Los Angeles and/or San Diego Market Info (Development)

Looking for some advice on a throwaway, anyone's input is very much appreciated.

Currently working in development in DC which is becoming an increasingly over-saturated development market, due both to the decreasing supply of land/infill sites and a city-wide zoning height limit. Foreign capital investment in the city is also at unprecedented levels, making deal investment at a reasonable basis increasingly difficult. I am also getting a little bored--the investment thesis for most blue chip developers in DC (buy near Metro, the primary train network) is exactly the same and does not lend itself to much creative investment strategy.

I've always been in love with the West Coast and want to get some market experience elsewhere. Targeting end of this year/early next year for a potential move. Does anyone have first-hand feedback on the future outlook of these two west coast markets, specifically for future development potential? Do they face the same barriers to entry for investors? Do you enjoy the challenges of investment in areas with limited transportation networks (ie, harder to pin down the exact investment "formula"?) Any other information for what I should expect or read up on would be great. I am obviously digging through west coast bisnow, CBRE research reports, etc. but nothing beats firsthand knowledge.

Comments (27)

Feb 25, 2016

Bump

Feb 25, 2016

I've been in San Diego for 20 years. It's a fantastic place to live. The last few weeks have been mid 70's during the day. Super mellow people. Shorts and jeans is what I where with repeat clients. They do the same.

On to business. We still have our challenges here but San Diego, and you may want to research this, is geographically large. I want to say one of the biggest counties in the state. Yet are population is rather small. We are a small big city/county. Is the coast tight? Of course. The coast is probably tight all the way up to the Bay Area. There will always be deals to have in any market. Good folks are successful everywhere despite the challenges.

Most of the action I'm getting from institutions regarding employment is up in the Irvine/Newport Beach/Orange County area. Less than an hour north of SD. We have large firms in SD but there are more options in Orange County as a whole.

Hope that helps.

Feb 25, 2016

SD FTW for lifestyle happiness mayn

Feb 25, 2016

LA born and raised, but went to school in SD for 3 years. I have to say, I miss it daily. The people, beaches, Mexican food, and overall "vibe" (despise that word, but it's applicable in this context).

As for business, the reason I didn't stay in SD is like everyone mentioned above. Although it's a huge county, most of the wealth lies on the coastal cities and other than the Downtown/Gaslamp district, you're not going to be developing a lot of commercial product. With that being said, it seems that most SD folks do their business all the way from OC and downward, with some even venturing into LA.

There's foreign capital being poured at a exponential rate in LA, and the last couple major CRE networking events I have been to have exposed me to at least 10 new contact all with Asia investor relations, looking to re-capitalize developments and place equity. There is also concern about a recent moratorium that might go into place that would put a huge halt on development. That and the timing of the market leaves me skeptical about large ground up developments, but to each their own.

Feb 25, 2016

Yeah, you're not going to get a carne asada plate the way it should be done unless you're in San Diego.

Hillcrest, a very well known location just north of downtown is considering major zoning changes for skyscrapers. This of course will create a land grab that we have not seen in SD for some time. My understanding is three families own nearly 1/3'rd of all of Hillcrest. Things are going to change.

I found it interesting that Oliver McMillion, a very large investor/developer who typically does high-rise or master planned commercial/multifamily bought a free standing, single story 20,000 sqft building on Washington Ave near UCSD medical center. My guess is they feel Hillcrest will open up to major development.

Feb 25, 2016

Thank you for the responses--I really appreciate it. Coming from a market with major development activity it sounds like SD would be significantly less busy, and LA more consistent. I'm wondering if major development firms in LA (sorry, I'm not well-versed on who these are yet) still have active/large pipelines (2 MSF+?) and what's typical for a "big" project (unit count for resi or RSF for office)? Sometimes blue chip firms (TIshman, Related, etc.) open small offices in other markets to diversify risk, even if there isn't a lot going on.

Not sure how other developers with curiosity for exploring other markets feel, but my one gripe with the business is it's geographic limitations! Would have already moved to LA months ago, just worried about the comparative shift work-wise and backtracking on local market expertise. But such is life.

Feb 25, 2016

Oh, LA is a disaster.

I do some boat instruction during the summer. Everyone from all over the US and around the world tell me the same thing. They thought LA would be like SD based on the TV shows. No, it's not. It's a very very different lifestyle.

Feb 25, 2016
PacNumber:

Oh, LA is a disaster.

I do some boat instruction during the summer. Everyone from all over the US and around the world tell me the same thing. They thought LA would be like SD based on the TV shows. No, it's not. It's a very very different lifestyle.

THIS!!!!!

Feb 25, 2016

Is there a lot of opportunity for real estate development in San Diego? Obviously Los Angeles is booming right now, and this summer I'm working on one of the skyscrapers going up in DTLA. But a lot of the general contractors I've spoken with have said that their SD offices aren't doing so hot.

Feb 26, 2016

Not my neck of the woods but CoStar usually has some pretty good write ups.

San Diego:

"The San Diego apartment market is perennially under-housed. Thanks to an above-average
employment recovery and some of the most desirable weather in the U.S., vacancies--currently below
3%--are among the lowest on the West Coast. Tight vacancies have led to impressive rent gains over
the past few years, both of which are leading to a sustained development wave, with projects cropping
up in Downtown, along I-15, and Mission Valley, which could put downward pressure on fundamentals
and rents. Another obstacle working against landlords is that rents are already nearly 30% above
prerecession levels, which could slow household formation. Ultimately, the market's strong supply
barriers should keep vacancies stable and rents growing, albeit at a slightly slower pace."

LA:

"LA continues to be a favorite target of multifamily investors and developers. Supply constraints
and community opposition virtually guarantee that most submarkets won't get overbuilt, and a high
degree of investor interest means that the market will remain liquid. More than 50% of residents rent
their homes, the highest ratio of renters to owners of any major metro in the country. The deep renter
pool helps to guarantee steady demand and strong rent growth potential. The improving economic
picture should ensure that fundamentals remain stable for the foreseeable future, and the impending
arrival of an NFL stadium in Inglewood should help jump start development in a formerly neglected part
of the metro."

Feb 26, 2016

Coastal San Diego is very supply constrained as well - lot of players chasing few deals which drives returns lower, also difficulty doing any new development. Large number of San Diegans think that it is still a small town and want to keep it that way which leads to significant pushback from community groups (http://www.sandiegouniontribune.com/news/2016/feb/...) as well as the typical environmental crap you deal with everywhere in California. That being said, there are job/career opportunities that exist, you'll just see a lot of the bigger shops doing more deals outside of town.
As everyone else has said above, culture in the two cities is night and day and figuring out where you could be happy should be a big part of your decision.

Feb 27, 2016

CoStar's write-up is is pretty spot on for San Diego currently. However, San Diego could be a very interesting market over the next 5-10 years. You're seeing a lot of developments pop up around the Mission Valley area near Friars Road, but you're also seeing quite a bit of projects happening in East Village Downtown. From what I've been reading, there are 3 impressive projects that have been proposed downtown. One near the convention center, one near 7th and Market and another on the bayfront near the Midway. On top of this, there is always the wildcard of the city expanding the Convention Center to accommodate ComicCon and the Chargers building a stadium downtown. This could bring a whole different dynamic to the area could make Golden Hills an interesting spot for development. Hell, Qualcomm could even be torn down and developed into a small multi-use facility to accommodate an MLS team and SDSU's football team. At any rate, I'm actually not in the business of CRE, but I lived in San Diego for many years and just think theres potential in this city. Plus, the lifestyle is so much different (in a good way) than LA. If you want some names of boutique shops here, just PM me.

Feb 27, 2016

I know it's expensive to live there, but I'm surprised that someone interested in west coast real estate isn't even considering San Francisco...

Feb 29, 2016
CRE:

I know it's expensive to live there, but I'm surprised that someone interested in west coast real estate isn't even considering San Francisco...

Yep. The bay area is its own beast.

Jul 9, 2016

,

Feb 28, 2016

LOL.

24hr Taco Shops are a staple here. Lets not forget In-N-Out Burger. That Double Double is delicious.

San Francisco has some heavy hitters for sure. I grew up in NorCal but moved to SD when I was 19 back in 1996. San Francisco is considering opening up much higher density in order to try and control their housing shortage problem. It's getting very expensive to live there.

Feb 29, 2016

Thanks for the feedback, everyone. Agree that San Fran is a logical top west coast choice, I just don't think I would move cross-country unless it was SoCal (primarily for weather and associated lifestyle reasons). But feel free to tell me if that is stupid. I'm just trying to get a sense for the real estate fundamentals in those markets and whether they are as strong/encouraging looking forward as the DC market.

It sounds like both markets are well-capitalized, competitive, with local restraints/negatives like any other major market. From what I'm hearing/what I've experienced (and not to detract from either city on a personal level), San Diego is basically heaven on earth but a much smaller/mid-level investment market, while LA is a strong market with a lot of institutional capital, but has mixed reviews for primarily non-work related reasons. Am I getting it right?

What is really the knock on life in LA? It would be great to hear it from real estate investment people. Is it the traffic, the lack of intelligent business-oriented people, the sprawl? Combination of all? LA is my off-the-cuff preference based on its prominence as an investment market, but I worry I don't know what I'm getting myself into.

Everyone's feedback has been super helpful, thank you.

Feb 29, 2016

LA > SD for real estate development and investing. Hands down. More money. More people. Higher barrier of entry.

SD > LA for lifestyle. Cheaper. Cleaner. Less traffic. Better vibe.

You hit LA until you make your money then move to San Diego or somewhere in between SD and LA.

Feb 29, 2016

Yep.

Mar 1, 2016
WestCoastDeveloper:

LA > SD for real estate development and investing. Hands down. More money. More people. Higher barrier of entry.

SD > LA for lifestyle. Cheaper. Cleaner. Less traffic. Better vibe.

You hit LA until you make your money then move to San Diego or somewhere in between SD and LA.

Make your fortune in the LA market, retire in the La Jolla sunset. (preferably in a bed of carne asada)

    • 1
Mar 3, 2016

I live in Bird Rock/La Jolla.

Feb 29, 2016

Any other opinions on the market in Orange County?

Mar 3, 2016

@westcoastq Have you considered doing the Real Estate masters program at USD? I've heard it's pretty well regarded in the region and might be a good entry point into the local market. Not sure if its anything to go by but it featured recently in a Bisnow article on "The 5 Top West Coast Real Estate Grad Programs."

I'm actually looking into the course myself for 2016-2017.

Best Response
Mar 3, 2016

I took Professor Tu's Argus class last year at USD. I know tons of USD and MSRE grads down here. Of course the contacts help, but I know MSRE guys the spent a good year+ looking for that first analyst role. However, as you search through "team" pages on local institutions websites, you'll see two things...lots of USD Grads, some with MSRE and lots of SDSU Business grads. Despite SDSU's rep, it has a rather popular and widely respected business program.

    • 2
Mar 3, 2016

@oweeny1000 appreciate the heads up on that program in SD. definitely agree that would be a good way to toe into the market but I already have a MRE degree from a good east coast program, so probably not my best personal option.

Based on the challenges of job searching and securing interviews from 2,000 miles away, I would not be surprised if I have to try and lay some networking ground work from the east coast and move out to SoCal without a next gig lined up. That kind of sucks but indicates a commitment to the market instead of being that guy from the east coast that is thinking about moving. I also imagine I would have to take a significant pay cut as an out of market guy with less local market knowledge value.

Still interested in learning about the knock on LA if anyone has thoughts.

Mar 3, 2016
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Mar 3, 2016