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A third border crossing

South Bay is booming with retail, industrial and housing development

Chula Vista is a real estate mecca, Otay Mesa is the last bastion of affordable industrial land, the coastal portion of the South Bay is poised to explode with new development, and a third border crossing is needed to complete the picture.

Those were a few of the conclusions reached during a recent meeting of the National Association of Industrial & Office Properties (NAIOP) at the La Jolla Marriott. The program was moderated by Rob Hixson of CB Richard Ellis, who also chairs the Otay Mesa Community Planning Group.

Michael Vogt, a broker with International Real Estate and a developer of industrial projects in Otay Mesa, said that with the addition of developments like Eastlake, Otay Ranch and Rolling Hills Ranch, Chula Vista will see its population grow from about 209,000 residents today to between 275,000 and 300,000 within the next 15 years.

Guy Asaro of McMillin Cos., said as recently as 1996 the South Bay represented about 17 percent of the residential units being built in the county. He said this year the figure is running at about 41 percent.

"In 1996 this would have been a dream," he said.

Asaro noted residential developers knew a decade ago of the South Bay's residential potential, but it took a few years for it to be fully realized.

"In 1996, it was $210,000 for the average house. Today it is $864,000," Asaro said. "We have 16 projects in Chula Vista with prices in excess of $800,000 and six with homes in excess of $1 million."

Asaro said Chula Vista's master plan developers work in concert to solve regional problems. For example, Olympic Parkway was privately funded before the need even existed.

In the meantime, homebuilders have been erecting new homes at a furious pace.

At McMillin Cos.' Rolling Hills Ranch, 1,400 units are scheduled for build out by 2008. McMillin also has developed a significant number of the 5,100 homes in the Lomas Verdes portion of Otay Ranch.

The Otay Ranch Co., still controlled by the Baldwin family of Irvine, will have 10,000 homes on its portion of Otay Ranch; between one-third to a half of those homes have been constructed and sold. About 17,000 more are planned or have been constructed by guest builders.

A total of 12,000 units were planned at EastLake, and about 10,000 are expected to be realized by the end of 2006.

"The last half of these units will have been built in a third the time as the first (half)," Asaro said, noting that schools in Chula Vista are being added at the rate of one per year.

Vogt also mentioned the ongoing effort to bring a four-year university campus to Otay Ranch. If all goes as planners would hope, colleges from around the region would be part of this effort. The university would start with about 15,000 students, but no timetable has been established for its development.

While the residential portion of the EastLake master plan continues its steady march toward build-out, other parts of EastLake also are experiencing major activity.

Vogt said nearly 1 million square feet of retail space has been built in Chula Vista in the last two years. All of this was leased during construction despite rental rates -- some of the highest in the county -- that top out at $4 per square foot.

Projects under way include the 450,000-square-foot Eastlake Design District slated for a grand opening next month and the nearly 900,000-square-foot Otay Ranch Town Center near the intersection of Eastlake and Olympic parkways, scheduled for completion in October of next year.

A bit farther south, Judd Halenza of The Judd Co. said Otay Mesa is in the awkward position of having very little developable industrial land and a 20 percent industrial vacancy rate at the same time. He said he isn't worried about the space leasing up, however.

With the completion of the projected $630 million State Route 125 toll road between the border and Spring Valley, the access to and from the mesa will be significantly better than it is today.

"This will put the South Bay within a 20- to 25-minute commute to other parts of the county," Vogt said.

"I think I am still underestimating the impact of S.R. 125," Halenza added. "It will have 30,000 to 40,000 cars the day it opens."

Limited sewage access has kept parcels from being developed in the unincorporated portion of Otay Mesa, but Halenza noted that plans "that will provide enough capacity for the rest of our lifetimes" are moving both by the city and the county.

Even with the sewer, the land is not limitless.

"It's becoming more and more difficult to find opportunities," Hixson said.

Halenza, recalling that the maquiladora industry took a big hit earlier in the decade, said there is now a shortage of land in Tijuana for new twin plant development.

In a related vein, Halenza says the importance of a third border crossing for Eastern Otay Mesa can't be overestimated. He cited a report by the San Diego Association of Governments, claiming that the region loses as much as $2.3 billion in commerce per year because the crossing isn't there.

On the waterfront, Dennis Moser of Pacifica Cos. is concentrating on the 550-acre Chula Vista Bayfront plan being done in conjunction with the Port of San Diego, the city of Chula Vista and Gaylord Hotels. Demolition work is under way on some old B.F. Goodrich (formerly Rohr) buildings at the southern part of the property.

The plan calls for 2,000 residential units, a range of 750,000 to 1.25 million square feet of office/commercial space, a 210,000- to 450,000-square-foot civic center and several hotels totaling 2,300 rooms.


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