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Thursday, Jan. 11, 2007 | Next to a couple of the county’s major freeways and minutes from downtown San Diego, the border and the ocean, National City may be the obvious next big thing for local real estate development, especially after a countywide housing boom that proved a boon for urban, dense housing. The city is sandwiched between two areas — San Diego’s downtown and surrounding neighborhoods, and Chula Vista — that saw skyrocketing production and soaring prices for several years at the beginning of the decade.
But that boom is, by most accounts, over. Demand for new housing isn’t what it was a few years ago. And still, more than 4,000 new condo units are slated for the community, with developers hoping to metamorphose National City’s downtown and help the city catch up to the rest of the county. In 2000, there were about 15,400 total units in National City — and only 5,250 of them were owner-occupied, not rentals.
Though there’s no telling how long the tougher conditions will last, developers are, for the most part, still optimistic about their plans to build in the South Bay city.
“It’s a sleeping giant in San Diego County,” said Eugene Marchese, a developer with more than 300 condo units planned in the city. “All around it has happened and National City has kind of been left out. It didn’t have the first development, and so it didn’t get the second, third or fourth, either.”
Indeed, downtown San Diego’s condo market boomed, adding roughly 5,000 units between 2001 and 2006. Other new construction, many planned communities of new detached homes and townhouses, popped up around the county. Now, dropping sales rates and prices, combined with rising construction costs, have raised sizable roadblocks for developers. Local economists predict a decline in construction and other real-estate-related employment, one that could have significant negative impacts in the region. And so, these plans for National City seem an effort on the part of the development community to get back into the groove of profitable development.
Developers eye National City like it’s one of the last developable places in the county. But it’s hardly open land. Its main road, National City Boulevard, is currently filled with door-to-door auto sales and repair shops, and mom-and-pop stores. The development that buds, if it comes to fruition, would transform downtown National City into a trendy urban hotspot.
“For the new projects, the consumer will inevitably be younger, more affluent — people that have a connection in terms of their work to coastal and urban San Diego,” said Gary London of London Group Realty Advisors, who has worked with several of the developers on their National City strategies. “The rub only is that it’s going to take longer for this to play out than the development companies seem to think.”
National City recently passed a sales tax increase to cover what officials describe as a structurally deficient budget. The sales tax sunsets in a decade, and officials have been busy working to attract development to the South Bay city. Part of the effort to bring new businesses and building to the city has extended to professional sports, as city officials have been engaged with the Chargers regarding the construction of a new football stadium since last year.
While San Diego’s economy has become real-estate centric, National City has long supported itself in other ways, with a workforce employed on ships, at auto businesses and in the military. Now, developers in National City consider themselves pioneers, venturing into a neighborhood that has been overlooked for years. And while the scope and schedule of the developments remain to be seen, at least two of the projects will break ground in the next few months.
One 75-unit, mixed-use development, Harbor View Condominiums, laid its first layer of concrete last weekend. Near the intersection of 8th Street and D Avenue, it’s the first project to break ground under the city’s blueprint for downtown development that was approved in 2005. The plan sketches a vision of two of National City’s main roads as a developed, walkable, urban center, and it calls for more than 5.8 million square feet of residential living space. Government officials, developers and even many residents laud these plans, hoping National City can be revitalized from an industrial, working-class community.
Concerns persist locally about the metamorphosis. For one, the construction cocoon that would transform the place has been promised for a long time, and many locals say they’ve seen no delivery on that promise. One car dealership has had a “Coming Soon” sign for a condo development in its parking lot for a few years.
Others worry about what the city will look like. Current residents could easily be priced out of the new condos, they say. The least expensive so far is a $185,000 starting price for a one-bedroom unit in the BayView Tower, a former hotel.
Other plans widen the price range — from $229,000 to prices that could reach beyond $1 million in the coming years. Units released in future phases will be subject to future prices for construction labor and materials, and those costs are on the rise.
And so, it seems, the households that could afford most of these new units would be considerably wealthier than National City’s current residents. The most recently estimated median household income for National City is nearly $20,000 less — $33,625 — than that for the county, according to SANDAG figures.
Of the city’s 54,000-plus residents, nearly 60 percent are Latino, according to the 2000 Census — more than double the share of Latinos in the entire county. The city’s residents don’t, for the most part, own their own homes. The Census data shows 65 percent of the city’s 15,000-some housing units are rental units.
“There’s likely to be a demographic sea change as these units are developed,” London said. “Residential development is in its infancy.”
Marchese and his Constellation Property Group have plans for three adjacent projects, called Centro, Revolution 1 and Revolution 2. The first to be constructed will probably be Centro, Marchese said, and he hopes to break ground on that this summer.
“We’ll be one of the first,” he said. “And then the ‘me, too’ mentality will really take off.”
Marchese said funding is tricky to come by when an area has seen relatively little development activity. As soon as a few of the projects take off, he said, banks and other backers will start recognizing National City as a legitimate, profitable location for development.
“It has, potentially, the most going for it,” Marchese said. “It sits between downtown and the Mile of Cars — commercial activity. And it really has been left out in the boom.”
But London said the slowing in the county’s housing market has already and will continue to affect the timing of several of the projects.
Recently-elected National City Mayor Ron Morrison said the tough market conditions will “separate the wheat from the chaff” for the developers who really want to help redevelop the city.
“True developers know there’s always a four-to-five year lag, and they plan for that,” he said. “Those who are getting all upset about what today’s market is — they’re more speculators.”
Perhaps one of the most ambitious plans on the table is the Green Village proposed by Josh Knoefler, a four-and-a-half block project that would include as many as 1,100 residential units and would be built to be sustainable, with alternative energy sources and recycled water. Knoefler said the project is in the beginning stages of the permit process, and he imagines it could take as long as a decade before all of the phases are complete. Thus, the immediate conditions in the market don’t worry him, he said.
“We are not concerned about real estate in Southern California, in San Diego,” he said. “We expect the development could coincide with the next real estate boom in San Diego.”
Morrison said creating a downtown in National City will be easier than the redevelopment of downtown San Diego because of less political resistance.
“It’s basically a scrape design, a whole new design,” Morrison said of the downtown.
But that blank slate may still prove difficult for the city, London said, as developers have to plan based on “on-paper” amenities.
“Chula Vista already has a walkable, interesting, cute downtown,” London said of National City’s South Bay neighbor. “National City doesn’t have that. That makes their job infinitely more challenging.”
The Mile of Cars and automobile service businesses currently near the city’s downtown have been a significant sector in its economy. But for the car businesses near the newly redone municipal buildings on two future “Main Streets,” National City Boulevard and 8th Street, residential development threatens their existence.
Kirk Verner and Joseph Knight work for the Auto Spot on National City Boulevard between 11th and E. Plaza Boulevard, just a block away from the Revolution and Centro development site. Verner, an Imperial Beach resident, and Knight, from Chula Vista, say they’d be surprised if the development happens anytime soon.
“You know, in the back of [the developers’] minds, they’re thinking, ‘This is not the right place and it’s not the right time,’” Verner said.
“I can’t justify high-rise condos without a sustainable local economy,” he continued. “The car business has been National City’s backbone for a long time, and they want to get rid of a bunch of it.”
Verner said he’s worked in National City for more than 15 years and, in that time, has seen it change from a middle-class neighborhood, to a working-class one, and now, he said, to a place most people go just for work, not to live.
“From [Interstate] 15 down, the money’s not here anymore,” Verner said.
“[The residents] won’t be able to afford these condos,” Knight said. “There’s no local draw.”
Brad Raulston, executive director of the National City Community Development Commission, said the cheaper land in National City could help lower prices. Raulston formerly worked for local real estate developer Doug Manchester and has been at his current post for four months. The city, he said, hopes to add services and amenities to add value to the condos, such as the new library across the street from one of the proposed developments.
“I, personally, like having a library and an arts center within walking distance, and I’m willing to pay an extra ‘something’ for it,” he said. “It’s an important time to establish a value.”
Marchese said he likes being on the cusp of gentrifying communities.
“It’s about pioneering,” he said.
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