written by
Kyle Clark

Addressing Common Misconceptions on San Diego Ballot Measure E

Next month, San Diego voters will have the opportunity to weigh in on Measure E which, if approved, will eliminate the 30-foot height limit in the Midway Planning Area surrounding the Sports Arena. Over the past couple of months, we’ve heard loads of discussion about this measure and what effect it will have on our community. Aside from the traditional media sources, local internet discussion boards like NextDoor are alive with commentary and like most propositions, the information being shared ranges from “Interesting” to “You’ve Got to be Kidding?”. As a local specific to the measure’s zipcode, and commercial real estate agent with over 20 years of experience, I want to neutrally shed light on the common misconceptions surrounding measure-E and hopefully offer insight in contrast to local fearmongering

Misconception-This measure will expose all of our coastal areas to unlimited building heights, which will result in a landscape similar to Waikiki Beach offering no views available more than a block inland from the shore.

Fact- “This measure pertains Only to the zoned area within the Midway Community Planning District. It will not have any effect on the regulations affecting other properties in the Peninsula, Ocean Beach, Pacific Beach or Bay Heights neighborhoods. The current 30 ft. limits will continue to apply in all these other areas”

Misconception-If this measure passes, developers will have no limit to how much they can build.

Fact- “While the 30-foot height limit will be removed, any new development will still need to obtain approval from the Midway Planning Group and the City of San Diego. The City Zoning ordinance incorporates a Floor Area Ratio (FAR) factor, which limits how much density can be placed on a particular property. If you want to build to a 200 foot height, the FAR will prohibit that. For instance, if the FAR is 3.0 and the land parcel is 10,000 square feet, the developer cannot legally build more than 30,000 square feet on the parcel (3.0 x 10,000 ft.). This FAR is the true limiting factor to how much can be constructed on a site, not the building height”

Given the over-cautious and FAR constraints, the developer cannot build any more on the land regardless of the height restriction. The key difference is the mass of what would be constructed. With a three-story limit, the builder would build three stories at 10,000 feet per floor, effectively covering 100% of the land parcel. If the height limit were removed, the builder could build a six-story structure that covered 50% of the land area. This would be preferable since we now have 5,000 feet of open, landscaped space.

The City has already designated Brookfield as the preferred developer for the Sports Arena site. We can assume that they will continue with their efforts to eventually redevelop this massive site. Surely, this will spur additional redevelopment on other properties in the area. So, what are the options? What would you like to see in our community in 10 years, with the assumption that any developer will see to maximize the utility of their land given the development constraints and regulations in-place?

The mantra we keep hearing over and over is our desire for open space and walkable communities with plenty of public-access to the various amenities. With the 30 ft. limitation in-place, the chances of this are slim since the builder will need to maximize the footprint while complying with the FAR regulations. Imagine a 30-foot wall of uninterrupted structures all along Sports Arena Blvd, with an intermittent break where the side streets intersect. You will not be able to see the new sports arena because of the wall’s obstruction. In contrast, imagine a series of taller structures offering the same square footage of space yet with greenbelts and walking/biking paths in between offering view corridors throughout.

The passage of measure-E, will not open the floodgates and allow the developer to construct any more building area than they can under the current in-place regulations for permitted floor area. What it will do is allow for the development of taller buildings, which will then allow for the open space and amenities we all desire.

The pressure to come together for measure-E is heavy as this decision will have a multi-generational impact on Midway and the sports arena area.

If you have any interest in learning more about local market updates reach out to Kyle Clark at kclark@intersectioncre.com

written by
Dan Leon & Anton Myskiw

Research shows a significant pipeline of industrial demand, can we THINK™ like supply chain managers to predict where it will go?

 

Our team hopes everybody is staying safe and healthy during these unprecedented times. 5 months ago, California and our office went into a state of lockdown. Businesses temporarily shut their doors, some fully closing in consequence. The state of the economy and real estate sector shifted overnight. The industry collectively held their breath in anticipation of what was to come.

Friday, March 18th, we were both new to the functionality of working-from-home. We sat on a Zoom call that morning discussing the market implications, whether it was derived from Peter Linneman’s Webinar or general market sentiment. The bottom-line from our discussion was that our firm needed to take a proactive approach to recent events and that a refresh in our investment strategy was necessary. Through significant macro & microeconomic research over the course of the next two weeks, we arrived at a high-level strategic concept of pursuing logistics-based industrial assets. Once we had a foundation, we needed to piece together support around this idea.

Two primary drivers reinforced our reflections: the rebirth of domestic production (offshoring to onshoring manufacturing) and the surge of e-commerce.

Over the past 2 years, retail e-commerce sales, as a percentage of total retail sales, have increased by 500 bps. The volume of those purchasing staple and discretionary items at the touch of a button has only increased from the onset of the virus, with many market experts believing in an irreversible shift from traditional brick-and-mortar sale. The previous, intertwined with the growing argument for domestic manufacturing, invokes the need for logistics-based assets in the near future. The fact that the opportunity cost margin of offshoring production of final goods is shrinking, due to on-going trade discussions/uncertainty & increasing labor costs overseas, supports the prior. Our vision encapsulates these market shifts, in our pursuit of suburban distribution centers (best utilized for same-day delivery), city-center distribution centers (1-2-day delivery), and manufacturing facilities.

As a result of this accelerated e-commerce adoption, the increased inventory levels required by retailers could generate square footage demand for logistics-based industrial equivalent to the total supply of industrial assets in the Inland Empire. Now that we have our rationale behind the investment, where does the demand go, and how do we intend to capture it? That’s where the proprietary THINK™  process came into play. Our team developed a quantitative site selection formula that incorporates the use of multivariable regression analysis to find markets that are best positioned to serve future logistics operations.

In effect, we had to understand what drives the logistics industry, where supply chains would thrive, and ultimately, we had to THINK™ like a supply chain manager.

If you have any interest in learning more about the acquisition & financial criterion within our 3rd offering, please reach out to the experts at Intersection.

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