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SAN DIEGO-With the shortage of developable land driving real estate prices sky high, a measure quietly adopted by the city could make it easier to accommodate the space needs of fast-growing companies, according to a local architect.

The city’s decision to increase its floor-to-area ratio for industrially zoned buildings allowed one company–BAE Systems, an aerospace technology and military systems firm–to expand at its current site in Rancho Bernardo rather than move out of the area, according to John Turpit, president of Turpit & Potter Architects.

The company scoured the area for a suitable expansion site and found nothing, Turpit says. But Turpit & Potter found that the new ratio, adopted by the city council in December, would allow BAE Systems to build a new six-story, 213,000-sf office/engineering structure and an adjacent five-story, 340,000-sf, 1,009-space parking structure at its current site.

In December, the city increased the allowable floor-to-area ratio from 1:1 to 2:1, permitting developers to build mid-rise industrial projects for the first time, Turpit says. Under the old rules, the project would have blown out the site’s allowable building area by 263,416 sf.

“The city council’s decision could not have been more perfectly timed,” he says. “This allowed us to satisfy the BAE Systems requirement and keep the company in San Diego. It also paves the way for other companies to expand in San Diego as well.”

With just 1,420 gross acres of land left in the county for development, fast-growing companies are finding it increasingly difficult to expand, particularly in the mid-county area, Turpit says.

“Vacancy rates for existing office, industrial and R&D space are all in the single-digit range, and most of the new space under construction in these sectors is already committed to by firms who are acting now to lock in the space they need,” he says. “What this means is that an increasing number of firms will be forced to look outside the area if we in the industry cannot provide viable solutions for their expansion requirements.”

With land prices in the $8- to $15-psf range, the development approach has been to build one- and two-story campus-style structures with large surface lots for parking. The result: underutilized land, Turpit says.

This underutilization began in the early 1970s, when tenants and real estate officials believed that demand for space would never catch up to what was then to be considered a plentiful land supply, according to Russ Gibbon of the San Diego’s Economic Development Division.

“Tenant product demand, rental rate sensitivity, and land availability all drove the trend in the 1970s and 1980s to build low-rise industrial and R&D buildings with surface parking,” agrees Mike Philbin, managing director of transaction services with Burnham Real Estate Services.

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