Anchor ads are not supported on this page.

4S Ranch Allied Gardens Alpine Baja Balboa Park Bankers Hill Barrio Logan Bay Ho Bay Park Black Mountain Ranch Blossom Valley Bonita Bonsall Borrego Springs Boulevard Campo Cardiff-by-the-Sea Carlsbad Carmel Mountain Carmel Valley Chollas View Chula Vista City College City Heights Clairemont College Area Coronado CSU San Marcos Cuyamaca College Del Cerro Del Mar Descanso Downtown San Diego Eastlake East Village El Cajon Emerald Hills Encanto Encinitas Escondido Fallbrook Fletcher Hills Golden Hill Grant Hill Grantville Grossmont College Guatay Harbor Island Hillcrest Imperial Beach Imperial Valley Jacumba Jamacha-Lomita Jamul Julian Kearny Mesa Kensington La Jolla Lakeside La Mesa Lemon Grove Leucadia Liberty Station Lincoln Acres Lincoln Park Linda Vista Little Italy Logan Heights Mesa College Midway District MiraCosta College Miramar Miramar College Mira Mesa Mission Beach Mission Hills Mission Valley Mountain View Mount Hope Mount Laguna National City Nestor Normal Heights North Park Oak Park Ocean Beach Oceanside Old Town Otay Mesa Pacific Beach Pala Palomar College Palomar Mountain Paradise Hills Pauma Valley Pine Valley Point Loma Point Loma Nazarene Potrero Poway Rainbow Ramona Rancho Bernardo Rancho Penasquitos Rancho San Diego Rancho Santa Fe Rolando San Carlos San Marcos San Onofre Santa Ysabel Santee San Ysidro Scripps Ranch SDSU Serra Mesa Shelltown Shelter Island Sherman Heights Skyline Solana Beach Sorrento Valley Southcrest South Park Southwestern College Spring Valley Stockton Talmadge Temecula Tierrasanta Tijuana UCSD University City University Heights USD Valencia Park Valley Center Vista Warner Springs

Smart Corner units at 11th and Broadway don't sell too fast

Downtown condo market "is a slow market”

San Diego’s heralded Smart Corner is smarting — as in stinging. It’s a condominium/office building project, another of the City’s touted public/private sector ventures. What titillates city planners is that the trolley runs between a low-rise office building and a high-rise condominium tower. At the groundbreaking for the $120 million project in 2004, then-mayor Dick Murphy exulted, “This is such a great example of smart-growth principles, which are part of our City of Villages plan.… You can walk and take transit to the ballpark, City College, the Gaslamp Quarter, the downtown business center.”

Oops. The privately financed condos aren’t selling well, and the publicly financed office building has not leased out the space it had anticipated. There are big questions: has the presence of the trolley turned off potential condo buyers, as well as those who would pay for space in the office building? Or is the problem the downtown condo market, which some call disastrous and others say is merely slow? Or do the trolley and the ailing condo market share the blame?

Smart Corner occupies the block bounded by C Street, Park Boulevard, Broadway, and 11th Avenue. There is the 5-story office building that, beginning in January of last year, became the $23.8 million headquarters of the San Diego Housing Commission. The commission occupies the top three floors and hopes to lease up the first two. Adjacent is the 19-story, 301-unit condominium project.

The gleaming new Housing Commission headquarters and the condos are supposed to have a symbiotic relationship. The commission has a bank loan on which it pays $1.7 million a year, and $1.1 million of that was to come from parking, office, and retail leases at the 5-story building. Today, only two retailers, Starbucks and 7-Eleven, occupy the first floor, partly because the condos have not been selling and there aren’t as many residents as anticipated. “Market conditions are slower than we expected,” says Erica Rooks, commission spokesperson, adding, “It’s a national trend. Large retail chains are not expanding.”

Sponsored
Sponsored

The second floor, which must be rented to a nonprofit, is still vacant. So the expected $1.1 million annual take is only $457,476, but the commission says it has a cushion; it sold its old headquarters on Newton Avenue to the Centre City Development Corporation — like the Housing Commission an entity of city government — and the sale went for $2 million more than anticipated.

The Housing Commission building has four levels of subterranean parking. “We still have some capacity,” says Rooks, so revenue isn’t as much as anticipated.

Of the 301 condo units, “We have closed on 48 or 49, and we’ve got 19 more in escrow,” says Sherm Harmer, codeveloper of Smart Corner as president of Urban Housing Partners. “We have 25 set aside for affordable housing, and 8 of these are processing now.” Sales began in April 2004, when the downtown condo market was still hot; people began occupying the units in October of last year.

Because the units are selling slowly, “We are going to rent 100,” says Harmer. “We just started renting in December and have rented 45. We expect to rent about 20 a month. I gave everyone that is renting an option to buy. We will help them get a loan.” Overall, Smart Corner “is a moderately priced project for the workforce downtown.”

The phenomenon of condos going rental is one of San Diego’s great ironies. A few years ago, condo conversions, or rental units going condo, were sizzling and considered a scourge by some. Now, downtown, the trend is in the other direction. Several condo projects, including luxury ones, have gone rental. Individuals who own condos but don’t live in them rent them out too. From a societal standpoint, the trend isn’t necessarily bad: “When a condo goes back as an apartment, if the rent is affordable, that is a good thing,” says attorney Cory Briggs, who is suing some apartment building owners who went condo. “If the apartment goes condo, it takes affordable units off the market.”

Harmer says the problem is the downtown condo market. “It’s a slow market,” he says, but not a disaster as others say. Indeed, he believes, “We saw the bottom a month or two ago. The entry-level homebuyer is caught up with the difficulty of getting mortgages, with all the subprime problems. Younger buyers are nervous about mortgages and the economy and jobs and have no urgency. Older buyers have long-term confidence in real estate” and are buying. He believes media coverage has been slanted to the negative. However, he concedes, “The real test will come this summer.”

The County overbuilt homes and condos for a number of years. “We need to get rid of inventory,” he says. Noting that the number of building permits has slowed every year since 2005, he asserts, “There is discipline in the building industry to dramatically curtail production.” New product is not coming online, and stability is coming downtown, he insists. The Smart Corner units will be sold or rented in 18 months to two years, perhaps even earlier, he enthuses. However, Harmer is chairman of the Downtown Residential Marketing Alliance. And he is the 2008 president of the Building Industry Association of San Diego. His optimism is to be expected.

Taking the opposite point of view is Robert M. Campbell, publisher of The Campbell Real Estate Timing Letter, who has had a very good record in recent years: he predicted that the Southern California downturn would be severe at a time when others thought it would be mild. The downtown condo market “can be described in one word which starts with D: disaster,” he says. Prices are now down 30 percent. “At the bottom you will be able to buy at 20 to 30 percent of peak value,” he says. Prices plunged that low in the early 1990s. The supply/demand situation downtown “is the worst of the worst, although maybe South Bay will be worse. Downtown, you have huge supply hitting the market, dwindling demand, severe tightening in the mortgage market, a nasty recession that will possibly be lengthy.”

One close student of the downtown condo market, asking not to be identified because of pending litigation, says, “The market is slow for good buildings, but certainly not disastrous.” A “good” building is defined as well built, with adequate parking, in a good location — “meaning not too many surrounding aggravations,” including homeless encampments, freeway or train noise, or the Gaslamp’s all-night partying.

But it’s a disastrous market for bad buildings, says this source. “Bad” means poor construction or poor location. Says this person, “Smart Corner is also a bad location because the [City College] trolley stop causes noise to be trapped between the two buildings and there are undesirables who hang around there at all hours.”

“We’ve tested the trolley noise, and it’s absolutely negligible,” says Harmer, who admits the neighborhood isn’t the greatest. “We have a full security system. There have been zero reports of violence. Things that have turned people off are a burned-out building in the area and some other issues. This is an emerging area; it’s not the marina district, but we don’t charge marina prices. There is an enormous commitment to revitalize the area.”

Rooks says the access to public transportation enhances the commission’s ability to serve clients. “We serve a lot of elderly people, persons with disabilities,” she says. She and Harmer are still committed to smart growth. And Smart Corner. Time will tell if that’s smart.

The latest copy of the Reader

Here's something you might be interested in.
Submit a free classified
or view all
Previous article

Mang Tomas, banana ketchup barred in San Diego

What will happen to Filipino Christmas here?
Next Article

Gonzo Report: Jazz jam at a private party

A couple of accidental crashes at California English

San Diego’s heralded Smart Corner is smarting — as in stinging. It’s a condominium/office building project, another of the City’s touted public/private sector ventures. What titillates city planners is that the trolley runs between a low-rise office building and a high-rise condominium tower. At the groundbreaking for the $120 million project in 2004, then-mayor Dick Murphy exulted, “This is such a great example of smart-growth principles, which are part of our City of Villages plan.… You can walk and take transit to the ballpark, City College, the Gaslamp Quarter, the downtown business center.”

Oops. The privately financed condos aren’t selling well, and the publicly financed office building has not leased out the space it had anticipated. There are big questions: has the presence of the trolley turned off potential condo buyers, as well as those who would pay for space in the office building? Or is the problem the downtown condo market, which some call disastrous and others say is merely slow? Or do the trolley and the ailing condo market share the blame?

Smart Corner occupies the block bounded by C Street, Park Boulevard, Broadway, and 11th Avenue. There is the 5-story office building that, beginning in January of last year, became the $23.8 million headquarters of the San Diego Housing Commission. The commission occupies the top three floors and hopes to lease up the first two. Adjacent is the 19-story, 301-unit condominium project.

The gleaming new Housing Commission headquarters and the condos are supposed to have a symbiotic relationship. The commission has a bank loan on which it pays $1.7 million a year, and $1.1 million of that was to come from parking, office, and retail leases at the 5-story building. Today, only two retailers, Starbucks and 7-Eleven, occupy the first floor, partly because the condos have not been selling and there aren’t as many residents as anticipated. “Market conditions are slower than we expected,” says Erica Rooks, commission spokesperson, adding, “It’s a national trend. Large retail chains are not expanding.”

Sponsored
Sponsored

The second floor, which must be rented to a nonprofit, is still vacant. So the expected $1.1 million annual take is only $457,476, but the commission says it has a cushion; it sold its old headquarters on Newton Avenue to the Centre City Development Corporation — like the Housing Commission an entity of city government — and the sale went for $2 million more than anticipated.

The Housing Commission building has four levels of subterranean parking. “We still have some capacity,” says Rooks, so revenue isn’t as much as anticipated.

Of the 301 condo units, “We have closed on 48 or 49, and we’ve got 19 more in escrow,” says Sherm Harmer, codeveloper of Smart Corner as president of Urban Housing Partners. “We have 25 set aside for affordable housing, and 8 of these are processing now.” Sales began in April 2004, when the downtown condo market was still hot; people began occupying the units in October of last year.

Because the units are selling slowly, “We are going to rent 100,” says Harmer. “We just started renting in December and have rented 45. We expect to rent about 20 a month. I gave everyone that is renting an option to buy. We will help them get a loan.” Overall, Smart Corner “is a moderately priced project for the workforce downtown.”

The phenomenon of condos going rental is one of San Diego’s great ironies. A few years ago, condo conversions, or rental units going condo, were sizzling and considered a scourge by some. Now, downtown, the trend is in the other direction. Several condo projects, including luxury ones, have gone rental. Individuals who own condos but don’t live in them rent them out too. From a societal standpoint, the trend isn’t necessarily bad: “When a condo goes back as an apartment, if the rent is affordable, that is a good thing,” says attorney Cory Briggs, who is suing some apartment building owners who went condo. “If the apartment goes condo, it takes affordable units off the market.”

Harmer says the problem is the downtown condo market. “It’s a slow market,” he says, but not a disaster as others say. Indeed, he believes, “We saw the bottom a month or two ago. The entry-level homebuyer is caught up with the difficulty of getting mortgages, with all the subprime problems. Younger buyers are nervous about mortgages and the economy and jobs and have no urgency. Older buyers have long-term confidence in real estate” and are buying. He believes media coverage has been slanted to the negative. However, he concedes, “The real test will come this summer.”

The County overbuilt homes and condos for a number of years. “We need to get rid of inventory,” he says. Noting that the number of building permits has slowed every year since 2005, he asserts, “There is discipline in the building industry to dramatically curtail production.” New product is not coming online, and stability is coming downtown, he insists. The Smart Corner units will be sold or rented in 18 months to two years, perhaps even earlier, he enthuses. However, Harmer is chairman of the Downtown Residential Marketing Alliance. And he is the 2008 president of the Building Industry Association of San Diego. His optimism is to be expected.

Taking the opposite point of view is Robert M. Campbell, publisher of The Campbell Real Estate Timing Letter, who has had a very good record in recent years: he predicted that the Southern California downturn would be severe at a time when others thought it would be mild. The downtown condo market “can be described in one word which starts with D: disaster,” he says. Prices are now down 30 percent. “At the bottom you will be able to buy at 20 to 30 percent of peak value,” he says. Prices plunged that low in the early 1990s. The supply/demand situation downtown “is the worst of the worst, although maybe South Bay will be worse. Downtown, you have huge supply hitting the market, dwindling demand, severe tightening in the mortgage market, a nasty recession that will possibly be lengthy.”

One close student of the downtown condo market, asking not to be identified because of pending litigation, says, “The market is slow for good buildings, but certainly not disastrous.” A “good” building is defined as well built, with adequate parking, in a good location — “meaning not too many surrounding aggravations,” including homeless encampments, freeway or train noise, or the Gaslamp’s all-night partying.

But it’s a disastrous market for bad buildings, says this source. “Bad” means poor construction or poor location. Says this person, “Smart Corner is also a bad location because the [City College] trolley stop causes noise to be trapped between the two buildings and there are undesirables who hang around there at all hours.”

“We’ve tested the trolley noise, and it’s absolutely negligible,” says Harmer, who admits the neighborhood isn’t the greatest. “We have a full security system. There have been zero reports of violence. Things that have turned people off are a burned-out building in the area and some other issues. This is an emerging area; it’s not the marina district, but we don’t charge marina prices. There is an enormous commitment to revitalize the area.”

Rooks says the access to public transportation enhances the commission’s ability to serve clients. “We serve a lot of elderly people, persons with disabilities,” she says. She and Harmer are still committed to smart growth. And Smart Corner. Time will tell if that’s smart.

Comments
Sponsored

The latest copy of the Reader

Here's something you might be interested in.
Submit a free classified
or view all
Previous article

San Diego seawalls depend on Half Moon Bay case

Casa Mira townhomes sued after losing 20 feet of bluffs in storm
Next Article

For nutty pies at Pizza by Aromi in La Mesa

Sicilian cousins add to the Italian goodness they dish out around Lake Murray
Comments
Ask a Hipster — Advice you didn't know you needed Big Screen — Movie commentary Blurt — Music's inside track Booze News — San Diego spirits Classical Music — Immortal beauty Classifieds — Free and easy Cover Stories — Front-page features Drinks All Around — Bartenders' drink recipes Excerpts — Literary and spiritual excerpts Feast! — Food & drink reviews Feature Stories — Local news & stories Fishing Report — What’s getting hooked from ship and shore From the Archives — Spotlight on the past Golden Dreams — Talk of the town The Gonzo Report — Making the musical scene, or at least reporting from it Letters — Our inbox Movies@Home — Local movie buffs share favorites Movie Reviews — Our critics' picks and pans Musician Interviews — Up close with local artists Neighborhood News from Stringers — Hyperlocal news News Ticker — News & politics Obermeyer — San Diego politics illustrated Outdoors — Weekly changes in flora and fauna Overheard in San Diego — Eavesdropping illustrated Poetry — The old and the new Reader Travel — Travel section built by travelers Reading — The hunt for intellectuals Roam-O-Rama — SoCal's best hiking/biking trails San Diego Beer — Inside San Diego suds SD on the QT — Almost factual news Sheep and Goats — Places of worship Special Issues — The best of Street Style — San Diego streets have style Surf Diego — Real stories from those braving the waves Theater — On stage in San Diego this week Tin Fork — Silver spoon alternative Under the Radar — Matt Potter's undercover work Unforgettable — Long-ago San Diego Unreal Estate — San Diego's priciest pads Your Week — Daily event picks
4S Ranch Allied Gardens Alpine Baja Balboa Park Bankers Hill Barrio Logan Bay Ho Bay Park Black Mountain Ranch Blossom Valley Bonita Bonsall Borrego Springs Boulevard Campo Cardiff-by-the-Sea Carlsbad Carmel Mountain Carmel Valley Chollas View Chula Vista City College City Heights Clairemont College Area Coronado CSU San Marcos Cuyamaca College Del Cerro Del Mar Descanso Downtown San Diego Eastlake East Village El Cajon Emerald Hills Encanto Encinitas Escondido Fallbrook Fletcher Hills Golden Hill Grant Hill Grantville Grossmont College Guatay Harbor Island Hillcrest Imperial Beach Imperial Valley Jacumba Jamacha-Lomita Jamul Julian Kearny Mesa Kensington La Jolla Lakeside La Mesa Lemon Grove Leucadia Liberty Station Lincoln Acres Lincoln Park Linda Vista Little Italy Logan Heights Mesa College Midway District MiraCosta College Miramar Miramar College Mira Mesa Mission Beach Mission Hills Mission Valley Mountain View Mount Hope Mount Laguna National City Nestor Normal Heights North Park Oak Park Ocean Beach Oceanside Old Town Otay Mesa Pacific Beach Pala Palomar College Palomar Mountain Paradise Hills Pauma Valley Pine Valley Point Loma Point Loma Nazarene Potrero Poway Rainbow Ramona Rancho Bernardo Rancho Penasquitos Rancho San Diego Rancho Santa Fe Rolando San Carlos San Marcos San Onofre Santa Ysabel Santee San Ysidro Scripps Ranch SDSU Serra Mesa Shelltown Shelter Island Sherman Heights Skyline Solana Beach Sorrento Valley Southcrest South Park Southwestern College Spring Valley Stockton Talmadge Temecula Tierrasanta Tijuana UCSD University City University Heights USD Valencia Park Valley Center Vista Warner Springs
Close

Anchor ads are not supported on this page.

This Week’s Reader This Week’s Reader