Having been insulated from the overbuilding experienced in other markets such as Phoenix, AZ. and Las Vegas, NV., the San Diego retail property market has rebounded more quickly and activity continues to grow.
The first large retail development site in San Diego to sell in more than four years closed escrow recently in the affluent La Costa Area of Carlsbad. Property Development Centers (PDC) recently purchased the site of the proposed 285,000-square-foot La Costa Town Square shopping center located at La Costa Avenue and Rancho Santa Fe Road. In addition to the proposed 60,000-square-foot, state-of-the-art Vons Grocery store, there has been a very high level of interest from retailers to co-anchor this proposed upscale development. PDC expects to commence construction in the fourth quarter of this year and open the center in early 2014. The surrounding neighborhoods are currently underserved by retail.
Another example of the San Diego retail development market stirring is the proposed 48-acre Sunroad Otay Plaza, located at state Routes 905 and 125. In addition to the tremendous freeway exposure, the property has approximately 2,300 feet of frontage on Otay Mesa Road, making it the most visible and easily accessible retail development site on Otay Mesa. Sunroad Enterprises, the developer, is close to finalizing negotiations with a very large retail anchor tenant, and is in negotiations with potential co-anchors. This strategically located project will conveniently serve the approximately 19,000 residential units (proposed at build-out), nearly 19,000 daytime employees working on Otay Mesa, and 10 million people who cross the border every year -- the busiest commercial border crossing in the world.
San Diego’s high barriers to entry and diverse growing economy have always made it an area of interest to expanding retailers. The retail vacancy level has dropped dramatically in the last couple of years, with savvy retailers such as Ross, Dick’s Sporting Goods, Nordstrom Rack and others, snapping up vacated large retail boxes around the county. As the market tightens, these opportunities have dwindled and pressure has been quietly mounting for new retail development.
In addition to the expansion plans of tenants who already have a presence in the county, other retailers such as Orchard Supply Hardware and Lifetime Fitness are scouring the county for opportunities. Mission Foods, a retailer and producer of high quality tortillas, chips and salsas, recently chose a City Heights location for its first tortillaria in the United States. Mission Foods operates approximately 300 tortillarias under the name of Casa Del Maiz around the world, and the company expects this will be a very successful location. It has leased approximately 2,592 square feet of the former Blockbuster Video building in the busy Albertson’s-anchored City Heights Retail Village, located at the southeast corner of University Avenue and Fairmount Avenue.
2012 should bring a continuation of the trend of decreasing vacancies.