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Empty spaces plague older buildings in downtown SD

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Downtown San Diego high rises are a tale of two worlds for landlords -- either a tenant feast or famine.

A CBRE (NYSE: CBG) downtown high rise building survey conducted this month found that about 1.28 million square feet of space was vacant, or roughly 700,000 square feet less than is available in the entire office market in buildings of 10,000 square feet or larger.

A 2007 renovation according to CBRE has not been enough to fill the 1963-vintage 171,545-square-foot (rentable) Chamber Building at 110 West C St., which was 41.2 percent vacant at the time of this survey. The CoStar Group’s website said the property was last renovated in 1978.

Major tenants in the building include business services firm Alexander Gallo Holdings, College of English Language, Inc., attorney Gordon Cruse, and Howard Wiggins, Attorney at Law among others.

The Chamber Building was last sold for $29.25 million to a unit of the Jamison Services Inc. of Los Angeles in 2007.

Another 1963-vintage building that has had trouble keeping full is the 707 Broadway building that was once occupied by Great Western Bank.

The building, which is on a long-term ground lease was part of a 41-property, $7.2 billion portfolio sale in October 2006.

The building was 35.65 percent vacant at the time of CBRE’s survey. Local developer Chris McKellar renovated the building in 2001.

Major tenants include Family Justice Center Alliance, Associated Technical College, and Lowell & Robin, and Scott & Scott Attorneys at Law.

A unit of The Blackstone Group (NYSE: BX) acquired these properties from Brookfield Office Properties (NYSE: BPO) in a transaction that also included the Merrill Lynch Building at 701 B St., and buildings in Sorrento Mesa.

Even though the 550 Corporate Center building was built decades later than either the Chamber Building or 707 Broadway in 1990, its landlord too is having difficulty getting its space filled.

By CBRE’s accounts, the 357,477-square-foot building was 27.57 percent vacant at the time of this month’s survey. CoStar (Nasdaq: CSGP) said the vacancy was an even worse 28.9 percent.

The tenants for 550 Corporate Center (once known as the Cabot, Cabot & Forbes building), which is owned by the Alaska Permanent Fund Corp., include Wilson Turner & Kosmo LLP; Manning, Kass, Ellrod Ramirez & Trester LLP; the U.S. Navy; and the U.S. Secret Service, according to CoStar.

The Manning Kass law firm signed a $3.23 million lease expansion and renewal for 15,162 square feet in the building in 2010.

At the other end of the vacancy spectrum is the 236,711-square-foot (in rentable office space) DiamondView Tower development overlooking Petco Park.

Sold for $121 million to a joint venture of CruzanMonroe and Cigna (NYSE: CI) last October, DiamondView had 2.8 percent vacancy as of the January survey. The building was completed in 2007 just prior to the recession.

Major tenants at DiamondView include Cox Communications; Comerica Inc.; Kirby, Nonnan Lance & Hoge LLP; and CBRE. The law firm of Bender & Gritz is slated to move into DiamondView on Feb. 1.

Six major high rises owned by The Irvine Co. have all fared quite well, with four of the six with single-digit vacancies.

The 1991-vintage signature One America Plaza, building has had its share of vacancies over the years, with various law firms, coming and going, CBRE leaving for DiamondView and other misfortunes.

Now, despite these events and the recession, One America checked in with a vacancy of 6.3 percent, according to CBRE.

That translated to 39,249 square feet available out of 622,580 square feet of rentable space.

The low vacancy number may be at some risk given that Latham & Watkins is moving out of 77,147 square feet on the 16-19 floors late in February 2014, though The Irvine Co. still has more than a year to market the space.

Latham will move some of its operations to the University Towne Centre area.

Other major tenants include McKenna Long & Aldridge and the Nicholas Applegate financial services firm.

The Irvine Co., which went on a spending spree in San Diego County in the 2000s, paid $300 million to buy the asset in 2006.

An even stronger performer for The Irvine Co. based on percentage vacancy is the 346,340-square-foot 225 Broadway building with a 5.2 percent vacancy.

Tenants at 225 Broadway include NBC Channel 39; City National Bank and The Law Offices of Lincoln, Gustafson, & Cercos.

A joint venture of Angelo Gordon & Co. and Lincoln Property Co., which paid $49 million for the 347,972-square-foot 600 B St. building in December, acquired a property that that has about a 15.02 percent vacancy.

But there are scheduled move-outs that could affect this percentage.

By the end of March, personnel services firm EmbassyCES is scheduled to move out of 14,584 square feet -- but a much bigger issue is that the city of San Diego has a 139,000-square-foot lease slated to expire in May.

Another building sold last year is the 553,715-square-foot Columbia Center property, at 401 West A, that sold for $135 million to Emmes Master Services of New York. That building was 26.83 percent vacant, according to CBRE.

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