Park Terrace Spurs Retail Trend

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SAN DIEGO-The residential condo boom has blazed a vast trail through Downtown San Diego in recent years with units coming from conversions as well as ground-up development. Another product type is beginning to make small waves in the area. While the scope is not expected to be on the same level as residential condos, some real estate players are banking that retail condos will hold a similar appeal for investors.Park Terrace, a high-rise residential project being developed by Intracorp, will offer 223 residential units in two towers at buildout. The 14-story tower is set for an April 2007 completion date. The second property, a mid-rise eight-story building, will be available in January 2007. The project is being built adjacent to Petco Park.Besides the residential element, the project will also offer 22,725 sf of retail space that will be developed and sold as retail condo units. According to Bill Shrader, senior vice president and founder of Burnham’s Urban Retail Group, the units will range in size from just under 3,000 sf to 6,200 sf.”The units can either be purchased together, or in groups of three and two units,” Shrader tells GlobeSt.com. “This gives buyers the opportunity to occupy all or a portion of the space themselves, lease the units to other businesses, or hold as an investment and re-sell.”Retail specs on the 14-story building call for three condo units totaling 11,155 sf, with an additional 1,508 sf of potential mezzanine space. The units are divisible to 3,937 sf, 3,857 sf and 3,361 sf, and are being offered together at roughly $6.4 million. The second building will include 9,119 sf of space in two units, along with 943 sf of mezzanine space. These units are being offered at $5.2 million together and are divisible to 6,200 sf and 2,919 sf.Shrader tells GlobeSt.com that this idea of retail condominiums has been around in Downtown San Diego for the past 5-7 years, but that it’s gaining significant steam due to the housing boom in the area. “We’re seeing that this is a new investment vehicle for people wanting to invest (in real estate) who are maybe priced out of other product types Downtown.” He says possible investors include people coming out of 1031 exchanges.Currently, the Downtown retail market includes nearly 4.4 million sf of existing space, according to the latest Burnham Real Estate report. Also, just over 1.1 million sf is either under construction or in the pipeline. “While this may seem like a high percentage to absorb, the urban model is different in that the retail space is built concurrently with residential, not before,” says Shrader, who adds that vacancy is less than 6% overall Downtown, and less than 3% in “well positioned areas like (Park Terrace).”