Downtown Still Awaiting Rush of Urban Pioneers

Four years before the Marina Park and Park Row condominium projects opened in the early 1980s, thousands of San Diegans, dreaming of being urban pioneers in what they hoped would become a New, Revitalized Downtown, began signing waiting lists to reserve places in the developments.

“If you’re not on the list, you may have already missed the boat,” a city official gushed when the projects opened in the spring of 1982.

Three years later, the boat’s still at the dock and there’s plenty of room aboard. But perhaps, some say, not for long.

Although only slightly more than half of the 446 units in Marina Park and Park Row are occupied today, local political and business leaders are upbeat about both the short- and long-range prospects of downtown housing--widely regarded as a critical ingredient in making downtown, as Mayor Roger Hedgecock put it, “more of an active 24-hour community and not simply a destination for commuters.”

The August opening of the $140-million Horton Plaza retail and entertainment center, combined with downtown’s continued cleanup through other redevelopment projects, will, they contend, soon have San Diegans clamoring to live downtown.

That view is far from unanimous, however. An equally sizable contingent of local politicos and development experts remains skeptical of downtown’s future as a residential center, and not only because of Marina Park’s and Park Row’s unimpressive track record.

Six-figure prices will keep downtown housing beyond the reach of many middle-income families--unless the city offers developers multimillion-dollar subsidies in the form of reduced land costs. Moreover, skeptics argue that the vast majority of San Diegans are contented suburbanites who rarely even visit downtown, much less want to live there--a contention some surveys reinforce.

“It takes a certain attitude to be an urbanite, and many San Diegans don’t have it,” said Glen Sparrow, an associate professor of urban studies at San Diego State University. “People here are used to a suburban life style, not living in the heart of a city . . . where you have to be willing to put up with things like noise, congestion and some inconveniences.

“When you grow up in the suburbs, you’re not ready for waking up in the morning and seeing a transient sleeping on your doorstep or throwing up on the sidewalk. You want to see the guy next door walking his dog or watering his lawn.”

Redevelopment officials, who privately scoff at Hedgecock’s vision of downtown’s current 11,000 population increasing ninefold to 100,000 by the year 2000, acknowledge that the market for urban housing is a small one. However, with Horton Plaza seen as the answer to downtown’s lackluster retail picture, additional housing is needed to help add a sense of community to the center city area, they say.

“We want downtown to be more than just a place where people work or shop,” said Peter Q. Davis, president of the Centre City Development Corp., the city’s redevelopment arm. “It’s true that all the studies show that about 98% of the people will want to continue living in the suburbs. But a relatively small amount of housing can help create a whole different feel and environment downtown. It helps round out the picture.”

Marina Park and Park Row--CCDC’s first major attempts to work with private developers to persuade San Diegans to move downtown--have yet to come close to fulfilling the high expectations that preceded their 1982 opening. Second phases of both projects were completed last year. According to CCDC figures, 132 of Marina Park’s 224 units and 131 of Park Row’s 222 units had been bought or were in escrow as of June 1.

“It certainly wasn’t an encouraging beginning,” conceded Gerald M. Trimble, CCDC’s executive vice president. The sluggish sales are even more disappointing to redevelopment officials in light of the projects’ special 30-year fixed rate financing at 9 5/8%, viewed as a major selling point. The condominiums range from $73,500 to $210,000, high by citywide norms but still within the financial means of a large segment of the local population.

Although the projects were plagued initially by a downturn in the economy, a more serious problem was consumers’ reluctance to gamble on downtown housing before redevelopment cleaned up more of the center city area. In short, being the first major residential development in a gradually improving downtown--once considered a potential advantage in attracting urban pioneers with an eye for a good investment--became a serious liability.

“The pioneer spirit was there, but unfortunately, the pocketbooks didn’t follow,” said Hal Struck, vice president of marketing for Pardee Construction Co., which built Park Row in partnership with Great American First Savings Bank. Shapell Industries Inc., in a joint venture with Goldrich, Kest and Associates, developed Marina Park.

“The problem was, we were selling promises of what downtown would one day be, not what it was,” Struck added. “You can talk a lot about all the things proposed, but it takes a couple major things like Horton Plaza actually getting off the ground before people start to believe . . . in that future. We underestimated people’s skepticism and perceptions about downtown.”

Some architects and others also have criticized the projects’ design--in particular, the relatively spacious, townhouse-style units--as more suburban than urban in character. “Most people interested in living downtown probably want something a little different than the typical condo development you can find anywhere,” said architect Lee Platt.

“At the time, we felt that we needed a bridge from the suburban style that the buyers were used to,” Davis explained. “If they came to us today, we’d probably do it differently and ask for a higher density on the property.”

Marina Park’s and Park Row’s densities are 50 units and 35 units per acre, respectively. In contrast, one informal goal for future downtown residential projects calls for average densities of 80 units per acre.

Many development experts, however, argue that the major roadblock to Marina Park’s and Park Row’s quick success was not style or even price, but rather a question of timing--a problem that ultimately can be overcome.

“That project was maybe a little ahead of its time,” said San Diego Unified Port District Commissioner Louis M. Wolfsheimer, whose agency is financing the new bayfront convention center. “But 10 years from now, people will be scratching each others’ eyes out trying to get one of those things.”

Struck said he expects Park Row’s remaining units to be sold by next spring.

The Marina Park-Park Row record illustrates what Ray Robbins, of San Diegans Inc., describes as “a kind of chicken-or-egg dilemma” that continues to confront the downtown housing market.

“You can’t induce people to live downtown unless you have the environment, transportation, culture and other aspects that make it desirable to live downtown,” Robbins said. “On the other hand, it takes people living downtown . . . to make some of those things happen.”

Perhaps more than any other single development in downtown’s recent history, the 6 1/2-block Horton Plaza retail and entertainment complex is being heralded as a project that could, in Robbins’ words, begin to “make some of those things happen” to dramatically heighten San Diegans’ interest in downtown not only as a place to work, shop, dine out or attend a movie or play, but also as a place to live.

“Horton Plaza is going to . . . electrify downtown,” said Pam Hamilton, CCDC vice president. “It’s not only going to cause a lot more people to visit downtown--it’s going to start some of them thinking seriously about living there.”

However, even some of CCDC’s top officials and the redevelopment agency’s own studies raise questions about the depth of interest in downtown housing.

A 1983 study done for CCDC by Robert Charles Lesser & Co., a real estate consulting firm, found that downtown housing appeals most to the nearly 68,000 people who work there. While the desire to be close to shopping, restaurants, entertainment and the waterfront will draw some people downtown, the top prospects for urban dwellings will continue to be downtown workers, expected to number about 85,000 by 1990, the Lesser study concluded. Another study completed this spring also identifies retired and semi-retired couples as a major target group for downtown housing.

Based on a formula used to estimate the so-called “capture rate” of residential developments, the Lesser study forecast that the potential annual demand for downtown housing equals only about 300 condominium units and 275 apartments. If that projection proves accurate, it would mean that less than 10,000 new residential units will be built in the core area of downtown during the rest of the century.

Although additional housing also is expected to be built in the northern and eastern areas of downtown not under CCDC’s jurisdiction--the agency oversees redevelopment in only about one-fourth of the 1,200 acres in the center city area--most experts doubt that the downtown residential community in the year 2000 will be even half as large as Hedgecock’s 100,000 projection. One top redevelopment official called the mayor’s oft-stated target “absolutely ridiculous, a totally unrealistic number.”

In comparison to other cities with high concentrations of urban dwellings, CCDC’s goals for downtown housing are relatively modest. Since the late 1970s, the agency has been working toward a goal of developing 3,000 new residential units downtown in the 124-acre Marina Redevelopment Project area, which extends south and west from Horton Plaza to the waterfront. Roughly half of that area, which also includes Seaport Village and the convention center site, is considered suitable for residential development.

Redevelopment officials say about 3,000 new residences are needed in the core of downtown to attract doctors, dry-cleaning stores, grocery stores and other facilities or services now missing or in short supply--a shortcoming that discourages people from moving there.

However, CCDC is only about halfway toward that goal. Nine housing projects--five existing, four under construction or proposed--will produce about 1,600 units by late 1987, Davis said.

“We’re moving along . . . but it’s a slow process,” the CCDC president conceded.

One major reason--indeed, perhaps the reason--that the process is slow is the high cost of downtown land, which, in turn, can translate into high housing prices.

Some prime downtown sites sell for more than $100 per square foot, while suburban property generally is available for only a fraction of that amount. In addition, parking spaces can add as much as $15,000 each to construction costs, depending on whether they are above or below ground. Therefore, in order for downtown housing to be competitive with suburban developments in terms of both quality and price, public subsidies in the form of reduced land prices are all but necessary.

For example, the city subsidized the Marina Park and Park Row developments by about $25,000 per unit, and is expected to underwrite the land costs of a retail, office and condominium project to be built on a block adjacent to Horton Plaza by as much as $2 million.

“You don’t have to be an Einstein to see that, without subsidies, you price most people right out of the market,” Trimble said. “There’s no way you can expect consumers to shoulder the burden of an extra $20,000 to $25,000 per unit. It just won’t work without subsidies.” Indeed, as the Marina Park-Park Row development seems to suggest, sometimes it won’t work even with subsidies.

City officials strongly emphasize that the subsidies are designed to lower housing costs for consumers, not to fatten developers’ profits. And, because of the priority placed on downtown housing, there is generally strong support at City Hall for continuation of the subsidies.

“It’s expensive, but the benefits are so great to downtown generally . . . that I’m 100% in favor” of the subsidies, Hedgecock said. “It’s an investment that will result in the transformation of downtown from a destination for commuters who all go home at night, leaving it virtually deserted, to a true 24-hour-a-day community.”

City officials acknowledge that in their effort to promote development of inner-city housing, they could, ironically, be victims of their own success elsewhere downtown. If Horton Plaza and other projects do produce a dramatic rejuvenation downtown, that success could drive land prices even higher, worsening the housing market’s existing problems. Recognizing that possibility, redevelopment officials increasingly are searching for innovative ways to stretch the value of scarce public dollars.

“Our problem is pretty simple--we don’t have enough money to do everything we want to do downtown,” said Jan R. Anton, a member of CCDC’s board of directors.

One alternative that Anton and many others believe could help solve that problem is so-called “mixed-use” projects, which combine condominiums or apartment units with other revenue-producing uses such as retail, office, hotel or recreational facilities in a single development.

A major advantage of mixed-use projects is that the retail, commercial and other uses can, in essence, subsidize housing development by covering a large portion of the land costs that, in a strictly residential project, would be borne by home buyers.

“Retail and commercial are the rich uncle that subsidizes residential,” Anton said.

Last month, plans were unveiled for a $36-million condominium, office and retail project that will be the first mixed-use residential development in downtown. The seven-story City Plaza project, to be built on a block diagonally across from the southwest corner of the Horton Plaza center, will include 80 one- and two-bedroom condos priced between $110,000 and $175,000 each. The developers believe that if the City Council approves the project later this year, City Plaza could be completed by the fall of 1987.

CCDC Director Gil Ontai has called City Plaza “a real benchmark project,” and Davis characterized the proposal as “the first of the next generation of projects” downtown.

However, the city still will have to subsidize the project by as much as $2 million to make it economically feasible for the developer, Trimble explained. The city probably will have to pay $4.5 million to $5 million for the 1.3-acre site, while the developer is expected to pay the city only about $3 million for the land, the CCDC official explained.

While other mixed-use developments may appear downtown, another major residential project, the Meridian, is widely viewed as a unique effort that is unlikely to inspire repetition--at least not in the immediate future. The $71-million luxury condominium project opens in July.

The 27-story Meridian, the city’s tallest building, features 172 condominiums priced between $280,000 and $1.4 million, most of which offer sweeping views of the bay and downtown. Unlike the other major downtown housing projects to date, the Meridian is being built on unsubsidized property--because, officials say, it would have been difficult to justify using public funds to subsidize housing for the wealthy.

Meridian officials have begun accepting non-binding reservations from prospective buyers and claim they are exceeding their goals, but refuse to release specific numbers. “We don’t want to get caught up in a numbers game . . . about sales timetables,” said Meridian developer Walter A. Smyk, showing that he has learned the expectations-versus-performance lesson taught by the Marina Park and Park Row projects. Smyk added, however, that he believes the Meridian will reach full occupancy within about three years.

Even if that proves to be the case, redevelopment experts say it could be years before another project similar to the Meridian appears.

“There’s just not a very large market for high-rise luxury downtown housing in San Diego,” said Robbins of San Diegans Inc. “The jury’s still out . . . but most developers feel that that’s something that’s going to evolve only once every five to 10 years or so, at best.”

While most wealthy San Diegans apparently will continue to prefer areas such as La Jolla and Rancho Santa Fe to living downtown, what prevents would-be urbanites at the other end of the economic spectrum from becoming downtown dwellers is not choice, but the thornier problem of affordability.

That problem will be partially alleviated over the next two years by the planned development of two apartment complexes--a commodity now in particularly short supply downtown. City officials estimate that there are less than 1,000 apartments available to the general public downtown, excluding rooms in some small, rundown hotels that in essence serve as apartments for month-to-month tenants, according to CCDC figures. In addition, three apartment towers include a combined total of 429 units for low- and moderate-income senior citizens.

The two planned projects--Market Street Square and another yet unnamed complex--will be built just south of Horton Plaza, and will add a total of 372 apartments to the stock of downtown housing. Forty of Market Street Square’s 192 units will be set aside for low-income families.

The additional apartments not only will help make urban living an option to middle-income couples who cannot afford downtown housing’s steep prices, but also will give other San Diegans who remain doubtful about living in the center city area “a chance to sample it before deciding whether they want to buy,” Trimble said.

Because downtown housing costs will continue to strain the economic resources of both the city and most potential buyers, many experts suggest that the city should encourage infilling in communities that ring downtown, such as Hillcrest, Golden Hill, Middletown and Barrio Logan.

“Desirable as it is to have more people living downtown, for market-rate housing, you probably have to look outside the core of downtown,” said Roy Potter, executive vice president of San Diegans Inc.

San Diego Chamber of Commerce President Lee Grissom added that he is “unconvinced that the results . . . justify the huge public subsidies” needed to build downtown housing.

“You can accomplish a lot of the same things (produced by downtown housing) through more housing in those surrounding communities, and for much less than it costs to build downtown,” Grissom said. “By increasing the number of people living within a mile or two of downtown, you increase the number of people who are going to make more frequent use of downtown. And that, after all, is the ultimate goal.”

Others, however, argue that downtown will not attain its full potential without a major residential component.

CCDC President Davis sometimes likens downtown to a clock when discussing the importance of housing in the center city’s overall development.

“The business community takes over from about 8 (a.m.) to 5 (p.m.),” Davis said. “That’s about all we have right now, but Horton Plaza is going to begin to stretch that out from about 5 to 11 (p.m.).

“That leaves the 11 (p.m.) to 8 (a.m.) period, and that’s where housing comes in. That’s a critical period, because it sets the tone for the end of one day and the beginning of the next one. If more people live downtown, the transients won’t be the only ones on the street late at night or early in the morning. That can make a big difference in downtown’s image.”

As with downtown redevelopment in general, however, the central question that hangs over the future of urban housing here is when--or even whether--the vision becomes the reality. And Trimble, who perhaps is closer to downtown’s pulse than anyone else, concedes that the transformation is unlikely to be a rapid one.

“Downtown’s problems developed over 20, 30 years, so they’re not going to go away overnight,” Trimble said. “It’s going to take years to even put a dent in them.

“We’re still working on trying to get more people to visit downtown. So getting them to live there . . . isn’t an easy sell. I can’t say for certain today that we’re absolutely going to be successful. No one can. Ultimately, that’s something that San Diegans will decide. We know that developers are interested in building downtown housing. Whether many people are interested in living there . . . is the unknown.”

TUESDAY: Plans show that by the end of this decade San Diego’s waterfront may be transformed into a perfect complement to downtown development.