Golden Triangle businesses'
leases expiring with almost no
place to grow but Downtown

It's rough running a promising company in the Golden Triangle with no place to grow. The best office space is all filled up in the UTC area. Maybe 6 or 7 percent of 3.5 million square feet are available and in such small contiguous spaces that, effectively, there's no more room. Besides, who wants to pay $2 a square foot monthly if you could even find the space?

    And so you look to the larger Golden Triangle neighborhood, some of the low-rise buildings on Sorrento Mesa or Torrey Pines, even the pocket of 400,000 square feet down in Sorrento Valley, and you realize that 10 percent vacancy in a broader 8.5-million-square-foot market isn’t much better. Ernest Rady is building the only 240,000 square feet of brand new spec office space in the region in Del Mar Heights, the so-called Torrey Reserve, and those buildings likely will be entirely preleased before they're open.

    At about this point the business owner ought to be asked if he or she has considered Downtown San Diego or Mission Valley. The answer likely would be no, but even more likely, the question wasn’t even broached.

    That's about to change.

    A lot of leases are coming up for expiration in 1998 and 1999 in the Golden Triangle the end of five- and 10-year deals made when the Golden Triangle was new which means a lot of tire-kicking and negotiating begins this year. It might seem easy enough for a tenant to renew a lease, but it won’t happen in the Golden Triangle at the same low lease rates and options for expansion will be limited. Hey, this ain't 1992, thank God.

    And so San Diego’s near future offers many situations not unlike Howard Asher's Advanced Bioresearch Associates. A biotech support consulting firm not itself a biotech discoverer or manufacturer ABA could not find expansion space on its home turf of Torrey Pines. So it’s moving to larger quarters Downtown, 12,000 square feet on the ninth floor of One America Plaza, picking up expansive views of the city, parks, bays, ocean, islands, and paying less rent for more space right on the trolley line, across from Amtrak and Wyndham Emerald Plaza, a block from the Coronado Ferry and four minutes to the airport.

    The building, like its newest neighbors in Downtown, is wired with fiber optics. In fact, the newcomers are just realizing that Downtown San Diego is the most densely wired fiber optic office market in San Diego County, as it traditionally has been the most densely developed with water delivery, sewage removal, streets, parking and transportation services. Visitors have more choices of hotels and restaurants down there. And the recreational and cultural alternatives are unrivaled.

    "Downtown has been a good environment for us," says Chris Alan, whose discovery of the Centre City three years ago is ancient history by high-tech standards of time. Alan is the owner of ElectriCiti, San Diego’s fastest growing Internet service provider. His sales have grown from nothing to more than $1 million annually since he discovered Downtown.

    "I gained 10 pounds eating all this Italian food; that’s good," says Alan. "I used to be one of these sickly looking underweight software developers. Now I’m a sickly looking slightly overweight software developer.

    "Our space is relatively inexpensive. We’re still in the sub-dollar-a-square-foot area in Little Italy. It has character. We’re in a red brick loft with skylights. That kind of character isn’t available in the North City or North County. We actually do take bay walks from time to time. We are three blocks from the Embarcadero. Tonight the whole ElectriCiti staff is going bike riding through the Embarcadero, around Seaport Village and Embarcadero Marina Park. That's going to be fun.

    "We’re less than five minutes to the airport; that’s been useful as we do more air travel now. When I was in the 600 B Street Building, I would meet down in the Gaslamp Quarter almost every night. I miss being within walking distance of that.

    "Of course, there's some fantastic eateries within easy walking distance of where we are now in Little Italy.

    "I have 18 employees, starting with two employees Downtown 2 1/2 years ago."

    Alan continues, "Only Sorrento Valley and Downtown have fiber optic networks. A lot of the new telecommunications services are available through those facilities and often substantial cost savings can be had by locating in buildings that have these facilities. That's actually becoming a very important part of someone's requirements for work space. That's becoming a check-off item. 'If you’re not on fiber, we can’t consider your building.' A few years ago, that was just a bunch of talk. That's now a reality, not just for telecom companies but any business of any size that needs the kind of services that can be had on the fiber network.

    "Downtowns, central cities are usually the first to get these facilities because of the vertical nature of the real estate and high density. As new technologies come out, Downtown remains highly desirable to get those services first. That's the case in Downtown San Diego. That probably will never change."

    Another pioneer and recent immigrant to Downtown from Hightechland, George Lattimer shared responsibility for developing 1.6 million square feet of office space and 3,200 residential units in the North City. Lattimer spent 19 1/2 years with Harry L. Summers, Inc., rising to become Summers' right-hand man before they parted ways a few years ago. Less than a year ago, Harry Mathis had Lattimer named to the board of the Centre

    City Development Corp., the Downtown redevelopment agency for the City Council, and Lattimer likes it.

    "I have a strong sense that San Diego is a better community with a strong Downtown core. We need that from both a business, financial, cultural and recreational sense. (Serving on the CCDC board) was an opportunity to contribute to that.

    "But I don’t see my function, or CCDC's function for that matter, as going out and soliciting individual companies to become Downtown tenants. I think CCDC's task is to create the environment that begins the redevelopment process, making an area attractive. For every dollar CCDC has invested over time there has been nine times that put in by the private sector.

    "Is it appropriate for companies throughout San Diego County to consider Downtown? Absolutely. Downtown has a set of factors that make it attractive business, financial, cultural, recreational, dining, proximity to the airport. Is it particularly attractive to companies in the North City? It could be."

    Lattimer suggests that North City's business expansion or relocation efforts may be driven in the future as much by economics as it has been driven in the past by the tendency to locate near the mother, UCSD, that spawned much of North City's private sector.

    "Economics," Lattimer emphasizes. "What it costs them in terms of space, travel, time, etc. (will be weighed against) the tendency to cluster. Are there opportunities for them to move to Downtown? Absolutely. Are there other factors? Yes. What’s their relationship to the university, Salk and the others?"

    Andy LaDow, who spent years peddling University City space for CB Commercial and who recently jumped ship to The Irving Hughes Group (just as CB moved regional headquarters to UTC, still maintaining a Downtown office) says the smartest thing anyone could do is build a speculative office building in the UTC area right now. Short of that, LaDow says:

    "Downtown represents the best inventory of Class A mid-rise and high-rise space in San Diego County. For that reason alone, Downtown will attract very strong tenant activity in the next few years. There's nowhere else in San Diego where you can get good space in excess of 20,000 square feet. Right now, there are a number of large tenants looking Downtown who otherwise might not have" had the suburban markets not recovered so quickly from the office space glut and recession of the early '90s.

    "There's more flexibility negotiating with Downtown landlords than in the North City," LaDow says. "Absorption is supply driven. Downtown has the supply, so will continue to see absorption.

    "This Downtown market is going to come back quicker than anyone thinks. If you think how much office space was built in the 1980s, probably 20 million to 25 million square feet half of the whole county was built post-1982 and figure there isn’t any new construction going on now, and realize how fast suburban vacancy rates have been dropping with rents rising, Downtown is going to recover very quickly as well."

    It’s only apropos. With the primary exception of Cooley Godward, LLP, most of North City's legal, accounting and architectural support services are located in Downtown, having all the fun, because that’s where most of the lawyers, accountants and architects were operating before high-tech was much of an economic engine in San Diego.

    Imagine if Irwin Jacobs, founder of 2-million-square-foot Qualcomm, had sited his headquarters in Downtown San Diego and his manufacturing in Centre City East, and other telecommunications firms had done likewise. What if all high-tech and biotech occupants of the 8.3 million square feet in the 24-square-mile Golden Triangle had located Downtown?

    Jacobs probably wouldn't have had to treat the San Diego Symphony like a charity case.

    With 14 million square feet of office space and a $165 million airport expansion (meeting the No. 7 goal on BIOCOM/San Diego’s 1997 State and Regional Legislative Issues Agenda), San Diego’s three-square-mile bayfront Centre City is a pretty compelling, efficient office market that finally is about to get its fair share of high-tech tenants.

    Why?

    Because operationally, Golden Triangle businesses have been more successful than the real estate developers speculated.

    Need more of an emotional punch than land-use economics to look at Downtown?

    The growing Golden Triangle business owner might consider it, might just think about Centre City space, in honor of Jim McGraw, the 54-year-old architect who died suddenly last year of cancer. A career-long devotee to Downtown San Diego, he served on a variety of Centre City professional organizations while founding BIOCOM/San Diego. From offices in the Imperial Bank Building, he and his colleagues at McGraw/Baldwin Architects designed about 4.5 million square feet of space in San Diego’s North City, including about 2.5 million of biotech and medical device space and 2 million of advanced tech, high-tech and manufacturing space.

    He never proselytized to his high-tech clients in behalf of Downtown some of the biotechs certainly wouldn't fit but "we were always very proud of the opportunities to bring our high technology clients to our Downtown offices and take them to lunch and dinner in this environment and we were always pleased by their appreciation and sometimes surprise for their exposure to Downtown," says McGraw's partner Ken Baldwin. "Some of these people had never been Downtown before. So our deliberate commitment to remaining Downtown and bringing these clients to Downtown contributed, we hope, to their recognition of the true urban center."

BIOCOM didn’t even have to leave town last year to hold its fifth annual CalBio Summit at the San Diego Convention Center.