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As we look to the dawn of the second decade of the 21st century it is an opportune time to reflect on the appropriate stewardship of land use and how it impacts our economy.
The lack of almost any private sector investment in land use over the past three or four years gives us the opportunity to act during the market lull. At present, aside from an extremely anemic residential sector, development and land use planning and investment have come to a dead stall.
While this was led in large part by the capital markets meltdown, a more important issue to examine is the fundamental change that is coming in how new economic conditions will profoundly affect land use patterns over the next few decades.
First and foremost are our plan updates. In the city and county of San Diego, we formally call these Community Plan Updates. In other jurisdictions they have different names but in all cases the intent is the same: to provide planning guidelines to direct growth. The ability of static land-use documents to accommodate, much less predict, the future is limited in the best of times. Regrettably the time, money, and political capital required for local agencies to generate and approve long-range planning goals and policies frequently dooms these documents to being retrospective rather than prospective tools.
This was heightened at the peak of the last market when seemingly unlimited growth and free capital would have caused land use shifts more profound than were realistic. The bottom line in how we use land is changing but maybe not as much as some policy documents forecast. In other cases, newly enacted policy is already out of date.
A great example of this is our more suburban jurisdictions that have modeled land use planning based on downtown San Diego/East Village density concepts that contemplate at least 40 units per acre and a variety of vertically mixed uses.
While appropriate in highly urbanized areas, such a leap of density does not make economic or demographic sense in an older community characterized by single-family homes at six units per acre. Such proposed densities simply do not conform to the mindset of the residents who live there.
Another example of this is the myth we have perpetuated that every rail stop requires a five-story mixed use development around it. While that certainly works in downtown San Diego, Mission Valley and similar areas, it may not work in San Ysidro or within the SR-78 Corridor.
Now is a good time to better calibrate land use planning with economic reality. Ideally this is done via formal planning legislation that would create and implement highly flexible planning documents. But in a more nimble and entrepreneurial jurisdiction this may be a function of interpretation. Those jurisdictions which can interpret their codes and provide timely solutions (i.e., without static CEQA requirements that may take years to work through) will prove to be the winners.
While private sector development may currently be dormant, when private sector investment and development wake up, we offer the following warning: Fasten your seat belts, as we will have rapid growth due to years of pent-up demand.
We suggest that at that time land use trends will be very different and we should be rethinking the best ways to use our limited land resources now so that we are ready for the next wave of development. The San Diego of 2020 and 2030 will realistically look a lot like the San Diego of 2010 but the uses — economically and demographically — are likely to be quite different. The repurposing of land and the built environment is in order. This requires a very progressive look at emerging trends in office, housing, and retail.
Historically, San Diego was a Navy town with a blue-collar manufacturing base. The Navy is invested in the long run but manufacturing as we knew it is gone and will more than likely not return. Any remaining heavy manufacturing cannot compete in the global market. We absolutely will have some assembly and manufacturing but only for high value items requiring skilled labor. This will be especially true of our pharma and life science industries. We will excel at the creative side of product development, but the mass manufacturing side of these innovations will move elsewhere.
Conversely, the temptation to convert our industrially designated lands to some other use should be viewed with great caution. Industrial land does not do well if it is chopped into small islands. We must provide for the large and viable industrial areas that exist in places like Torrey Mesa, Sorrento Valley, East Otay Mesa, and the like. These areas of innovation will lead job and economic growth into the next few decades.
Our toughest decision may relate to office uses. Even if we assume zero job growth, firms who have stable employment will use less space due to technology and changing office use trends. The questions are:
- What do we do with areas that may have excessive office zoning?
- What do we do with functionally obsolete office buildings that are not well located for office redevelopment?
The primary goal should be to determine what other job creating land use can be repurposed there. Should that fail, local agencies need to allow owners and developers flexibility to address the changing market.
Virtually every year for the past century our region has enjoyed an increase in population. In decades past this was a result of in-migration. Most San Diegans were born elsewhere. Growth now has become a function of natural increase. Either way, the result is the same. Demand for housing will not abate. This will be further fueled by literally decades of under-supply of housing resulting from people “doubling up,” moving north and east to find more affordable housing options, or simply not building enough housing to meet the demand.
What will be different is that due to both demographic changes and the lack of raw land, most new housing will be attached. Very little of this will look like downtown San Diego with high rises. Housing will, however, be more similar to Mission Valley, North Park, or the long list of well-built attached condos and apartments constructed over the past decade.
This leads to a fundamental land use challenge — retail. We seem to have two trends that are pulling in very opposite directions.
Nationally retail is becoming far more “efficient”: retailers can sell more but use less retail space. This is a function of both high volume retailers like Walmart, Costco, etc. as well as online sales.
Conversely, most recently prepared planning documents have a strong focus on mixed-use development. That implies that most new residential development must include some ground-floor retail. Regrettably, much of that demand is driven by policy makers, not from actual retail shoppers. Thus, much retail space sits vacant. What this space becomes needs to be evaluated.
Officially we have retail vacancy rates of 2 to 3 percent in the county. But that is a misleading figure — it only accounts for the space in formal shopping centers. Much of our retail space is in small shop space in unanchored strip centers that are not considered when evaluating vacancy. This vacant or highly underperforming space needs to be converted to other uses. The market should decide what this is, but planning flexibility should allow these areas to convert to residential, light industrial, or other uses that better serve the local economy.
These shifts imply that now is the right time to progressively engage, plan for, and prepare so that when the private sector finds capital and when the public sector plans for the next decades there is an alignment of goals.
This year, 2011, is likely to be the year when we begin to see the land use deep freeze begin a long and slow thawing out period. It will be important for our regulatory agencies to be able to respond to a shifting market — one which may or may not resemble the future that had been planned for by a prior period’s forecasts. Recognizing that planning documents are but a snapshot in time is a first step towards effective land use planning — if there is a word land use professionals should focus on in the next year, it is nimbleness.
Tony Pauker is past chairman and Mary Lydon is the executive director of the Urban Land Institute San Diego/Tijuana District Council.