| November 2000 - You can�t help but notice downtown San Diego.
The downtown area may have evolved more rapidly than any other in the California
region in the last three decades. Today, an even broader and more
ambitious development palette is emerging with a mix of Convention Center,
retail, entertainment, hotel and condominium uses as well as public venues,
such as the Ballpark. Why is the downtown area so hot?
Jill Leibowitz of San Diego-based consulting firm Goodwin & Associates
provides a succinct overview, �The downtown area is unique in that it showcases
one of San Diego�s best and most celebrated attributes: the waterfront.
The presence of the Convention Center as well as numerous leisure venues,
such as Seaport Village and the cruise ship terminal, give the downtown
area destination appeal. The expanding entertainment, dining and shopping
options in the Gaslamp District, which sprawl to the entertainment and
shopping areas of Horton Plaza, complement waterfront offerings � all offering
more amenities for both visitors and local residents. The end result is
that the downtown area has more to offer than just a �business address.�
It offers a depth of complementary uses that produce a diverse micro-economy,
which is attractive to developers, investors and residents.�
The downtown area was at one time subject to years of economic, physical
and social neglect. The Center City Development Corporation was created
in 1975 by then-mayor Pete Wilson to implement appropriate redevelopment
in the downtown area. But it wasn�t until 1992, when the CCDC was provided
the appropriate tools for redevelopment, that objectives began to be met.
A Story of Downtown Neighborhoods
It is a story of neighborhoods, according to Pam Hamilton, Senior Vice
President of CCDC, �Downtown San Diego has gone through a remarkable evolution
to get to the place that it is today � a hot bed of development. The pioneering
redevelopments that were done in the various districts have paved the way
for the diverse development that is occurring along and near the waterfront.
For the first time, downtown is becoming a popular area for San Diegans
to live and work.�
There are seven neighborhoods that encompass downtown San Diego and
each of the seven has a unique history and character. And each is contributing
to the current vitality of the market.
| Horton Plaza. |
The development of Horton Plaza by Ernest Hahn in the early 1980s was
the first pivotal redevelopment project in the downtown area. This multi-use
retail and entertainment project was truly pioneering for downtown San
Diego, and the quality and success of this project sparked much of the
redevelopment that has occurred in the last two decades in peripheral districts.
The Horton Plaza Redevelopment Project includes the Horton Plaza retail/entertainment
complex, and adjacent Westin Hotel, the Meridian condominium tower, Spreckels
and Balboa Theaters, the Federal Courthouse and the Pacific Bell and Home
Savings office towers.
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| The Marina. |
| The Marina Neighborhood runs along the Bay and includes the Convention
Center and the nearby Hyatt and Marriott hotels, the new Hilton-Gaslamp,
and the 11th Naval District Headquarters. The neighborhood also includes
public venues such as Seaport Village, Martin Luther King Promenade and
the Children�s Museum.
This neighborhood�s considerable growth and beautification efforts are
expected to continue with the pivotal Convention Center expansion project.
According to Greg Clay, Development Director � Lodging, JMI Realty, Inc.,
�The expanded convention center is expected to continue to draw people
to downtown San Diego who otherwise might not have thought to visit.
With this new exposure, people have decided to return for pleasure, and
many times those who are able have chosen San Diego as a new home for themselves
and their businesses.�
Additional major redevelopment projects within this area include the
planned Hyatt expansion, an extension of Martin Luther King Promenade from
F Street to Broadway and a possible expansion of Seaport Village.
The Marina area is also expected to receive the majority of approximately
1,100 condominium units that are being developed in the downtown area.
According to Alan Nevin, Director of Economic Research of MarketPoint,
�Currently, 90 percent of the buyers have been empty nesters or retirees,
which is not the typical profile of purchasers for an urban setting, and
this is because the units available were traditional in nature. However,
these demographics are expected to change with the next round of projects,
which are more contemporary and, therefore, are expected to appeal to a
younger audience.�
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| The East Village. |
| The East Village is downtown�s largest neighborhood and is expected
to be the recipient of the most redevelopment in the near-term future.
The two major projects planned for the area include the Ballpark District
and the proposed hotel at Campbell Landing.
The Padres Ballpark District is an area of approximately 60 blocks that
has been a blighted and underutilized area. The citizens of San Diego approved
the financing of a new Ballpark for the San Diego Padres that would be
the catalyst for redeveloping this area. The initial 30-block phase will
include approximately 950 hotel rooms (in three hotel projects), 200,000
square feet of retail space, 5,000 parking spaces, a new main city library,
700 apartments and condominiums, and 700,000 square feet of office space.
The Campbell Landing Hotel had been proposed on Port tidelands, and although
development plans have not been finalized, a 1,000 to 1,200-room hotel
and marina is contemplated.
Given the Ballpark District redevelopment�s size and scope, according
to John Kratzer, President and CEO of JMI Realty, Inc., who is spearheading
the majority of development in the District, �This is the most significant
redevelopment project in the country. There are multiple examples (Baltimore,
Denver, Cleveland) where the creation of an urban sports venue has provided
the energy to revitalize a neighborhood and where this facility has provided
a major catalyst to redevelopment.�
Noel Heller, of Heller Company, and developer of the rising Hampton
Inn and Suites in downtown, sees another need and commented that the downtown
marketplace is �very favorable right now based on current demand levels
and those that are expected with the Convention Center expansion. We found
a need for new, high-quality, mid-market hotel rooms with superior and
upgraded amenities.�
Are the 1,950 to 2,150 hotel units proposed for The East Village threatening
saturation? Greg Shannon, President of Sedona Pacific, developer of a hotel
in the Ballpark District adds, �Downtown San Diego needs more lodging because
of multiple demand generators � the Convention Center, the County�s largest
office and business concentrations, San Diego Bay, the Gaslamp Quarter,
the nearby San Diego Zoo and Balboa Park.�
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| Gaslamp Quarter. |
The redevelopment of this 16-block area began in 1976 when the
City adopted The Gaslamp Quarter Revitalization Plan. The area soon after
became a designated historic district, yet development languished until
peripheral developments allowed the District to come into its own. Today,
with its variety of restaurants and clubs and growing number of retail
operations, it is the region�s largest entertainment destination due to
its many festivals and unique urban character. Proposed redevelopment efforts
include major name retail and entertainment expansion. Additionally, at
least two hotels projects are proposed for the area: a Homewood Suites
Hotel and a Le Meridien Hotel.
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| The Core/Columbia Neighborhood. |
This neighborhood encompasses San Diego�s downtown business district,
including the majority of the high-rise office space in the downtown area,
the hotels along Broadway and a variety of government buildings. The area
was the focus of redevelopment in the 1980s and early 1990s when many of
the high-profile office buildings and hotels were constructed. However,
this neighborhood is slated for additional redevelopment as well. Among
the projects are some historic rehabilitation, a mixed-use Music Village
project, and government building expansions. The North Embarcadero Visionary
Plan will master plan the underutilized stretch of waterfront between Harbor
Island and the Cruise Ship Terminal. One part of that is the proposed Lane
Field project which would include office, retail and/or hotel components,
a rearrangement of retail and commercial uses and a possible expansion
of the cruise terminal to potentially accommodate up to three home-ported
cruise ships. And in hotel development for the Core/Columbia Neighborhood,
the Courtyard by Marriott opened in November 1999, and there is a proposed
hotel at the site of the former SDGE power plant, and a proposed new hotel
under the W flag.
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| Cortez Hill. |
The Cortez Hill neighborhood is one of San Diego�s most distinguished
and oldest residential neighborhoods that draw its name from the famous
El Cortez Hotel. Redevelopment efforts include the rehabilitation of the
El Cortez Hotel into 85 apartments, the construction of the Cortez Hill
Apartments and a 210-unit condominium project, the Cortez Hill Residences.
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| Little Italy. |
The Little Italy Neighborhood was at one time home to
the tuna fishing industry and the many Italian families who worked within
the industry. Today, it is an urban neighborhood with single and
multi-family homes, a commercial center on India Street, and includes the
San Diego Maritime Museum, the Cruise ship terminal and the County Administration
Center. Redevelopment efforts include the Marriott Residence Inn, which
opened in the summer of 1999, the Hampton Inn that is under construction,
and a variety of loft apartment and row home projects.
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While redevelopment of downtown San Diego was virtually suspended during
the recession of the early 1990s, the continued success of projects built
in the 1980s gave momentum to the downtown area�s redevelopment. The current
wave of downtown redevelopment has a continuing thread. Every neighborhood
has projects that will enhance the downtown area�s appeal to visitors,
such as the expansion of the Convention Center, the development of the
new Ballpark, the possible expansion of Seaport Village and additional
restaurants, entertainment and shopping venues. And these projects
are expected to benefit the local resident base, and complement the commercial
uses of the downtown business district.
Is this critical mass of hospitality-related development realistically
financeable? According to Tim Wright, Senior Managing Director of
Holliday, Fenoglio Fowler, L.P., �Despite a continued shortage of capital
for hospitality projects elsewhere, there remains a handful of lenders,
from the international to the local level, who are eager to invest in the
San Diego market place. The attraction is multi-fold. Because of the mismatch
in the supply and demand for hospitality financing, lenders are able to
pick the best projects with top tier sponsorship and operators. In addition
they are able to get excellent terms with low loan to cost ratios, strong
guarantees and credit enhancements, and pricing premiums.�
Marty Collins, President of Gatehouse Capital, who is developing the
W Hotel in the Core/Columbia neighborhood, added, �Gatehouse Capital only
does business in high barrier markets. The math is very compelling in this
downtown area when the barriers to entry are combined with the attractiveness
of the San Diego climate, business environment and demographics.� Tim Wright
underscored that the �excellent� market dynamics of downtown �have given
lenders comfort as to the feasibility and long-term success of a number
of the planned hotel developments in the downtown area.�
The outlook for hospitality in this hottest of markets? JMI Realty�s
Kratzer summed it up neatly. �This is an exceptionally strong hotel market,
even before the Convention Center expansion comes on line. The substantial
barriers to entry in this market make hotel development a very attractive
investment.�
| The Global Hospitality Advisor would like to thank Jill Leibowitz
and Bruce Goodwin of Goodwin & Associates for their contributions to
this article. You may contact Bruce Goodwin at (858) 558-4488 or [email protected]. |
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