The sale of The Ivanhoe at 7817 Ivanhoe Avenue in La Jolla, California, was one of San Diego’s high-profile coastal office sales during Q2. Aubry-Dumand is handling the leasing for this property. | Courtesy Aperture Photo Arts and a representative of JLL

SD Coastal: An Autonomous Office Submarket

Carrie Rossenfeld Office

As SoCal Real Estate recently reported, office-sales activity in the coastal submarket of San Diego — La Jolla, Pacific Beach, Torrey Pines, Del Mar, Solana Beach, Cardiff, Encinitas, and Carlsbad Village, to be specific — picked up in the second quarter, closing at $59.6 million in sales, according to a recent report from JLL. In addition, the coastal office-property segment experienced some positive absorption during the quarter, breaking away from three consecutive quarters of low negative absorption, the report says.

Pascal Aubry-Dumand | Courtesy a representative of JLL

We spoke with Pascal Aubry-Dumand, a VP at JLL, about the reasons for this uptick, which office users are drawn to the coast vs. inland, the amenities offered by each environment, and why coastal is now recognized as its own autonomous submarket.

SoCal Real Estate: Both sales and leasing in the San Diego coastal office market picked up during Q2. To what do you attribute this increase?
The increase in leasing and sales activity in San Diego’s coastal office market has a direct correlation with product availability and the quality of the offering. The more properties that hit the market or that have available space, the more sales and leasing transactions take place.

With good fundamentals, investors are putting money into properties to attract and retain coastal tenants. The market is extremely tight, so once a new property is repositioned, coastal tenants tend to be attracted to it. We are a seeing real appetite from investors for value-add properties in general and for well-located class-B buildings offering good curb appeal. For example, the recent renovation of The Ivanhoe at 7817 Ivanhoe Avenue by our client Capstone Advisors has turned out to be a real success. About a year ago, The Ivanhoe lost its second-largest tenant, a mid-size tech company still in start-up mode. The tenant in question occupied one-third of the building. Since going vacant, Capstone Advisors repositioned the suites using high-quality material, and as a result, we have managed to not only increase the rent substantially, but also to recategorize the building as class A and lease 90 percent of the space vacated to four tenants with stellar credit.

Which office users are more drawn to the coastal regions and which are more drawn inland?
We are seeing all types of companies, from start-ups to subsidiaries of global firms, relocate to the coast, with one caveat being the lack of large, contiguous space over 15,000 square feet. Generally speaking, executives who live on the coast have a real desire to locate their companies close to home. The coast is seen as less congested, and the “vibe” more pleasant. Tenants’ employees, especially the youngest among them, love the idea of walking or riding a bike to lunch or to happy hour after work, or even of taking a stroll on the beach during their break, which they can easily do in certain parts of Del Mar, Solana Beach, Encinitas, La Jolla and Carlsbad Village.

Which amenities are more available in the coastal markets than inland, and how are landlords providing them?
Tenants on the coast enjoy access to the beach and work in a pedestrian environment that can’t be found inland. To that point, some landlords offer bike storage, surfboard storage, wetsuit lockers, and outdoor showers, to name a few.

What else should our readers know about this topic?
When looking for office space in San Diego, many people tend to think about the larger markets like Downtown San Diego, Del Mar Heights, and UTC. What people don’t know is that the coastal area is a submarket in and of itself, with 619 office properties representing over 7 million square feet of leasable space from La Jolla to Carlsbad Village. We’re not talking about high-rises, but rather, about smaller buildings, mixed-use properties and small, campus-style situations. The resurgence of areas like the Cedros District in Solana Beach and the recent high-profile sale of The Bungalows at Del Mar on Jimmy Durante Boulevard are a testament to the strong demand to come.