you get west, more and more interest follows the water. But, in calling around on rent comps, I couldn't believe how fast these apartment units were renting. On the properties we own right now, the only thing holding us back on renting them is the speed of my renovation crew. We're locking it down as soon as it's ready

Also, it's less expensive to live in IB than in Coronado—not even in the same ballpark. You can get a one-bedroom unit staring at the ocean on the sand in IB for $1,800 a month. In Encinitas, there's a $1,000 difference. Plus, the city itself is working hard to change the area and improve it. It's one of the easier cities to work with, and it has some of the lowest permitting fees out there.

GlobeSt.com: How has the market changed over the years?

Creagan: When I first looked at IB in 1996, nothing much was happening, and then last year I was enticed to come back down and look at a property. That's when I noticed how things had really changed. In the interim I had been investing in Oceanside, Encinitas, Leucadia, Bonsall, and Chula Vista, an di had watched what was going on in Oceanside. I spoke to my investors and said, “If we could go back five to seven years and buy more properties in Oceanside, would you?” And they said, “Heck, yeah!” That's what enticed me to go back down to IB and check it out.

Collectively, it's a good story. In the last three years, from 2012 to 2015, the per-square-foot sales price in apartment projects in IB has gone up about 79%. When you look up and down the coast of Southern California from here to Ventura, it's the last affordable area from both a rental and purchase standpoint. San Diego County as a whole for the same period of time saw a per-square-foot price growth of less than half of that. Oceanside went up 82%.

GlobeSt.com: How would you characterize the CRE market in this submarket?

Creagan: The city's approach is encouraging investors to come in and develop or redevelop the area. A new hotel went in and opened up—Pier South Resort—which is right on the beach and part of the Autograph Collection of hotels developed by Pacifica Host Hotels. The Cohn Restaurant Group put in SEA180 coastal tavern, and combined with the hotel it's just wonderful. The Hilton group acquired another group of properties an eighth of a mile south of there on the sand and plans to put in about 80 new hotel rooms. Coronado Brewing Co. just put another restaurant in down there, just north of that. There's also about 600 acres just north of IB where the naval field-training facility is going in, and they're putting $1 billion into that. There are 4,000 new jobs going in on that 600 acres. And Sudberry Properties is putting in a new retail center on Palm Ave east of where it heads toward Coronado, and the agent says the preleasing is going well.

GlobeSt.com: What else should our readers know about IB?

Creagan: It seems as though everyone I've talked with about IB either knows about what's going on here or has heard about it. It's going to be a little unfortunate for some of the old-timers living at the beach at such a low rate who will get pushed a few blocks inland.