San Diego Market Report

Despite downturn, several area projects are underway, including the huge San Diego County Operations Center, Sony Electronics Corporate Headquarters and Rady Children’s Hospital.

By Greg Aragon

It’s been a tough year for the San Diego County construction industry, where an estimated 16,000 construction jobs were lost and the total valuation of building permits fell by about $750 million in the first 11 months of 2008 compared to the same period in 2007.

“The private market is in shambles right now,” says Jason Hunking, business development representative with San Diego-based Roel Construction. “There is work out there but you are finding five to 10 times the competition that you [normally] would on every job.”

He says the industry depends on bank loans, and “when no one is lending, no one can get private funding for any type of development whatsoever.”

Douglas Barnhart, president of Associated General Contractors of America and founder of San Diego-based Barnhart Inc., says that as residential and commercial sectors dry up, trade contractors that work in those areas are “gravitating towards public works, where there is activity.”

He says areas to watch include military and building roads and freeways.

Hunking agrees and adds tribal gaming, education, tenant improvement and health care to the list.

“We are adamant about getting heavily involved in health care,” Hunking says. “No matter what the economy does, people are always getting old and getting sick.”

advertisement

Borre Winckel, CEO of Building Industry Association of San Diego, says one way to get things building is for local government to “get serious about offering stimulus measures and recovery jump-start activity” to the industry. He says local city halls should change or defer permitting, entitlements and zoning fees.

“We need impact-fee relief -- paying [fees] later, closer to the point of actual impact rather than way up front at the building permit where we are not impacting anything,” he adds.

Michael McNerney, senior vice president of Lowe Enterprises Real Estate Group –West, says his company will stay active by taking advantage of the market’s downturn and buying distressed properties.

“We will look forward to find some land where we can do some entitlement work and have development sites available for the next cycle whenever that happens to be,” McNerney says.

He says Los Angeles-based Lowe will also focus on completing the $530 million San Diego County Operations Center and Annex project in the Kearny Mesa.

Located on 38 acres, the three-phase project includes six 150,000-sq-ft office buildings; two 500,000-sq-ft, six-level parking structures; an 84,000-sq-ft medical examiner and county veterinarian building; a 20,000-sq-ft conference center; and 12,000-sq-ft central utility plant.

And it all has to be built while at the same time tearing down the existing 45-year-old operations center.

“The site is currently completely built out and operating, so we have to demo buildings, move people around, build more buildings and then move more people into those,” McNerney says. “It’s a little like a three-dimensional chess game.”

Roel is serving as general contractor and San Diego-based RJC Architects are designers for everything except the medical building, which is being designed and built on a separate contract by Los Angeles-based Harley Ellis Devereaux and Wildomar, Calif.-based ProWest Constructors.

Construction on the medical building and utility plant broke ground in October. When these structures are complete in December, Roel will begin phase one, which includes two office buildings and one parking structure.

Mike Berryhill, Roel project director, says that only phase one is authorized at this time.

“If the economy goes well and the project keeps going, then they will authorize the next phase, which is two more office buildings and a conference center,” he adds. “And then if that goes well, they will authorize the last two office buildings and the last parking structure.”

McNerney says if everything goes as planned, the project should take two years per phase, or six years to complete.