REAL ESTATE NEWS

A wave of recent high-rise sales, driven largely by Irvine Co. divesting its entire CBD portfolio at steep discounts, has reset the San Diego downtown office landscape and introduced new capital to the market.

The market is also seeing pricing divergence and asset modernization. For example, Westside bayfront properties in the Columbia District command premium rental rates and pricing over eastside assets located in the older Core Financial District, given their superior views and proximity to amenities.

To capture demand and achieve higher rents, new owners are actively investing capital in common-area upgrades, elevator modernizations and amenities.

Downtown's long-term transformation will increasingly rely on adaptive reuse, according to JLL, with landlords converting obsolete office properties into residential, hospitality or mixed-use.

At the same time, accelerating flight-to-quality will drive tenant consolidation into premier Class A assets, forcing owners of legacy buildings to reposition or repurpose their holdings.

Richard Gonor, JLL managing director, told GlobeSt.com that this downtown San Diego revolution has seen the biggest office building ownership change in over a decade.

"Downtown high-rise office market and fresh capital are repositioning the central business district," Gonor said.

"New owners aren't just buying buildings. They're buying location advantage and investing selectively with elevated amenities, modernized spaces, and repositioning for today's office users."

This new ownership brings repositioning expertise, he said, such as adaptive reuse potential, residential conversion and mixed-use transformation.

"Location creates optionality," Gonor said.

"Westside properties near Little Italy and the waterfront have multiple paths: office repositioning, residential conversion, mixed-use transformation. Eastside buildings require creative strategies, but downtown's ecosystem provides the demand foundation."

Source: GlobeSt/ALM