Downtown San Diego Office Tower Converting to Hotel, Residential

A hotel developer has purchased a mostly vacant office complex in downtown San Diego with plans to convert the property into a hotel and residential tower.

San Diego-based J Street Space acquired the 386K SF Tower 180 complex, which includes a 25-story tower with an attached eight-story annex and parking garage, from Hammer Ventures for $61M.

J Street Space plans to spend $140M to convert the complex, which is located at First Avenue and Broadway, into a hotel and residential property while maintaining existing ground floor shops, according to a report in the San Diego Union-Tribune.

The 61-year-old Tower 180 complex was renovated in 2020 with a new glass façade and interior upgrades designed to appeal to office tenants, but at the time of the sale about 340K SF was available for lease; a few retail shops occupy the ground floor.

San Diego’s office market is languishing with record high availability and record low leasing activity, according to a Q4 2023 market report from Kidder Mathews. The report said the availability rate has surged to 19.5% while leasing activity cratered at 1M SF in the fourth quarter, a 15-year record low.

The situation is not likely to improve, as supply is far outpacing demand: San Diego County is scheduled to see deliveries of nearly 4.5M SF of office space, with 90% of the new space without leasing commitments, the report said.

J Street Space, which began its business as J Street Hospitality in 2011, has specialized in ground-up hotel construction in downtown San Diego.

The firm’s downtown hotels include The Courtyard Gaslamp, Hotel Z, the Residence Inn Gaslamp and a boutique hotel, the Moxy. Under construction is the Bower Hotel, which is replacing the former Villa Capri motel near the landmark Hotel del Coronado.

The developer is planning to turn the lower-level office floors of Tower 180 into hotel rooms while converting the upper floors into residences. The mix of units has yet to be determined and a rooftop pool and bar also may be included in the project, which anticipates reopening in 2027, according to the newspaper report.

According to a preliminary review application submitted to the city in November, the developer may separate the annex from the skyscraper so it can be sold as a separate building, the report said.

Saj Hansji, president of J Street Space, told the Union-Tribune that Tower 180 is “a unique opportunity to bring new hotel and residential units into the market with speed and well below total replacement cost in a great location downtown.”

San Diego has adjusted its downtown zoning code to make it easier to convert office buildings to other uses in the post-pandemic economy. City officials said the Tower 180 project will only require ministerial permits, which are by right and not subject to discretionary review.

Hammer Ventures acquired the property, then known as the Executive Complex, for about $55M in 2016. The firm secured an $82M loan to finance the acquisition and renovation.