With downtown’s first new Class A office building in 15 years nearing completion, the market is healthy, yet changes to downtown and San Diego bring new challenges to the health of downtown’s business market, according to a panel at Destination Downtown, a lunchtime discussion sponsored by the Downtown Partnership on May 24 at the Marriott Gaslamp Quarter.
While the health of downtown is continually improving, bringing more companies and employees requires a number of considerations, outlined by the panel on hand, which was made up of Charles Black of the Irvine Company, Nancy Graham from the Centre City Development Corporation (CCDC), Stath Karras of Burnham Real Estate, Ed Muna of Lankford & Associates and Jason Wood of Cisterra Partners.
The most obvious is the need for new office space, said Black. The new 655 Broadway Building, along with DiamondView Tower, a mixed use office building scheduled to open in early 2007, is a step in the right direction and needs to be followed with more commitments from the CCDC, Black continued.
“We’ve just gone through a very significant residential real estate boom downtown, but we think that now it’s time to be more strategic about the office part of the equation,” Black said.
This need is more pronounced as more housing is built downtown. CCDC’s Community Plan Update states that while 30,000 people currently live downtown, capacity is predicted at 90,000, and while 75,000 people currently work downtown, up to 165,000 are predicted for the future.
Attracting businesses to downtown means overcoming several challenges, according to the committee. Parking was stated as the number one concern for businesses not to come downtown. However, upon crunching the numbers, Muna explained that the problem is in fact more perceptual. While the office markets in Del Mar Heights and the UTC area offer Class A office space at more than $4 per square foot, many downtown office space is closer to $3 per square foot. Even with parking added on at $.50 or $.75 per foot, downtown remains a cheaper option, a fact which often can go unrecognized. Often as well, parking allowances can be overestimated, according to the panel, as some employees opt to use public transportation to and from work.
But reasons for companies’ offices in areas like UTC and Del Mar go beyond crunching numbers. Other pressing concerns are matters of proximity to employees. The maxim of the business being close to where the CEO lives does indeed apply, as one only has to look at the office markets springing up along the I-5 corridor, such as in University City, Del Mar Heights and Sorrento Valley. Bosses need to focus on the needs of the “upper half” of the labor force, according to Karras, meaning the middle and upper management part of the company. Along with this, proximity to client base, amenities, mass transit and quality of the surrounding area are all prime considerations.
Secondly, downtown is conspicuously devoid of several cornerstone industries to San Diego, namely wireless technology, biotech and defense companies. While they are often clustered on the I-5 corridor, and especially the 56 and I-15 corridors downtown has very few, if any to speak of. One solution is to attract at least the headquarters of these companies to the area.
However, attracting headquarters of companies also belies another approach. In this era of business consolidation, companies like Cox recently consolidated all their satellite offices into one headquarters office downtown.
A question from the audience regarding the attractiveness of downtown, which, according to a study, has less park space than Manhattan, was answered by the panel. Wood talked of downtown’s many different neighborhoods. He argued the varied streetscape is just as nice as a park, he reasoned.
And while practical amenities like transit from North County, healthcare and other essential services are not yet available downtown, Kratzer reminded those present that despite the leaps and bounds downtown has recently made, it is still evolving and that these will arrive in time.