One out of every four attached homes in Southern California that sold in 2002 was built and sold in Downtown San Diego. It sounds startling, and it is. It sounds wrong. But it isn’t. “Basically, a lot of people want to live Downtown,” says Nat Bosa, offering a simple explanation. And reasons to live Downtown are on the rise, says Bosa, president of Bosa Development Corp. and the leader in Downtown housing construction with 588 homes built, 442 under construction and about 1,000 on the drawing board. “Every year that goes by is going to be more exciting. San Diego has a diversified economy. Great things are going to happen Downtown — the ballpark, the Embarcadero plan and the new library — there’s a lot going for it.”

The Downtown metamorphosis of today is the result of a 1997 initiative by Centre City Development Corp. “When CCDC was created in the mid-’70s,” says Peter Hall, CCDC president, “the goal was to create a 24/7 community (Downtown). There never was a history of a real Downtown population. The housing tended to be in the foothills. Downtown was a business area. Eventually retailers packed it up and left. The goal was not to be a city that was a Monday through Friday turn out the lights and go home and let the forces of evil take over.”

CCDC created what Hall calls a three-legged stool in order to bring life back into Downtown. “We had the work,” he says. “But we lost the shopping; We had to get that second leg going.” This was obtained with the convention center, hotels and rebirth of the Gaslamp Quarter with Horton Plaza. “The last leg was to figure out how to get the housing here,” Hall says.

Projects that began in the late ’80s and early ’90s tended to limp along. The Meridian, 172 luxury condominiums built by Nielsen Construction Co. in 1985, was Downtown’s first luxury tower. It took 10 years to sell out. “The builder would lose money and not build another project,” Hall says. That’s when CCDC decided to use the Urban Land Institute to distribute nationwide the information about the 11 opportunity sites within the Marina District. “Our local builder community did not value, respect or see the opportunity ahead in our Downtown. It took builders from other parts of the country who were used to building in urban environments, Vancouver or San Francisco, Cleveland, Boston and Chicago, to say, ‘this city has everything right for a great housing boom.’”

Calling All Builders

This national broadcast, which CCDC hoped would capture the interest of two or three builders, attracted 38 proposals across the district. From 1997 to 1999, CCDC worked with developers and land owners to shepherd development. Bosa stepped forward with Horizons to deliver two 25-story towers and 211 units in May 2001.

“Since 1999, when the first project, Horizons, started during this wave, every single one of the parcels that remain in the entire community of Marina has been put into development but one,” Hall says. “The one waiting to break ground is the KUSI high-rise mixed-use condo/hotel and TV studio. The next to last was Pinnacle and that’s in the middle of construction. So Marina is done.”

The early neighborhoods of redevelopment focus were Gaslamp, Horton, Marina and Columbia. Like Marina, Horton is virtually complete. Gaslamp is about 75 percent done; Columbia about 50 percent. In 1992, the redevelopment focus expanded to include Little Italy, Cortez Hill and East Village.

The onslaught of builders from other countries caused local builders to reconsider Downtown projects, Hall says. “We started to have some of the more traditional suburban builders who were building in our suburbs all of a sudden say ‘wait a second. We’re running out of land in the suburbs. The quality of life, the traffic, the infrastructure, is not what it needs to be and here’s this wonderful Downtown everyone’s building in. And every time somebody builds something, people are lined up to buy it.’”

Things have changed since Bosa dared to develop. Today, projects sell hotly before construction begins. “About 1,500 acres of this little town called San Diego has 25 percent of the entire Southern California market of sales in attached product,” Hall says. “Over 2,000 units last year. We have about 9,000 to 10,000 units in our pipeline right now and one out of every three units in the entire San Diego city’s housing is being built Downtown.”

This is a dynamic shift, Hall says. Statistics used to show that 100 or so new units would be built Downtown and 5,900 new abodes would be built in the suburbs. At any given time today, roughly 60 projects are under construction Downtown, which explains the perpetual cranes silhouetted across the skyline.

A Booming Market

Since 1998, nearly 3,500 units have been built Downtown. About 95 percent of those units have been sold. Another 1,771 condos are under construction and 1,685 apartments. Additionally, 2,087 condos and 1,291 apartments have been approved and shortly will break ground. In the application process are 1,251 condos and 403 apartments. This represents 5,092 condos and 3,379 apartments in the active pipeline today. In 2001, 539 units were complete, 439 were condos and 100 were apartments. In 2002, 551 condos and 599 apartments were completed.

“In ’03 we expect 900 units of condominiums and 700 units of apartments to be finished,” Hall says. As units are finished, others will start. There is no sign of a slowdown. Bosa reports the first tower at The Grande at Santa Fe Place is sold out. During the opening day of sales for the second tower at The Grande at Santa Fe Place, about 60 percent of the 221 units available were snapped up. Construction on the second tower hasn’t even begun.

“The market is very, very strong,” says Patricia Leone of Centre City Properties and Meridian Condominium Sales. “The only change is the real high-end (million dollar plus) units. They have slowed a bit, but there also are more available. Those units up to $800,000, we just can’t keep in inventory. It’s just incredible.” In September alone, Leone and her partner, Trudy Stambook, closed the sale of six units.

It is not just Bosa who has reason to be jocund about the market. Keith Fernandez, president of Intracorp, is seeing similar action. Waiting lists for his units are seeing a decline in dropouts. “We’re seeing 10 percent dropout instead of the usual 30 percent dropout rate,” Fernandez says. That can be good for the seller, but isn’t necessarily a good thing for buyers who will be offered those units at a higher price.

Busy developers mean busy Realtors.

Mike Althof of Prudential Realty says he gets about 10 calls or e-mails a day from prospective clients wanting information about Downtown living. “San Diego is on the radar screen for people all over the world,” he says. “There’s more culture, more cruise ships and the Super Bowl. San Diego couldn’t have presented itself better.

“We have so much that’s all coming together at the right time. San Diego is the right place to be at the right time. We are catching up in character to San Francisco and New York.”

Buyers are coming for second homes, and as a result of low interest rates, Leone says she is seeing some younger buyers. “The person who used to be the renter is now the buyer,” she says. That will change as rates start ticking back up.”

Fernandez says it will take a jump of three or four points in the interest rate to quell buyers. One point tends to push those on the fence toward buying. He has no idea how much longer this strong market will continue but says he doesn’t see anything changing dramatically within the next few years. Too much good is going on. “San Diego has a neat Downtown,” Fernandez says. “With the water, retail and restaurants. All those amenities help for a vibrant urban lifestyle. The ballpark also continues to be a good driver.”

San Diego’s quality of life has been its draw, says Douglas Wilson of Douglas Wilson Cos. In 1984 Wilson was drawn by the success of Horton Plaza and moved to San Diego to help develop Symphony Towers, which remains one of Downtown’s largest office projects. Nearly two decades later, Wilson has completed about four projects and is looking for more. He is getting ready to start The Mark, a $113 million, 32-story project north of his Parkloft project on Island Avenue in the East Village.

“There is no shortage of opportunity Downtown,” Wilson says. “If you stand at the top of Symphony Towers in the University Club and look out across Downtown, it’s not exactly Manhattan. There are still opportunities; we have a ways to go.”

Keeping Up With Demand

Developers can’t build Downtown fast enough.

“The market is still looking as strong as ever,” says Russ Valone, president of MarketPointe Realty Advisors. “But we are at a point of low inventory. At last count we have 625 units available for sale out of 3,952.” But there seems to be inventory available across the spectrum, it’s not just the million- dollar penthouses that remain on the market. Another factor aiding in the sale of Downtown residences is the rising cost of suburban property, which makes Downtown living look not quite as costly. The urban real estate market appreciated at 11 percent in 2001-2002 and at 12 percent in 2002-2003. The non-Downtown market saw an appreciation of 25 percent in 2001-2002 and 12 percent in 2002-2003, excluding luxury homes. “The price per square foot appreciation appears to be faster in the non-urban market because we’re dealing with a different animal,” Valone says. That different animal considers housing prices that went from $221,000 to $275,000 compared to the Downtown prices of $436,000 to $491,000.

Although Downtown sales are expected to see a lull soon, it has nothing to do with a lack of buyers. It will be because of a shortage in supply.

“It’s not that the market is disappearing,” Valone explains, “it’s just that we haven’t had the units available. It’s just timing. Some projects are selling out while others haven’t started.” Downtown buyers remain the same and seek to relocate for the same reason, “they are going for a lifestyle change,” Valone says. “These are the buyers who in the ’80s and ’90s would buy into golf course living. It would take a major hiccup in the economy to impact the market, but these buyers are older, empty nesters, the baby boomers.”

No End In Sight

The future has a silver lining. The Downtown market is still looking good to Bosa and there is no shortage of land. Speaking by telephone from his headquarters in Vancouver, Bosa says he is looking to do “quite a few more” projects here. “I’m going to be there for quite a while. The market is good and it will be for a while.” Intracorp also is aggressively looking for more sites and will begin infill projects in the suburban market.

Also planning for future projects is Wilson. He says things could slow but everywhere is prone to economic cycles. “The pause button may be periodically pressed — no one is recession proof. But the ballpark has created a momentum that can be built on.”

So with all this progress, what could keep Hall awake at night? “Trying to have jobs that are comparable to the housing,” he says. “It’s not smart growth if you create wonderful housing Downtown and it’s not balanced, integrated housing at all price points and then end up with everybody commuting to the suburbs to work. Now we’ve got the housing going on down here and we’re going to be focused on getting employers, the new economy jobs, Downtown. So people can walk to work. You can live, work and play all in one place.

“This is the ultimate planned community,” Hall says. “This is what we hoped for and it’s the strongest leg of the stool. We have a true 24/7 community. Downtown San Diego will be known as one of the finest urban renewal cities in the country. This is as good as it gets and people are discovering it from all over the world.”