By Bruce Farr
Downtown San Diego — ever a city center thrumming with excitement, activity and innovation — is in the midst of what, perhaps, is the most significant transformation of its long history.
Over the past few years, massive new development and redevelopment construction projects have been underway, auguring a seismic shift in the downtown commercial culture. Taken as a whole, these sizeable projects promise to usher in a new economic model in the city, one that’s guided by the rising star of life sciences research, development and practice.
This new life science/biotech imprint will likely supplant the city center’s long history as a hub for finance and government. That older identity was especially relevant a few decades ago, when the multi-level buildings rising above the city center and along its coast were bustling with more traditional “old economy” businesses and services.
Now, however, with the advent of “new economy” thinking, investment and development, San Diego’s city core is poised to redefine itself as a model of 21st century economics and lifestyle.
Why life science?
The push for life sciences as a subclass of the U.S. economy isn’t new — life sciences research and development have taken root in greater numbers of American cities over the past decade.
Perhaps the single-largest contributing factor to the explosive growth of life sciences is this country’s increasingly aging population, and the demands it creates for greater advances in healthcare. Couple that with a timely shift to an economy that’s based on highly innovative and technologically advanced healthcare tools, medications and treatments, and we can better understand transformations such as the one that San Diego is undergoing.
A long San Diego history
Life science-oriented businesses and institutions have been thriving in San Diego for more than three decades. This is partly in thanks to such iconic facilities as the public research institute at the University of California, San Diego, and the Scripps Research Institute in Torrey Pines. Adding to these are hundreds of smaller biotech companies that dot the suburbs and outlying areas of the city.
But several factors — including the lack of new, leasable inventory in the suburbs and the increasingly difficult accessibility issues these high-traffic areas cause — have, in the past three years or so, ushered in a new real-estate-focused demand for space in San Diego’s celebrated downtown.
The city core has become a new hub for these highly innovative industry niches. And, importantly, the downtown was ripe for the type of new development (and redevelopment of existing structures) that these industry investors were seeking. At the end of 2021, the city’s office market, which includes downtown and uptown, had a vacancy rate of 20.8%.
Downtown transformed
Christina Bibler, economic development director at the City of San Diego, has been involved in city planning and development for the past six years. She offers some perspective on the downtown transformation.
“There’s been this ‘awakening,’ if I can call it that,” she says. “It’s simply a case of people wanting to be centrally located in their work environment, and not spend their entire day on the road. [Because of this] a lot of life science/biotech companies see the convenience of doing business in San Diego. Add to that the cross-border connection [with Mexico], which bodes well for these companies that do business in the city. It amounts to what I might call the ‘make-sense market,’ and that’s why we’re seeing a million-plus square feet of development underway.”
The influx of real estate projects that are seeking life science tenants has created something of a domino effect in the city center. At the end of last year, San Diego had eight new-construction lab projects underway. In fact, about 5% of the city’s existing office supply is set to be redeveloped into lab space, according to a spokesperson for Jones Lang Lasalle Inc., an international commercial real-estate firm that specializes in life-sciences brokerage.
“When you look at the growth trajectory for tech and life science here in San Diego, well, it’s really pretty staggering,” Bibler says.
Capital funding
Staggering, indeed. Connect.org, a tech accelerator organization whose website tracks and compiles venture capital funding news for San Diego, reports that, last year alone, San Diego County startups raised more than $9 billion in funding capital (much of it earmarked for life sciences and biotech).
Matt Kroe, a capital funding manager for Connect, said the explosion of new startups and the money to fund them is really off the charts.
“It sometimes feels repetitive, with each of these reports announcing a new record high, but it’s important to continue to celebrate these wins for our region,” he says. “Just six years ago, San Diego County was struggling to break $1 billion in annual venture funding. In 2021, we hit $9 billion.”
Three such life sciences-aimed projects currently underway can be regarded as flagship undertakings, due to their size, scope and vision. They include Genesis-San Diego, The Campus at Horton, and the IQHQ Research and Development District.
Genesis-San Diego
The real estate project nearest completion among the three is located at 1155 Island, where an eight-story, 203,000-square-foot office space is being converted to a premier, class-A life science development building. Under the aegis and guidance of Genesis-San Diego, the ambitious project will offer the scientific community with what is being termed “the most modern and cutting-edge facilities designed to date, with strategically engineered laboratories and highly designed office space.”
Slated for completion later this year, the structure includes over a million square feet, spread among eight stories of Class A LEED Gold life sciences space. The Genesis project’s website says that it “will provide an environment for fundamental innovation and creation.”
The Campus at Horton
The Campus at Horton’s website is emblazoned with three stark statistics: “7 city blocks. 10 acres. Over a million square feet.” Those clipped stats form the basis for what is shaping up to become one of the most significant projects in Horton Plaza’s long and winding history as a city hub.
In 2017, the spacious complex was sold to Stockdale Capital Partners, which proposed a major overhaul of the former, five-level mall, converting it into an innovative, sophisticated campus fully outfitted for life science/biotech research and application.
One of the key focuses for the Horton Campus redesign is on environmental sustainability. Among other notable features, the campus is designed to meet a zero-carbon goal and, to that end, will offer cooling by a central on-campus plant, 5 MW photovoltaic and battery storage systems designed to cut energy costs. It will also offer an onsite commercial blackwater treatment system, which is projected to save more than half of the campus’s potable water use.
Inside the campus, a 10-story, 300,000-square-foot life science tower will provide lab space for life science or office tenants.
IQHQ
The third and most impressive project is IQHQ’s Research and Development District (RaDD), a property on San Diego’s iconic waterfront, planned for completion in 2023. The developers’ vision is to attract biotech or pharmaceutical companies to a prime downtown location that spans three city blocks along the picturesque San Diego Bay. Its website notes that the 1.7-million-square-foot campus “…will consist of mid-rise structures and a 17-story tower, including rooftop decks and green space.”
RaDD will offer exceptional views of the bay and access to dining, shopping and music events in nearby Seaport Village. There will be easy access to the popular USS Midway, and walking and biking paths along the Embarcadero.
Perhaps more than any other single project in the city core, the $1.5 billion RaDD aims to distinguish downtown San Diego as a key biotech cluster in the city. With IQHQ as its primary developer, the project covers more than eight acres on the waterfront, and is expected to total 1.7 million square feet of lab, office and retail space.
The entire project will include 150,000 square feet of on-site amenities, including ground-floor shops, restaurants, rooftop decks and a public paseo that travels the length of the property.
Ripple effect
Bibler says the completion timelines for this trio of massive projects are largely on schedule. “Genesis, for the most part, will be opening imminently,” she says. “The Campus at Horton is still under construction, with delivery of the project slated for later this year or early next. And IQHQ, which is a behemoth of a project, is being actively marketed [to the public and potential tenants] right now.
“IQHQ, in my opinion, is leading the pack with five buildings and a million-and-a-half or more square footage,” Bibler adds. “This project is really setting the bar very high as it regards public-private partnership. There’s really nowhere else up and down the California coast with that kind of waterfront development that required working with the U.S. Navy, the city and the regions in order to deliver. I’m happy to say that they are performing.”
Bibler says that she agrees with the theory that these projects will beget even further innovative growth. “At the end of the day, having all of this office and lab development coming to downtown is helping to spur other projects,” she notes.
One of them in particular is a brand-new, $1.5 billion dollar project called Tailgate Park, that’s being developed in conjunction with the San Diego Padres. “It will produce 1,800 housing units, 50,00 square feet and a parking garage, among other amenities,” she says. “The point is the opportunity that these current large projects produce for the greater downtown; there definitely is a ripple effect.”
Infrastructure is key
One critical factor in the success of these projects is the degree to which city infrastructure can ultimately support them.
“What it means is that we need to put forward conveniences like our central transportation hub,” says Bibler. “There’s an active conversation about that going on downtown that involves the city, the county, the state and our federal government. That’s because making these [infrastructural] enhancements is a multi-billion-dollar effort. Add to that the expansion of our airport, which is another project that’s been underway for many years, but is finally under construction.”
Bibler stresses the importance of the partnership the city, county and region has formed with the real-estate developers. “One really vital aspect of how the city is working with these private partners to optimize plans for these downtown spaces is how it will help ensure their convenience, attractiveness and the public’s access to them,” she notes. “For example, we just did a park agreement with the IQHQ team. There’s a public space that people need to be able to enjoy in order for these projects to be successful. And that includes a place for these new businesses’ employees to use, as well.”
Bibler says she hopes the key takeaway is the city’s investment into prioritizing infrastructure, and the movement that the private sector has made to ensure that this downtown urban hub is really a resurgence of opportunity and vitality.
“These projects are essentially laying the groundwork to move San Diego from what otherwise would have been a minor market into this international market that we truly are,” she says.