Today I am celebrating. I have just finished reading the 100th article published in the last year on the “Real Estate Bubble.” To me, Bubbles is a stripper at Cheetah’s. It is certainly not a topic germane to our real estate market, and definitely not germane to Downtown.
Most of the seminars I have attended this year feature experts who opine that long-term interest rates are going to move upward to the 6 percent to 8 percent range by year’s end. Could be, but right now they are moving down. And that is causing the home buying market to salivate or maybe drool over prospects of trading in, trading up, trading down or particularly buying a home for the very first time.
I know this is one of the least affordable housing markets in the nation and that, theoretically, only 18 percent of the households here can afford to buy. But statistics are statistics and very often have no relationship to reality. Most pointedly, 55 percent of the households in the county already own a home. I assume that among them are the 18 percent who can afford to buy a home. If that is true, then no renters could afford to buy. Well, so much for statistics because this year more than 16,000 households will acquire a newly built home or condominium or a condominium conversion, and yet another 45,000 persons will acquire a resale. Importantly, a significant number of those purchasers will be first-timers who do not agree with the unaffordability of our housing.
In San Diego County perhaps the most active condominium and condominium conversion market is Downtown. A good portion of those units are within the bounds of affordability at today’s sinfully low interest rates.
Until last month, I was prone to opine that we are virtually sold out of new condominium units until 2006. In other words, of the dozen projects now under construction Downtown, all except three are essentially sold out with two — M2i and Park Boulevard West — nearing sellout. The only one that has broken ground and not sold out is Metrome, but it just began construction last month.
Now there is some relief in the Downtown for-sale market. In the past month, four “under construction” rental projects have been converted to condominium status prior to completion and a fifth has completed condo conversion.
The conversion projects are Hovnanian’s Acquavista in Little Italy, Skandia’s Mills at Cortez Hill, Bob Champion’s Gaslamp Square and Palermo (at First Avenue and Front Street). The fourth is the El Cortez apartments. Combined they will add more than 1,000 units that will be the basis of the Downtown condominium market in 2004 and 2005. Without them, we would be in inventory starvation status.
Since mid-1999, seven condominium projects have closed out Downtown, adding 2,210 homes to the market. In addition, 11 more projects with 1,869 units are under construction and essentially sold out. That’s more than 4,000 condominiums sold in four years. Not bad. I am tempted to say we could have sold more, but the product wasn’t available.
No doubt the number sold in 2004 and 2005 will be significantly lower, but only because there are few unsold projects into which one could move.
The good news is more is on the way. My company’s databank registers 7,500 condominium units that will be delivered between 2006 and 2008, many of them to begin sales this year to be sold out by time of delivery.
Among the next group to break ground will be:
- Doug Wilson’s The Mark, the 31-story successor to Parkloft.
- Western Pacific’s Park Boulevard East, successor to Union Square and Park Boulevard West.
- Anka’s Gaslamp Plaza at the corner of Sixth Avenue and Market Street — the first San Diego project for this Australian firm.
- Intracorp’s 180-unit Park Terrace right outside right field, a first class follow-up to Trellis and Diamond Terrace.
- Point of View’s towering Vantage Point at the foot of Cortez Hill.
- Rob Lankford’s 19-story very Smart Corner, bounded by Broadway, C, 11th and Park, with 300 units, many of them entry-level.
To say that our skyline is being transformed is an understatement. In the past four years, including new condominiums and rentals, we have added almost 5,000 new housing units with more than 8,000 people. Remember that the total sale and rental inventory in 1999 was 4,000 market-rate units so we have doubled the Downtown population in four years. And will do it again in the next four years.
In addition to the residential component, an aggressive program of commercial/public sector projects is under way, not the least of which is Petco Park and outfield park, the 550-room Omni Hotel and Metropolitan Condominiums and the 235-room Kimpton Solamar Hotel — all the heroic effort of JMI.
Think of Downtown San Diego as a newly discovered waterfront suburb. Alonzo Horton was the first modern discoverer to recognize the benefits of living and working in Downtown San Diego and at a buck an acre, he had the right idea. The cost of entry has risen somewhat, but it’s not too late to take part in this round of discovery.
Vacant land is now scarce Downtown. The Marina District, Cortez Hill and Little Italy neighborhoods are nearing build-out, leaving only East Village with a somewhat adequate supply of undeveloped land. And that’s going fast.
Not to create an artificial gold rush, but it is difficult not to get excited about one of America’s most active new high-rise suburbs.
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NEW PROJECTS IN PLANNING/UNDER CONSTRUCTION/COMPLETED
DOWNTOWN SAN DIEGO 2001-2006
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Alan N. Nevin is director of economic research with MarketPointe Realty Advisors (marketpointe.com), a consultancy providing real estate and demographic statistics, feasibility studies and litigation support to the California land use industry and legal professions. Nevin can be reached by e-mail at anevin@sandiegometro.com.
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