San Diego Magazine / December 2004 / Urban Village: Myth or Manifest?

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Urban Village: Myth or Manifest?

LIVE, WORK, PLAY. THAT’S THE MANTRA from a coalition of economic development agencies that has ratcheted up efforts to create the elusive “urban village” in downtown San Diego. Two legs of this three-legged stool are in place, and the third shows promise—but there are still some hurdles. The “play” leg—which began with the opening of Horton Plaza and the San Diego Convention Center in the 1980s, and led to the revitalization of the Gaslamp Quarter in the ’90s —hit full stride with the opening of Petco Park last spring. This introduced a spate of new hotel, restaurant and retail jobs, albeit at the lower end of the wage scale.

The “live” leg is gathering momentum, with 14,000 residential units coming to market or in the pipeline within downtown or nearby Little Italy and Cortez Hill since 1997. The demand has outstripped supply as young urban professionals and empty-nesters snap them up. The number of people living downtown is expected to more than triple—from roughly 22,000 today to about 80,000 in the next 20 years.

What has needed propping up is the “work” leg. Until ground was broken on two high-rises in the past year, there had been no new construction of class-A office buildings in downtown San Diego since 1991. Now, there is a flurry of construction, with additional mixeduse structures scheduled for completion in the next two to three years. But those buildings need tenants.

Enter the Downtown Business Attraction Program, the combined effort of the San Diego Regional Economic Development Corporation, Centre City Development Corporation, the city’s Community and Economic Development Department and the Downtown San Diego Partnership. The program is an intense effort to lure business to the reinvigorated 1,500-acre parcel we know simply as “downtown.”

“About a year ago, the EDC and others joined us in this effort to stimulate job growth in downtown so that we don’t end up creating a great residential neighborhood and put everybody back in their cars,” says Peter J. Hall, CCDC’s president. “That’s not the definition of smart growth. One might say that’s dumb growth.”

Currently, most of the higher-end downtown jobs are in law, financial services and insurance, along with local and regional government. What Hall and his associates want to see are more of San Diego’s “new iconic industries”—telecommunications, electronics, software, life science and medical instrumentation. Not all industries, particularly manufacturing and biotech research labs, are suitable for a high-rise environment, he acknowledges. But any company that relies on computers would be a good fit, as would sales, marketing and professional services.

“We believe we can start thinking in terms of vertical campuses,” Hall says, noting that the number of downtown jobs is expected to nearly double, from 77,000 today to approximately 150,000 in 2025.

The movement has already begun. Golden Eagle Insurance consolidated its regional offices and 1,100 employees downtown in 1997, followed by American Specialty Health Networks. And the NBC 7/39 television station moved into its new digs on Broadway in late 2001. “I’m from San Diego, so I wasn’t intimidated by the scene down here,” says Phyllis Schwartz, president and general manager of NBC 7/39. “We saw the impending Padres ballpark and downtown sizzle as something we wanted to be associated with. This is the pulse point of the region.”

Schwartz’ staff was concerned about the urban environment, so she initiated an education effort prior to the move. A significant percentage of the staff now live downtown or in nearby neighborhoods, some close enough that they walk to work.

“I think our folks see how fantastic it is to work downtown. There is no question this is a trend,” she says.

Taking a cue, rival KUSI is building a mixed-use structure near the convention center that will include an outdoor broadcast plaza, a five-star hotel and condominiums when it’s completed in 2006.

“Television stations can no longer sit out in some industrial park; they need to be part of the community,” says owner and general manager Mike McKinnon.
He predicts up to 25 percent of his staff will eventually reside downtown. “I think a lot of them will move, especially the younger staff.”

The folks at the EDC are now carrying this message beyond San Diego to entice businesses not only from the West Coast, but nationally and internationally. “There are two kinds of people who drive location decisions—corporate real estate professionals and site-selection consultants,” explains EDC president Julie Meier Wright. “We’ve been working to ensure that downtown is on their radar screens.”

It’s working. “San Diego doesn’t have to take a backseat to anybody in terms of the level of construction activity going on in the downtown area,” says Robert Ady, of Ady International in Chicago, who attended a two-day conference hosted by the coalition in October. “I had no idea there was that level of activity going on. It shows a sense of vitality, and that’s very important to a company.” His comments were echoed by other consultants who also attended the conference.

THAT’S NOT TO SAY there are no stumbling blocks. There’s a lingering perception that California is anti-business, although workers’ compensation reform has lessened that concern. There is also the high cost of housing and commercial real estate. Rhett Weiss of DealTech Ltd. in Skaneateles, New York, says relative to the rest of the state and West Coast, San Diego is cost-competitive, but when compared to other places in the West, California, as a whole, is not.

For most of the consultants, however, housing affordability and commercial lease rates are not the chief concern. Typically, when companies move or expand, only a handful of well-paid corporate executives are relocated, and they can afford the housing. The remainder of the staff is hired locally and, for the most part, they’ve already made their housing decisions. The upshot is that lifestyle choices carry considerable weight in the decision-making process, unless the move is specifically market driven.

Indeed, because so many people are choosing to live in San Diego, employers are now following them here, says Stath Karras, president and chief executive officer of Burnham Real Estate Services. The biggest factor in a company’s location decision today is the quality of workforce, he says.

“With so much of our business related to technology,” Karras says, “talent pools are aggregating in areas like San Diego, forcing employers to come to where the talent is, as opposed to expecting employees to go where they are.”

Even so, “time to market” is critical, and a company with strong ties to Asia or Latin America may turn a jaundiced eye on something that has haunted this region for decades—the airport. “The inconvenience of international travel could be a deal killer,” says Weiss.

“Whatever needs to be done to improve the airport situation should be done,” adds Ady. “It’s like you’re in a time warp.” Still, San Diego has “no fatal flaw,” he says.

In fact, the biggest impediment to completing the urban village may be cultural, acknowledges the CCDC’s Hall. It could take a full generation for a significant number of residents and businesses to turn their backs on suburban sprawl and embrace the high-density, vertical environment that characterizes San Francisco, Chicago, New York, Boston and, increasingly, Seattle.

The redevelopment coalition’s next phase is soliciting companies directly. The initial focus will be on the West Coast, including those in the San Diego region.

“They won’t have the same sticker shock as somebody from Boise or Phoenix,” say Hall, who foresees “a downtown skyline of SAIC, Qualcomm and other logos —more than just Sempra.

“The underlying principle is smart growth, to create a community where people can live, work and play,” he adds, describing downtown as a model for what the region can do over the next 30 years as it deals with growing pains and concerns for the quality of life.

“We have to have jobs where we have housing,” Hall says. “We can’t just keep building more freeway lanes.” .