Downtown San Diego is considered the heart of San Diego County, and given its excellent accessibility attributes, there are a variety of options for travel in and around the city. Three of the county’s nine major freeways flow through the city, Downtown is located only two miles southeast of the airport, and there are several ridesharing and public transportation options that can easily connect tourists to the area’s primary sources of lodging demand.
San Diego benefits from a diverse mix of demand generated by local corporations, government entities, meeting and group business, and leisure-related activity. Compression resulting from large conventions held at the San Diego Convention Center produces a significant number of room nights in the market on an annual basis.
Furthermore, the Little Italy and the Gaslamp Quarter neighborhoods are home to an array of restaurants, bars, nightclubs, and other tourist-oriented businesses that attract leisure guests and serve as amenities to convention attendees. Popular leisure attractions throughout the area continue to attract strong fly-in and drive-in demand. The local economy continues to expand, with tech start-ups, residential development, increases in military spending, and record high levels of visitation. One of the most up-and-coming areas of the city is its East Village neighborhood.
The downtown San Diego area can be divided into eight neighborhoods: Columbia, Core, Cortez Hill, East Village, Gaslamp Quarter, Horton Plaza, Little Italy, and the Marina District. Each neighborhood contains a unique mix of cultural and distinct demand generators, which, to some extent, may preclude the hotels from competing for the same business. Downtown San Diego’s primary economic districts are the Core (office space), Horton Plaza (shopping), Gaslamp Quarter (restaurants and entertainment), and Marina (waterfront and convention center).
Many residential, retail, office, and other commercial developments are occurring in the market. Most of the high-rise buildings that have recently been completed or are currently under construction represent high-end condominiums and hotels. Most of these projects are on sites near the waterfront or in East Village, consistent with the overall civic redevelopment plans for San Diego. We have outlined a few of these projects below.
Pacific Gate: Vancouver, B.C.-based Bosa Development Corp is currently amid developing a new condominium building called Pacific Gate; the 41-story property will contain 215 residences, 16,000 square feet of retail space, and 460 parking stalls within three below-grade levels. Bosa has played a major role in creating many of San Diego’s upscale, high-rise residences and landmarks; other completed Bosa developments in Downtown San Diego include Horizons, Park Place, Discovery, The Grande, and Electra.
Manchester Gateway: This project is being developed by Manchester Financial Group, a prominent San-Diego based development firm. The complex will occupy a three-million-square-foot site to be improved with a mixed-use development including the following components: a four-star hotel and four-and-a-half-star hotel, totaling 1,360 guestrooms; more than 1.2 million square feet of office space among three Class-A office buildings, one of which is being built solely for use by the U.S. Navy; a 391,000-square-foot retail development; and a public waterfront park. The site represents one of the largest, if not the largest, undeveloped urban waterfront sites located along the California coast, located in San Diego’s Central Business District and within walking distance of the convention center. Given the large size and scope of this project, as well as its location on the San Diego waterfront, this development represents one of the most prominent and unique development opportunities on the West Coast.
Seaport Village: Seaport Village is a waterfront retail and dining complex that opened in 1980 on the site of the San Diego-Coronado ferry landing. Operated by Terramar Retail Centers, Seaport Village represents yet another tremendous waterfront redevelopment opportunity. Various developers have expressed interest in the site; the most recent proposal is a $1.2-billion project that includes three hotels; retail and restaurants; a 480-foot observation tower; a partially underground aquarium; 30 acres of new parkland, beach, and promenades; and upgraded facilities for commercial fishing fleets and pleasure craft on more than 70 acres.
Ballpark Village: A 37-story apartment tower and retail development is under construction on a site located directly east of the Petco Park baseball stadium. With an anticipated opening date slated for the third quarter of 2018, the $250-million project is anticipated to include 439 luxury apartments, 274 low-rise residential units, 45,000 square feet of retail and restaurant space, a 12,000-square-foot open-air plaza, an above-grade walkway, and over 900 parking spaces. The developer is also proposing a 1,600-room hotel; however, the hotel component is contingent upon a convention center expansion. The developer noted that the projects could represent more than $1.5 billion of additional construction activity in Downtown San Diego.
UCSD Extension Project: UC San Diego and Holland Partner Group recently broke ground on a $275-million, 34-story apartment building and a UC San Diego cultural and education hub, which is expected to feature 426 apartments, a 53,000-square-foot office and classroom building, a historic restaurant facility, and a 3,200-square-foot outdoor amphitheater. Officials anticipate the project to be completed in 2021.
The following table illustrates new and proposed hotel supply in Downtown San Diego.
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