High Vacancy Rates Don’t Scare Planners of S.D. Office Towers
Another proposal for a high-rise office building for downtown San Diego is about to be unveiled, one of seven major buildings on the drawing boards despite the high downtown office vacancy rate, now at 20%.
In discussions with city planning officials, developer Rob Lankford of Lankford & Associates has disclosed plans to build what sources say is a 32-story office building on a parcel two-thirds of a block in size south of B Street between 3rd and 4th avenues. The parcel, just east of the Civic Theatre, is now home to a parking lot and a vacant building formerly occupied by First Interstate Bank.
Lankford declined to discuss particulars of his proposal, saying through a spokeswoman that there are still some “legal loose ends” to tie up before the project can be made public. But one source familiar with the proposal said the building would total 450,000 square feet and feature a dramatic roofline designed by the San Francisco architectural firm of Hellmuth, Obata & Kassabaum.
Lankford and an unidentified “major” joint venture partner are buying the land in several pieces from separate trusts, downtown development sources said. The developers have chosen John Burnham & Co. to market the building, they said.
A transplanted Denver developer who moved to San Diego three years ago, Lankford has built two mid-rise buildings, one of nine stories and the other 10, adjacent to the La Jolla Marriott Hotel in the University Towne Centre area.
Word of the Lankford project came on the heels of the release of an office vacancy study by the San Diego Chamber of Commerce that found 19.9% of downtown’s 6.8 million square feet of office buildings was empty as of mid-1986.
The rate has declined from the 1984 peak when the downtown office vacancy percentage rate was in the high 20s. But the rate is still high enough to make lenders wary of financing any new buildings that do not have substantial pre-leasing, Coldwell Banker office broker Kraig Kristofferson said.
Consequently, there is intense competition among developers to sign major tenants before construction begins. One of the most sought-after prospective tenants reportedly is the law firm of Luce Forward Hamilton & Scripps, which reportedly is shopping for 100,000 square feet of space.
Lankford and the other developers working on the new crop of high-rises are each targeting a “window” of demand for office space they say will open two years from now after downtown’s existing high-rises have been substantially leased, Kristofferson said.
But only two of the six other high-rise buildings that have been proposed report any pre-leasing. One, the 34-story Symphony Towers office building at B Street and 7th Avenue, is 25% pre-leased to AT&T;, the Peat Marwick & Mitchell accountancy firm, and the Gibson, Dunn & Crutcher law firm, Kristofferson said. The site for the office building, the old Fox Theatre block, is being demolished in preparation for construction.
The other building with a preleasing commitment is a two-tower office project planned by the Koll Co. for a site south of Broadway between Columbia Street and Kettner Boulevard. The Mission Valley law firm of Jennings, Engstrand & Henrikson is committed to lease 40,000 square feet of Koll’s first 21-story tower, to total 317,000 square feet, Kristofferson said.
Other high-rise projects on the downtown drawing boards include:
- A 19-story, 343,000-square-foot building planned by Cabot, Cabot & Forbes developers on a block bounded by B, C, Columbia and India streets.
- A 30-story, 375,000-square-foot office tower planned as a joint venture of Sandor Shapery and Emerald Hotel Corp. of Japan, north of Broadway between Union and State streets.
- A 26-story, 500,000-square-foot building to be built by Trammell Crow Co. south of B Street between 8th and 9th avenues.
- A 22-story, 411,000-square-foot tower to be developed by Manufacturers Life Insurance Co. of Canada on a block bordered by A and Ash streets and 2nd and 3rd avenues.
