Downtown San Diego’s office market, while lagging some suburban markets in health, may be poised for a surge, thanks to the influx of residents and higher rents in suburbia.

Urban commercial real estate was the topic of discussion for a Downtown San Diego Partnership panel that was led by JMI’s John Kratzer and featured Charles Black, Irvine Co.; Nancy Graham, CCDC; Stath Karras, Burnham Real Estate, Ed Muna, Lankford & Associates; and Jason Wood, Cisterra Partners.

For Muna, who is handling leasing for the new Broadway 655 tower, this is déjà vu all over again. It was 15 years ago that Muna did the pre-leasing for Emerald-Shapery Center, which was blessed with its distinctive shape but cursed by competition from three other new office buildings — Cabot, Cabot & Forbes, One America Tower and The Koll Center. At Broadway 655, Muna expects to add 100,000 square feet of tenants this year, most of them existing Downtown firms that are doubling their space in the move. Suburban tenants are taking a peek, but nervous about parking costs and ratios. But when competing against pricey space in UTC and Del Mar, Muna says the price is essentially the same. "The challenge is to paint (for the perspective tenant) the whole picture on the economics," he says.

Since the Irvine Co. entered the Downtown office in force last year, other landlords are pondering following its lead in charging a premium for views, Muna says.

Wood notes that Cisterra’s DiamondView office tower outside of right field at Petco Park is within four floors of topping out. Tenants will start moving in March 1. The building is 35 percent pre-leased, and Wood says he is getting some interest from the suburbs, including a 15-employee company in UTC that does a lot of business on both sides of the border.

Black, who recently left JMI, says Irvine is interested in building a new tower Downtown. While the vacancy rate is 9 percent, he says much of that is non-premium view space.

Office, Black says, is needed to strengthen the jobs-housing balance. "Now that so many people have moved Downtown it is time to make it easier for companies to move Downtown," he says, echoing a theme shared by the panel. In the last decade or so, Downtown’s share of the region’s office market has fallen from 23 percent to 15 percent. Kratzer tried to get Karras, who also is a board member of EDC, to say commercial incentives were needed to turn that around, but Karras wouldn’t bite.

Another topic was the need to attract employers outside the traditional law, financial and government sectors. Technology execs seem a perfect fit. "We are not going to be able to have a lot of success in attracting wireless companies to Downtown, but we ought to be looking at their headquarters operations," Black says.

Karras says that SAIC, Qualcomm, Sony and Toyota should have have a corporate presence Downtown. Perhaps, he says, the city could encourage that by creating a top-notch media center these companies could use to show off San Diego to top clients and partners.

CCDC expects to aggressively lead a business attraction program, reports Graham. "If any of us are going to be successful in making Downtown a (commercial) success, we are going to have to work together," she says.

— Tim McClain