Douglas Wilson

Change is the operative word on the national scene this election season, but nowhere is that word better used than in describing Downtown San Diego over the past quarter century. America’s finest city has become America’s city of change, thanks, in large part, to what’s taken place in 92101.

I’ve seen massive changes take place in our city’s urban core since arriving in 1984 from Denver where I had been involved in commercial real estate in that city’s redevelopment district. Here, my two partners and I at the time took the opportunity to change an old dilapidated city block into Symphony Towers, the city’s largest privately financed mixed-use development at that time.

Changes such as this have been replicated numerous times over the years. Project by project, Downtown has changed into a world-class commercial, entertainment, and residential center.

Many of the changes were anticipated and planned for in the Downtown Community Plan Update, a comprehensive process I participated in as a mayor-appointed member of its steering committee. Others are due to external factors not of our making, but within our capacity to deal with as we move through and take part in one of the largest downtown redevelopment programs of any city in the country.

First, the social factors. Today, the grown children of those who fled to the suburbs a generation or two ago have tired of fighting long commutes, crowded schools, the growing lack of water to landscape their suburban homes and are returning to a new and exciting lifestyle that inner city living can offer.

Our company first recognized that nearly a decade ago and pioneered the first for-sale condominium loft development in the emerging East Village neighborhood. Parkloft proved there was a market segment interested in living in an urban setting that was in the process of being transformed from an old warehouse district into what it is today — an exciting and vibrant urban village.

One thing that hasn’t changed since Parkloft opened six years ago is the keen interest in living Downtown — full- or part-time. That trend continues today as evidenced by what we see taking place in The Mark, our company’s 33-story high-rise across Island Avenue from Parkloft. In a down market, we sold more than half the 244 urban residences in the first 14 months after opening summer 2007.

What has changed, however, is that in addition to local suburban converts, The Mark is attracting a growing number of out-of-town buyers who are looking at Downtown as a vacation home destination. That Downtown has become a vacation home market is certainly a change worth noting.

Economic factors also are responsible for some changes taking place Downtown in the near term. No doubt about it, we’ve seen the effects of the adage “Capital fuels growth” come to pass. Along with other locations throughout much of the country, the 92101 real estate market is on “pause,” given the upheaval on Wall Street and in the mortgage markets. The lack of liquidity in the credit markets is a sure predictor that not much will happen for the next two to three years.

To that point, a MarketPointe Realty Advisors study this past spring reported there are no new Downtown condominium projects in pre-construction phases, meaning nothing will be available in 2010 or 2011. Meanwhile, completed condominium projects, as well as those now under construction, are projected to sell out by the end of 2009.

At this writing, only 110 new condominium units are available for sale in East Village, outside those we still have at The Mark. Given the normal course of economic cycles, we’re looking at a substantial pent-up demand brewing in Downtown for-sale housing when the market inevitably wakes up from its economic nap.

Meanwhile, the Downtown rental market is already red hot with increasing rents reflecting a short supply of units available.

There’s even more cause for continued confidence in Downtown’s for-sale housing market. The average price per square foot for new Downtown condominiums almost doubled from 2000 to 2007. Given the dearth of units now available or coming online in the next couple of years — as well as a diminished number of high-quality condominium sites available — there’s every reason to believe that appreciation will continue.

It may not be in vogue to be optimistic about the future of Downtown San Diego’s housing market. But I am. Balancing the declining inventory of new condominiums are the many lures of urban living. Believers and cynics alike need to keep in mind the overarching determinant in real estate value: Location.

When all is said and done, San Diego — in particular, its Downtown — has the location trump card that assures its long-term economic vitality. It’s something Downtown San Diego has always had; it’s something it always will.

Douglas Wilson is the founder and CEO of the Douglas Wilson Cos.