Kearny Real Estate’s Jeff Givens Is Bullish On San Diego’s Office Market
Los Angeles-based investor Kearny Real Estate Co. entered the downtown San Diego office market in 2014 and has been growing its presence ever since. The firm is invested in San Diego long term, according to Jeff Givens, Kearny senior vice president in the San Diego office, and expanding its San Diego office to support its growing portfolio of local properties.
“Given our success and expanding San Diego portfolio, we’re very excited about our growing San Diego office and prospects for future investments,” Givens said.
Kearney acquired the 24-story, 232,936 SF Union Bank Building at the corner of 530 B St. and Fifth Avenue in 2014. It was the firm’s first high-rise office tower. Rebranding it Five Thirty B, the company invested $15M in capital improvements that modernized common areas to attract tenants with a young workforce, which included the dramatic, $1M transformation of an underutilized patio on the third floor to a collaborative outdoor meeting space, as well as creation of a rooftop garden.
Kearny sold Five Thirty B in mid-2016 for a nice profit to Canada-based Bosa Development. In December, Kearny formed a JV with PCCP to finance the $91.7M acquisition of the iconic, 30-story, 364K SF Emerald Plaza office component at 402 West Broadway in downtown from Deutsche Bank. Originally developed by local developer and entrepreneur Sandy Sharpery in 1990 at a cost of $150M, this mixed-use project, which occupies one city block, also includes retail and a 436-room, four-star Westin Hotel that connects to the office component with a glass atrium.
Designed by local architectural firm C.W. Kim Architects & Planners, the office component has five hexagonal towers, or pods, of varying heights of 20 to 30 stories. These pods combine on the lower floors to provide 15K to 16K SF floor plates, but progressively decrease to just 2,800 SF on the penthouse level, Givens said.
“This is the only true mixed-use office environment in downtown,” Givens said.
Kearny was attracted to Emerald Plaza’s unique architecture and built-in amenities at the Westin, which includes a restaurant, a café and a bar. The Westin provides office tenants discounts on hotel rooms and food services and delivers takeout orders to office suites.
Givens said Kearny plans to invest $5.5M in capital improvements at Emerald Plaza to upgrade common areas. Improvements include revamping the main lobby area shared with the Westin with soft seating to create an alternative workspace and gathering place for socializing, improving lobby areas on individual floors and upgrading restrooms and elevator cabs.
Although the Emerald Building is just 72% leased, Givens is confident it will lease up fairly quickly.
“Tenants in downtown are here for the 24-7 environment and young talent,” he said.
Givens said during the Great Recession many downtown office tenants moved to desirable suburban markets, including University Town Center, Sorrento Mesa, Del Mar and La Jolla.
“Now suburban office users are moving into downtown to attract the millennial talent living in downtown. We saw that at Five Thirty B — tenants coming from Mission Valley and UTC,” Givens said. “I don’t see that ever happening again — tenants jumping back to the suburbs en masse.”
Demand for quality office space in downtown is increasing, and with a limited supply of new product under construction or planned, vacancy for Class-A space has now dropped below 8% and rents continue to rise. Asking rents at the Emerald Building vary from $2.50/SF on lower floors to $3.50/SF on upper floors, which offer views of the Pacific Ocean, Coronado Bridge, downtown and Balboa Park.
While both the Emerald Plaza and Five Thirty B are older, traditional, high-rise office buildings, these buildings have flexible bones that support a variety of office configurations, allowing tenants to adapt their spaces to fit the company culture, whether that calls for open collaborative space, traditional offices or a combination of both, he said.
Kearny acquired Mission Center Office Park, a three-building, 183,692 SF suburan office campus at 5333-5353 Mission Center Road in Mission Valley last year. The company invested $2.5M in renovations, which included a new gym with showers and lockers, an upgrade to the central atrium with outdoor furniture and ping-pong, as well as outdoor patios attached to the ground-floor suites. Improvements also included updating elevator cabs and a new signage program.
Givens said the improvements helped JLL brokers renegotiate leases and expand spaces occupied by the San Diego County Health & Human Services agency and Azusa Pacific University from five to 10 years. These two tenants now occupy more than 100K SF.
As it has grown in San Diego, Kearny has added two new staff members to the San Diego office.
Sonia Miro, former director of West Coast property management for BioMed Realty, has joined the local team as director for property management and will oversee leasing and management of the firm’s San Diego portfolio and properties under third-party management contracts. John DeSantis also joined the San Diego team. Formerly of Phase 3 Real Estate Partners, DeSantis will be responsible for analytical and financial modeling support for current assets and future acquisitions, as well as third-party assignments.
Hear more from Givens at Bisnow’s San Diego Workplace of the Future event July 27.
