An Orange County-based buyer, seller and operator of commercial real estate properties has bought a five-building office campus about 20 miles north of downtown San Diego for $77 million.
Seal Beach-based Harbor Associates LLC, in a joint venture with Irvine-based F&F Capital Group, is the new owner of 211,000-square-foot Highlands Corporate Center at 12730-12780 High Bluff Drive in San Diego’s Del Mar Heights.
The joint venture bought the campus for $365 per square foot.
Highlands Corporate Center was 90% leased at the time of the sale, according to a Harbor Associates statement.
The Harbor Associates statement said the center was renovated by the undisclosed seller. Renovations included new lobby finishes and upgrades to the conference center, fitness facilities, tenant lounge and the outdoor pavilion.
Highlands Corporate Center also features electric vehicle charging stations and private balconies on the upper floors.
Harbor Associates Principal Rich McEvoy said the office campus’ proximity to office, residential and retail amenities in the Del Mar Heights area helped the Highlands Corporate Center leasing team sign 40 new leases and renewals since 2021.
“Office performance today is bifurcated with the best locations and buildings seeing strong tenant demand and Highlands is a perfect example,” McEvoy said in a statement.
“The project’s walkable location to more than 40 restaurants at One Paseo is a game changer and one of the reasons that 150,000 square feet of leasing activity has occurred over the past three years.”
Harbor Associates continues to expand in San Diego, with holdings in Carlsbad, Chula Vista, Del Mar and now Del Mar Heights.
Homeless Takes Over in Downtown San Diego
Justin Loiacono, another principal with Harbor Associates, acknowledged prices are being reset as “the office capital markets remain choppy.”
A JLL report from the second quarter of 2024 showed capital investments across the San Diego market total $132 million, a 46% quarter-over-quarter decline and a 42% drop, year-over-year.
The price per square foot of $243 for the second quarter of this year was 62% less than the five-year quarterly average, according to JLL.
Tough market conditions were evident in the recent sale of Symphony Towers, the second-tallest high-rise in downtown San Diego. Newport Coast real estate investor Joe Wen used his multinational conglomerate Formosa Ltd. to buy the 34-story and 546,000-square-foot Symphony Towers for $45.7 million.
The $84 per-square-foot price represents a fraction of the high-end building’s pre-pandemic value. Irvine Co., Symphony Tower’s previous owner, bought the high-rise in 2003 for a reported $134 million.
Nicole Winters, executive vice president of JLL San Diego, said many companies have been leaving downtown San Diego as tenants seek to downsize and move to nicer buildings – a big “flight to quality” trend.
“There were some nice and appealing areas downtown but now the homeless have taken over,” Winters told the Business Journal in an email.
“We have seen companies move out of town strictly because they’re worried about their employees walking to their car.”
Those tenants, Winters added, are relocating to Del Mar Heights and University Town Center (UTC) in San Diego’s northern suburbs.
“We are seeing that companies in San Diego are trying to entice their employees to come back to the office full-time and some are mandating at least four days,” Winters said.
“They are trying to make the office more exciting by moving to other areas like the UTC or Del Mar Heights submarkets to get closer to cool vibes that some of the amenities can give.”
She noted, however, that each of these markets are still “tight and prices are going up, depending on where the building is located and how close it is to the amenities.”
