From SoCal Real Estate’s December 2018 issue:
Mark Kuske of Emmes believes that San Diego could be the next great tech market to rival San Francisco.
By Carrie Rossenfeld
Downtown San Diego, like many urban markets, has certainly come a long way since the Great Recession. Aside from the booming multifamily development sector and neighborhoods such as the East Village, Little Italy, and the Embarcadero undergoing revitalization, the tech-office sector has been quietly experiencing a renaissance, too.
Emmes Realty Services of California LLC, a member of The Emmes Group of Companies and one of the largest commercial-office landlords in Downtown San Diego, has been promoting this renaissance. Founded in 1992, with offices in New York and California, The Emmes Group of Companies and its affiliates are engaged in principal real estate investments, funds management and real estate services. If you ask Mark Kuske, VP of asset management for the firm, about Downtown San Diego’s potential as a tech market, he’ll agree with another publication’s recent assessment of the market as “Southern California’s answer to Silicon Valley.”
As San Diego is booming with innovation and entrepreneurship, creative companies continue to expand their urban footprint in this market, Kuske tells SoCal Real Estate. “Downtown San Diego has arrived as a dynamic hub for innovation-oriented companies, and Emmes is working hard to design, upgrade and improve its buildings to fit the culture and needs of today’s innovation companies.”
Kuske quotes Neal Bloom, founder of Fresh Brewed Tech and chairman of Startup San Diego, as saying, “San Diego is in the midst of reaping the rewards from building successful companies that have exited and are working on their next company and investing in local companies as well. We can see the fruits of the acquisitions of local tech companies faster laying the groundwork for spinning the flywheel of the San Diego tech ecosystem. Over the last couple of years, we have also seen a growth of tech companies opening satellite offices in San Diego, including Amazon and Walmart Labs. This brings more strong talent and expertise to the region.”
To accommodate this explosive tech growth in San Diego, Kuske says his firm is making a concerted effort to incorporate technology as a unique amenity to tenants and visitors alike and attract more technology tenants. One such example is 707 Broadway, which he says can serve as a “tech incubator” for tenants. “This tech-friendly building caters to both the tech and millennial-focused industries,” Kuske says. “Home to many creative companies like CPC Strategy and San Diego Magazine, the 18-story office building has this tagline at the entrance: ‘Innovation Works Here.’”
Among 707 Broadway’s millennial-attracting amenities are a basement game room, a “bark park” dog park, 30 electric-vehicle-charging stations, bike storage space, an upgraded conference room, large art murals, and a 24/7 fitness center and locker room. Kuske says Emmes has invested a lot of time, effort, and money into keeping 707 Broadway and all of its buildings upgraded and renovated, from lobby and common-area renovations to base building improvements.
One example of the firm’s ability to accommodate tenant growth is Psyonix, a video-game-development studio that recently expanded within the Emmes portfolio from an approximately 9,000-square-foot office space at 707 Broadway to a 40,000-square-foot office at 1 Columbia Place. The company relocated from North Carolina to San Diego in 2009 and has grown exponentially ever since, Kuske relates.
He adds that while Downtown San Diego is still in the early stages of its tech development, investors in tech properties should keep it on their radar since it’s showing so much promise and potential. With four high-rise office buildings (1 Columbia Place, 2 Columbia Place, 701B and 707 Broadway) and a parking garage (6th & A Parking) in its Downtown San Diego portfolio, “Emmes is a big believer in Downtown and has invested heavily in its properties,” Kuske says.
A firm that seeks properties to renovate, bringing them up to today’s standards and adding purpose, utility and value to them, Emmes has completed several projects in the Downtown San Diego market. The company recently completed a multi-million-dollar renovation of the 7th Avenue plaza and atrium lobby of 701 B Street (701B), which boasts a new water-wall feature spanning over 50 feet long and nearly 20 feet tall, making it the largest vertical water feature in Downtown, Kuske says. “A white sculptural trellis floats above the plaza, providing shade and inviting tenants and visitors to experience its transformative qualities as viewed from different angles.” A textile light wall in the lobby changes colors and themes throughout the day.
In addition, Emmes recently installed the first Tesla Superchargers in Downtown San Diego at its newly revamped 6th & A Parking garage. The installation features 16 of Tesla’s new 72kW Superchargers, which are optimized for deployment in dense urban areas, Kuske says. “The Tesla Superchargers are the latest example of how Emmes is boosting the value of its Downtown properties as more companies crave the urban culture.”
The landlord has also been signing leases with notable traditional and tech firms of global status, having recently renewed a lease with San Diego’s oldest law firm, Higgs Fletcher & Mack, which occupies 53,000 square feet at 1 Columbia Place. And last summer, global digital marketing agency iProspect, which has more than 4,200 employees in 91 offices across 55 countries, moved from the suburbs and now occupies a full floor at 1 Columbia Place, according to Kuske.
The firm also has big plans for the future, having recently joined other Downtown property owners, stakeholders, and the Downtown San Diego Partnership to enhance the Columbia District. Working under the newly formed nonprofit The Columbia Community Foundation, the group plans to establish neighborhood identity through comprehensive branding, marketing, and placemaking efforts. “The Columbia District is becoming a commercial and residential hot spot and hub of exciting and innovative development,” Kuske says. “By working with other businesses and the community at large, we hope to further activate the street fronts within the Columbia District and beyond.”
Serving both customers and community is key to landlords’ success in the Downtown San Diego market, Kuske adds. For example, as part of its goal of continuing to invigorate its properties and the Downtown community and in response to tenant requests for a fitness amenity, Emmes signed a lease with Pure Indoor Cycling for a new, boutique, indoor-cycling studio on the ground floor of 1 Columbia Place.
So, what distinguishes San Diego as a real estate tech market as compared to other markets like Silicon Valley, Orange County, and L.A.? Kuske cites Inc. magazine’s recently released annual “Inc. 5000” list of fastest-growing companies, which included 120 companies in the San Diego metropolitan region, many of them tech and life-sciences firms. He also points out that there is a significant military footprint in the region, which provides tens of thousands of jobs and contributes hundreds of millions of dollars to the regional economy. And he notes that on the office side, the median sales price for commercial real estate in San Diego continues to increase annually. “Add to that a five-year millennial population growth rate more than double the national average, coupled with proximity to universities, and San Diego is well-positioned to continue its transformation into a bona fide global tech hub.”
While the Silicon Valley is dominated by software companies, Kuske says Emmes believe San Diego is has a well-rounded tech sector with tech hardware and software companies taking space in the city. “Qualcomm, military contractors, life-sciences etcetera, have a long history in San Diego, and now we are seeing software services make up a significant component of San Diego businesses.”
Lastly, Kuske quotes Neal Bloom of Startup San Diego as saying, “In San Diego, we have a few elements in that a large majority of the beach communities are habitable and stretch for a much longer area than most other areas of California. Also, the accessibility to these different dense hubs, being able to drive from the Sorrento/UTC hub to Downtown San Diego in 20 minutes, allows for a lot more region-wide collaboration on top of the opportunity to work with the tech community right across the border in Tijuana. The Tijuana and Baja tech community is also maturing and very integrated into the San Diego tech community.”