Press: Penthouses Rise Over the Pacific

By Candace Jackson | January 8, 2016 | Wall Street Journal

Developers are remaking San Diego’s formerly derelict urban neighborhoods with a new wave of luxury condos, hotels, restaurants and bars. Residents are trying out a new perk: walking to work.

A 41 story luxury condo building is on the rise. Boasting a screening room, a swimming pool and a boat-share program, its 215 units will soon be going on the market at prices starting at $1.4 million. The building is in downtown San Diego, an area with a seedy past. The median sale price in the neighborhood last year was $741,500, according to real-estate website Trulia. San Diego has long been a car-centric city, dominated by suburban-style subdivisions and gated communities. Now, that’s changing. Cranes downtown mark where new office towers, luxury condos and hotels will soon join the skyline. Restaurants with upscale comfort-food menus and hidden speakeasy bars line revitalized street fronts. Though downtown’s revitalization has had several waves over the years, the latest is higher-end and picking up quickly post-recession.

The population of downtown is about 30,800 residents—a 76% increase since 2000—and more than 9,000 apartment and condo units are in the pipeline for development. Brad Termini, the co-CEO of Zephyr, a San Diego-based developer of high-end housing, said buyers want to be able to walk to neighborhood amenities. “We’re seeing a real flight out of suburbs like Rancho Santa Fe because of the lack of walkability and the high cost of maintaining those estates,” he said, referring to a wealthy suburban area in north San Diego County full of gated developments and large, luxury estate homes. A few months ago, Huey and Suzanne Antley sold their home in the northeast edge of San Diego and bought a 1,000-square-foot condominium in the Marina district downtown, a neighborhood known for its highend condos, parks and touristy Seaport Village. The couple paid about $600,000 for their condo, which is near a park where they can walk their dog.

A big impetus for the move was so that Ms. Antley, a deputy attorney general for the state of California, could give up her 40-minute commute and walk to work. “We maybe use the car once a week for an hour,” says Mr. Antley, a vice president of a data analytics company, who works from home. “We’re kicking around the idea of buying a Vespa.” Downtown San Diego, an area of about 2.6 square miles along the San Diego Bay, consists of several distinct neighborhoods, ranging from the tall buildings of the Civic Core to the lively cafes and bars in the Gaslamp and Little Italy. Some sections are still gritty, with clusters of homeless people and businesses like check-cashing stations and pawnshops. The city’s large Navy presence boomed along the waterfront during World War II, but residential development flourished in the suburbs. For decades after, downtown had a seedy reputation, its large homeless population mixed in with office buildings and a few tourist attractions. “When I moved here in 1983, the only reason to go downtown was the Old Spaghetti Factory,” says Christine Baker, an agent with Willis Allen, a Christie’s affiliate, referring to the chain restaurant. She moved to the Marina district after raising her children in the suburbs. In the mid-1980s, the opening of the Horton Plaza shopping mall and, later, the city’s convention center, marked the first major push to revitalize downtown. Gary London, president of the London Group Realty Advisors, says that more recently, residential developers began looking seriously at downtown, partly because suburban areas ran out of developable property for master-planned communities, as well as changing lifestyle preferences.

In 2004, opening of Petco Park, the baseball stadium, brought with it another wave of condos and apartments. Then the recession hit, halting nearly all development. Over the past few years, strong job growth in the science and technology sectors, and a trend toward urban living, are bringing buyers and developers back. “All of the sudden the market is waking up,” says Nat Bosa, a Vancouver-based developer who is one of the largest property owners downtown. He recently broke ground on Pacific Gate, the 41-story building with the boat-share program. San Diego mirrors a national urban revitalization that has played out in cities like Louisville, Portland and Los Angeles, with millennial and Gen X buyers, as well as empty-nester baby boomers, turning away from car commutes and higher-maintenance suburban homes to more walkable, denser city neighborhoods. Developers and real-estate agents say the latest wave of urbanbound residents tend to be wealthier and older. Near downtown, along Balboa Park—a 1,200-acre green space that is home to 15 museums and the San Diego Zoo—once sleepy neighborhoods like Golden Hill, South Park and North Park are undergoing a renaissance. Open-walled restaurants and craft breweries have cropped up along with yoga studios and boutiques.

Homeowners are rehabbing Craftsmans and Spanish Colonial-style homes that are within walking distance of cafes with kombucha on tap. Sally Schoeffel, a real-estate agent with Sotheby’s International Realty, first moved to Golden Hill in 1998 in search of a historic home. She and her husband have since spent 18 years and over $350,000 renovating a 1927-era Mediterranean-style house. In the past few years she says she has noticed more young families moving in. “Now I have clients who bicycle to work or catch the bus,” says Ms. Schoeffel. Melissa McKinstry and Doug Kipperman, who live in South Park in a Craftsmanstyle home they renovated, say the neighborhood feels like it evolved organically and maintains a friendly vibe. Ms. McKinstry teaches yoga at a studio within walking distance, and a bluegrass band that lives across the street performs a concert in their yard every year. “People really care about what’s going on here and maintaining it,” says Mr. Kipperman.

Developers are picking up on the opportunities. Abraham Edid purchased a 2,700-square-foot, 1906 Colonialstyle home in South Park, spent the past few months gut-renovating it and recently put it on the market for $1.295 million. Developer Mr. Termini’s latest project is a 60-unit building along Balboa Park with large terraces and bathrooms with giant marble-slab walls. Like Pacific Gate, the building’s prices are pushing new territory for the condo market, ranging from $1.5 million for 1,800-square-foot two-bedrooms to nearly $6 million for penthouses just under 5,000 square feet. Residents say downtown and its surrounding neighborhoods still face challenges. Though public transportation options have improved, with an expanded bus system and a trolley that goes all the way to the Tijuana border crossing, some say it isn’t extensive enough to allow for a carless lifestyle. Kris Michell, president of the Downtown San Diego Partnership, says early this year they are launching a new urban-transport system. The on-demand electric vehicles can be hailed via smartphone app, like an Uber.

The city also has been working to address a persistent problem of homelessness. And in areas like North Park, South Park and Golden Hill, upscale homes mingle with rundown properties in need of attention. Real-estate agents say the biggest issue for buyers is that there aren’t enough homes on the market, driving up prices. According to Trulia, the real-estate website, the median sale price per square foot in Bankers Hill has risen by 30% between 2013 and 2015. In suburban Rancho Santa Fe, the median price per square foot rose 10% in the same period. There is no sign of a slowdown. Ms. Michell, of the Downtown Partnership, says that over the next 30 years, the city’s population is forecast to grow by an additional 1 million residents.

Marsha Sewell, an interior designer and general contractor, moved downtown in 1991 to convert a 100-year-old mixed-use building into a single-family home. Then she purchased another historic building for $600,000, rehabbed it and sold it for $2 million. A few months ago she moved into a 3,200-square-foot condo she paid $1.075 million for and has just completed renovating. “The prices are only going to go up, and at the high-end of the market people really want space,” she says.

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