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Before many of today’s swash-buckling, high-speed entrepreneurs were graduating from diapers, Mission Valley and Kearny Mesa reigned as San Diego’s epicenters of commerce. Yes, oh youthful Turks, there was life south of what would become Sorrento Valley and UTC — huge defense contractors and established corporations were flush with high-paid employees that churned out the big revenues and technological marvels. North County was little more than an out-of-the-way suburb.
Well, we all know what happened up north, but now — after years of stagnation, debate and the consequences of a tight commercial real estate market here — Kearny Mesa in particular and Mission Valley to some extent are on the office-market rebound, and brokers and developers couldn’t be happier. Tim Moore, Arden Realty's regional leasing manager, says it was inevitable, given the sardine-can tightness of the office/industrial market north of 52. "I think what’s happening is we’re seeing a lot of migration from UTC and Sorrento Mesa, which have become not only expensive but extremely difficult to get into and out of," says Moore, who tends to seven office buildings in Kearny Mesa — as well as a few to the north. "I mean, don’t get me wrong. We own buildings up there, and they're doing really well." But recent activity below 52, Moore says, reminds him of the days in the mid-1990s when he worked the Atlanta office market. "Suddenly, tenants are no longer restricted just to looking within their own submarket for space, because there isn’t a lot of space, especially for larger companies," he explains with an almost kid-like quality in his voice. "These companies are now open to pretty much the whole metropolitan area." And thus, places like Kearny Mesa and Mission Valley draw suitors for new land deals. For Mission Valley, once grazed by cows but now a sort of amusement park for consumers, it’s an opportunity to be taken more seriously as a commercial destination with a growing residential presence. Jim Laing, a vice president with Burnham Real Estate Services and one of two leasing agents charged with finding tenants for the Rio San Diego Plaza project, Mission Valley's first office development in 10 years (Hazard Center, built in 1990, was the most recent), is blown away by the activity in the valley. "There's so much activity happening in all phases of living on the north side of Interstate 8," he says. "If you start driving west along Friars Road from the stadium to 163, it’s unbelievable the number of apartments that are being built. You have (Fenton) Marketplace, which is probably half done, with Costco up and running and IKEA under construction. "Mission Valley provides now much like what UTC has around it. . . . That live/work/play concept that is happening in UTC now is also happening in Mission Valley." The large companies, which Laing declined to detail, are starting to make inquiries now that foundation work has begun on the first phase of Currie Partners' speculative Rio San Diego Plaza, on a 12.2-acre site just west of the I-805 overpass at Rio San Diego Drive and Rio Bonita Way — conveniently just a stone's throw from a trolley stop, a Marriott, Fashion Valley and Mission Valley Center and the valley's hottest office complex at Hazard Center. The first phase — boasting 32,000-square-foot floor plates, rising six stories and decked out in modern-day technological regalia (i.e., lots o' bandwidth) — should be ready for tenants by March or April of next year, says Laing's partner at Burnham, Patrick Rohan. The developer's choice of what Rohan describes as an "avant garde" architecture firm out of Los Angeles to design the building suggests a "cutting-edge" contribution to Mission Valley's eclectic — some would say gaudy — mix of brightly colored buildings and man-made "natural" habitats along the San Diego River. "It’s going to be a great building," Rohan promises. Lease rates at the new development are expected to range from $2.25 to $2.35 per square foot fully serviced, not exactly chump change — although a healthy 15 percent rise from last year’s figures — but nowhere near the prices squeezed out of tenants to the north, where some rents have already cracked the $3 benchmark. Still, Laing points out, to big companies used to exorbitant rates in such corporate stratospheres as Silicon Valley, New York and Chicago, San Diego is "a pretty easy pill to swallow." Moore of Arden Realty say he has tried on several occasions to pick up property in Mission Valley, "but it just hasn't worked out of us down there. It’s a very active, changing market." Mission Valley and Kearny Mesa share not only near-identical overall vacancy rates — the former at 7.4 percent, the latter just a tick higher at 7.5 percent — but also highly motivated drives to bring more corporate business back within their borders. In Kearny Mesa's case, it involves a respectful nod to its defense-oriented past while pushing ahead with the so-called live/work/play plans that have worked in other parts of the country. No topic gets Kearny Mesans more chatty than San Diego Spectrum, a slowly progressing mixed-use development on the 232-acre site that once was filled with bustling General Dynamics employees. Purchased by Irvine-based Lennar Partners (runners-up in the NTC competition) in July 1999 for nearly $80 million, the site has been the subject of numerous community meetings between developers, business folks and residents to find the right mix for an area that’s short on amenities. What was thought to be the final plan called for some 480 high-end apartments built by Fairfield Development, about 1 million square feet of office/industrial space to be built by Sunroad and a supporting retail business park with restaurants, multiplex theaters and the like. (A Marriott is also set to open there in the fall of 2001.) But Matt Anderson, chairman of the Kearny Mesa Community Planning Group, which toiled mightily with the planned site, says the San Diego Planning Commission last month balked at the plan and delayed approval for another month. The commission, Anderson says, "wanted to increase the density for the residential and potentially for the offices. The planning group, staff and even developers were surprised that they wanted to go this route. It was the first time anybody had heard about this. We thought everything was lined up and ready to go." No one would suggest that the project is in jeopardy, points out Anderson, who also is principal facility manager for Solar Turbines, a stalwart Kearny Mesa fixture. For some time now, he has seen the writing on the wall for Kearny Mesa, with its freeway accessibility, central location and underused land. "It’s nice that more businesses are coming in. You can tell, particularly with the increase in traffic. That's the down side," he admits. "But it’s been good for the support businesses. The restaurants and shops seem to be coming back, because for a while there a lot of them were closing."
Even land deals elsewhere in Kearny Mesa are perking up. Last month, Cox Communications completed its purchase of the former Costco warehouse on Copley Drive — another hot spot for speculative developers — for $16.75 million. Three years ago, the same site sold for slightly less than $8 million. Jack Duncan, an investment broker with Colliers International who represented Cox in the recent deal and was involved in the earlier sale, says major improvements to the warehouse building accounted for most of the price jump ("it was an extensive and expensive retrofit," he says), but "it’s also a reflection of property values in San Diego County and Cox's decision to have a permanent presence here versus a leasing presence." Cox has used the facility since 1997 as its "customer care center." Tim Rudolph, manager of corporate real estate with CCN Inc., a Kearny Mesa-based health care provider and subsidiary of HMO giant Columbia/HCA, says his company has remained in the area for 15 years because of the central location and access to much-needed parking for a company booming with about 600 employees here. Like many, he awaits developments like the Spectrum for more upscale amenities. "We’re certainly looking forward to the whole General Dynamics thing," Rudolph says. "There's not much residential development in Kearny Mesa. It’s not really much of a place to live. The restaurants, well they're mostly fast-food and affordable. But where would you go for a good business lunch? Well, probably Mission Valley or the Golden Triangle." Well, maybe we should settle for live/work/play/drive-a-little for now...
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Indeed, Sharp HealthCare last month completed improvements on the old, stripped General Dynamics building in the center of the site and began consolidating its administrative offices in the 200,000-square foot structure at the Spectrum site. National University, which bought 12.5 acres near Ruffin Road for $10 million, also continues to build its flagship campus on the site east of Route 163, replete with a 64,000-square-foot Academic Center and 40,000-square-foot state-of-the-art library.Home | Features | Info | Cover Story | About Us | Back Issues | Search
