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North County busy with commercial development

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In San Diego's North County -- north of state Route 56 -- there is no shortage of activity on the office, industrial, retail and hotel fronts.

Rancho Bernardo is about to embark on a major transformation of old industrial sites into modern business parks. While the danger always exists that the submarket may be building too much space, developers are trying to phase their projects accordingly.

In a market that includes Rancho Bernardo and Poway, CB Richard Ellis arrived at a 22.4 percent vacancy rate as of the end of the second quarter. What's more, another 250,915 square feet was under construction as of June 30.

Although there is no shortage of space, that hasn't stopped developers from planning more, and they are paying top dollar for the privilege.

The Summit (500,000 square feet of R&D buildings) and the 739,000-square-foot Sony (NYSE: SNE) manufacturing plant were sold for $145 million late last year.

Jay Paul Co. of San Francisco, which bought the Summit and Sony buildings, broke ground this summer on The Summit Rancho Bernardo, a development with 3.2 million square feet of office, industrial and R&D space in 11 towers and two "amenities" buildings.

The first phase will erect two Class A office towers, one five-story and one six-story structure totaling 407,000 square feet and a two-story, 40,000-square-foot amenities building.

Also in Rancho Bernardo, the former Unisys campus (300,000-square-foot manufacturing site) has been purchased by Kilroy Realty (NYSE: KRC) and is being eyed for more than 700,000 square feet of office space.

Rancho Bernardo had a 9.1 percent industrial vacancy rate as of the end of the second quarter, according to CBRE, and 255,130 square feet of industrial space was dumped back on the market in the first half of the year.

On the retail side, Rancho Bernardo only has a market of 557,670 square feet, and most of that is spoken for with a 1.5 percent vacancy.

Further up Interstate 15, plans are moving forward for a 445,000-square-foot expansion of Westfield North County Fair mall that already sports about 1.25 million square feet of space. Escondido had a 2.4 percent vacancy rate as of the end of the second quarter but major malls are generally left out of these calculations because they tend to skew the statistics.

Along with new retail and entertainment space, plans call for a 140-room hotel, a theater and a warehouse club store. New parking garages to replace some surface parking have been proposed as well.

While the Westfield plan is processed, the San Diego Association of Governments is exploring the feasibility of building a spur southward from the Escondido side of the nearly completed 22-mile-long Sprinter rail line down to North County Fair.

Escondido's economic health will not only be fueled by an expanded mall and the Sprinter, but a new $700 million Palomar Medical Center in the Escondido Research & Technology Park that will feature 456 beds, a complete trauma facility, adaptable rooms limiting the need to move patients around, highly efficient heating and air conditioning systems, and even robotic devices in patients' rooms to measure their progress. Completion is expected in 2010 or 2011.

The Palomar-Pomerado Healthcare District, also in the process of doubling the size of Pomerado Hospital to more than 200 beds in Poway, is developing a re-use plan for the existing Palomar Medical Center, and the district intends on adding several satellite health care offices in Ramona, Rancho Peñasquitos, San Marcos and Valley Center.

In the meantime, following a struggle of nearly a decade, it now appears the proposal to develop a Marriott Hotel in Escondido adjacent to the civic center and the California Center for the Arts will finally get the go-ahead.

In May, Superior Court Judge Thomas Nugent ruled that C.W. Clark Inc.'s environmental documentation was adequate and there was no reason to stop the 196-room, seven-story hotel. Clark had previously considered having a residential component to the project but that has been dropped from the plan. A restaurant and lounge, meeting areas and 209 parking spaces are included in the proposal.

Construction is expected to begin early next year with completion by the middle of 2009.

In San Marcos in June, ground was broken for the Civic View Corporate Center, a 96,000-square-foot, four-story office project by Newport National Corp.

Located along Highway 78 just east of Twin Oaks Valley Road, the structure will be the largest multi-tenant building in the community. Completion is scheduled for first quarter 2008.

The largest active plan in San Marcos still in the conceptual stage is the Creekside Specific Plan. It calls for 1,725 condominiums, 575 apartments, 1.1 million square feet of shops and 600,000 square feet of office space along San Marcos Creek and Discovery Street. The 270,000-square-foot Creekside Marketplace shopping center abuts, but is separate from this plan area.

H.G. Fenton Co., already one of north San Diego County's major developers, recently announced plans to construct what has been billed as San Marcos' first research and development-oriented business park, along with as many as 750 condominium units.

The business park could accommodate 580,000 square feet of commercial and industrial space, the timing of which will depend on market conditions.

Fenton has several projects under way in Carlsbad and plans to acquire approximately 86 acres (about 50 usable) currently owned by Scripps Health in San Marcos, northwest of California State University, San Marcos.

In Carlsbad, H.G. Fenton is finishing lot and infrastructure improvements on the 147-acre former Carlsbad Raceway property. The site, now called The Fenton Raceway, has nearly 73 usable acres that will include as much as 1.4 million square feet of industrial, office and support space.

Fenton is also constructing five buildings totaling 105,000 in its 255,000-square-foot Carlsbad Corporate Center development at El Camino Real and Faraday Avenue.

Fenton also has about 24 usable acres in the Carlsbad Research Center expected to yield about 500,000 square feet of business park space.

Construction activity is going strong at Bressi Ranch Corporate Center, the 585-acre, mixed-use, master-planned development along El Camino Real and Palomar Airport Road in Carlsbad.

Proposed retail projects in Carlsbad include the 373,000-square-foot La Costa Town Square and the 170,000-square-foot Plaza at Sunny Creek. La Costa Town Square will be a mixed-use project including a shopping center, cinema and residential units. Plaza Creek will be a more traditional neighborhood center.

St. Croix Capital Corp. has broken ground on nearly 400,000 square feet in Bressi Ranch, including a 95,000-square-foot, build-to-suit for the Arrowhead Insurance Agency.

Ryan Cos. U.S. Inc., which is developing the eventual 2-million-square-foot RiverView business park in Santee, is also developing The Towers at Bressi Ranch.

The initial phase of The Towers will include 161,000 square feet of industrial/flex condos and stand-alone office condos in 12 buildings on 12 acres at the corner of Palomar Airport Road and Innovation Way. The 21-acre, two-phase project will total 280,000 square feet in 18 buildings.

Bressi Ranch is also expected to contain 623 homes being master planned by Lennar Communities, many of which have been built, and a 100,000-square-foot shopping center along with its more than 2 million square feet of office and industrial space.

Off Palomar Airport Road in Carlsbad, Grand Pacific Resorts' planned 700-room MarBrisas Resort hotel is well under way.

The first 129 rooms will be operated by Sheraton. That phase is slated for opening next January. At buildout, plans call for 350 hotel rooms, 350 time-share villas, two restaurants, meeting rooms and conference facilities for 2,000 people, four swimming pools for children and adults, tennis courts, a spa and a sports center.

The buildings will be developed in phases during the next several years.

Also off Palomar Airport Road, the Gemological Institute has about 10 acres adjacent to its existing campus, where it hopes to develop 150,000 square feet of new space that would include classrooms, a laboratory area and a gemological museum with a café.

Carlsbad, which has some of the most expensive finished land in the county, could be very expensive to end-users. It could be more expensive to those who wait, however.

Still, as is the case in the Rancho Bernardo/Poway submarket, Carlsbad has no shortage of office space. In fact, at 22.6 percent, its vacancy rate was second only to Scripps Ranch's 23.5 percent figure, and Scripps Ranch's office market is a fraction of Carlsbad's size.

Carlsbad looks much better on the industrial and retail side. The city posted an industrial vacancy of 12.5 percent, and a retail vacancy rate of 3.1 percent (which doesn't include Westfield's Plaza Camino Real mall).

Oceanside, by contrast, posted an office vacancy of 18.9 percent, an industrial vacancy of 13.4 percent and a retail vacancy of 4 percent, according to CBRE.

Not far from the largely built-out 400-acre Ocean Ranch master plan, the Pacific Coast Business Park will total 1.5 million square feet of research and development, office and industrial space.

The Seagate Corporate Center Business Park nearby will total approximately 384,000 square feet of office and research and development/industrial space on 24.6 acres, and Oceanside Gateway Business Park has 529,000 square feet of commercial space, with construction under way.

Proposed retail development in Oceanside includes the 900,000-square-foot Ocean Pavilion. The half-village, half-lifestyle hybrid development will feature big box retail, a theater and inline retailing, along with restaurants, a health club and specialty stores.

A future redevelopment site is the former Oceanside Drive-In where Thomas Enterprises of Newnan, Ga., has proposed 880,000 square feet of retail development. This will be divided into big-box users, medium-sized stores and lifestyle shops. The development also would include a 60,000-square-foot health club and a 136-room hotel.

Multiple projects are in the works in the vicinity of the Oceanside Pier. Citymark Development of San Diego is planning five blocks of development straddling a rail line. Plans call for 220 residential units, about 50,000 square feet of retail/restaurant space and possibly a hotel.

Close by, a development master-planned by Fairfield Resorts is slated for completion this fall. It will include 130 timeshares, 32 hotel rooms operated by Wyndham Hotels & Resorts, a restaurant, roughly 9,000 square feet of commercial space and underground parking.

But the most eagerly awaited coastal project in Oceanside may be SD Malkin's planned Westin Resort, featuring 289 hotel rooms, 48 timeshares and 47 boutique hotel rooms. Jane McVey, Oceanside economic development and redevelopment director, said she's hoping the project will be up by spring 2010.

D. Olson Construction of Irvine, a hotel and restaurant builder, is also currently developing a 125-room Marriott Residence Inn in Oceanside.

Back to the east, while most of Vista's business parks are all but built out, Burke Development is in the midst of constructing a 27-building office/industrial project with spaces ranging from 3,400 square feet to 26,000 square feet.

Vista checked in with a 6.6 percent office vacancy, a 7.4 percent industrial vacancy and a 0.6 percent retail vacancy as of the end of June.

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