After a 13-year fight, Otay Mesa approved a new community plan in 2014 – but the debate over how to use hundreds of acres near the border is still raging.
On one side is developers who want to see the land used for new homes to address a regional housing shortage; on the other, business groups that believe it should be industrial land to create jobs.
The Otay Mesa Chamber of Commerce is in the latter group. It wants the area just north of the Mexican border to become an expanse of industrial businesses – filling a regional need for spaces for the messy activities like manufacturing that people don’t want near their homes but that provide good-paying, middle-class jobs. But it isn’t that easy.
For one, the county perpetually needs more housing. And residential development contributes more to infrastructure costs than industrial development, tipping incentives for neighborhoods with busted streets. And, in the easternmost part of Otay where property values have increased, building industrial space isn’t profitable unless you’ve owned the land for decades.
Rob Hixson, who as chair of the Otay Mesa Community Planning Group spent years listening to the debate, said the community is well aware the region needs industrial space.
“We also have a housing shortage,” Hixson said. “We actually need both.”
The city brought forward a few different options during the lengthy community plan update process. The final version approved in 2014 included two new “residential villages” – a third was cut in the eastern part of the community to appease those who wanted more industrial area.
But current housing proposals – one that would create one of the two villages, plus a developer proposal to put a mix of homes and retail space farther east – continue to come under fire from those who think Otay should be reserved for industrial space.
Otay saw little development until the 1980s, when the border crossing opened. As the North American Free Trade Agreement expanded cross-border trade in the 1990s and SANDAG built highways like the 805, 905 and now SR-11, manufacturers, warehouses and businesses popped up.
Developers built some homes in the westernmost part of Otay. But few people live farther east, allowing heavy industry to open there without facing environmental justice concerns, or competing with tourism and recreation along the coastline, like in National City and Barrio Logan.
“It’s like the city of industry,” said developer David Wick of Otay Mesa. Wick and his partner, presidential candidate Roque de la Fuente, own property throughout Otay.
Places like Kearney Mesa and Scripps Ranch traditionally housed lots of industry, but as they added homes, developable land for industry became scarce, cementing Otay as the place for manufacturing, warehouses, offices and salvage yards.
“Otay right now is in the tightest industrial position that it’s ever been,” said Andy Irwin, senior vice president of Murphy Development, which has built many industrial units in Otay and throughout the county. “Demand has been very strong.”
Otay may be primed for an industrial development boom, but it’s not quite happening yet. Murphy Development has built and sold several properties and is currently constructing another.
But there’s little other current construction. Murphy Development has a unique advantage because it purchased property in the 1990s, when environmental mitigation and land were cheaper. Now it just has to pay construction costs.
Land is expensive. Complying with environmental regulations and paying for mitigation for endangered species, like the burrowing owl, is expensive. Construction costs are expensive.
But industrial rents aren’t as high, and don’t increase as fast, as residential space. Developers have a tougher time recouping development costs.
These are especially high hurdles on the county-run side of Otay Mesa, where there’s a prison, an immigration detention facility, a shooting range and lots of undeveloped, sprawling hills.
“Sometimes it’s easier to sell Otay in this conference room than driving around Otay,” Wick said, from a conference room in his truck stop in Otay.
Wick said industrial rents need to increase for new projects to break even. Then, industrial development in Otay will surge.
It’s all leading residential development to creep eastward. The two mixed-use villages in the city’s community plan update were meant to support industrial development; development fees for the Central Village, the easternmost residential village in the plan, are set to go to infrastructure that industrial development doesn’t provide.
That village is expected to include more than 4,000 homes and commercial development on 230 acres, though the final plan hasn’t been approved yet. The developer, ColRich, is paying the costs of writing the plan, though there are 30 different landowners in the area.
Outside the city of San Diego but still in Otay Mesa, where the county governs development, developers are even likelier to build homes where planners had intended to put industrial job centers.
Though residential developers also have to pay for costly environmental mitigation, residential development is more lucrative than industrial development, so the added costs shift developer incentives.
SunRoad Enterprises is trying to rezone its property in the county portion of Otay, from industrial to a mix of residential and commercial. SunRoad hasn’t responded to several requests for comment.
“We are always working to find the right balance between housing and uses that create jobs for local residents,” said County Supervisor Greg Cox, who represents Otay. “A lot of that, however, is driven by market forces and what developers and property owners will propose.”
Some industrial developers working in Otay, like Irwin and Wick, think the gradual shift to building homes instead of industrial space is a good thing.
“Any development is good,” Wicks said.
New residential development will improve Otay’s infrastructure and make it more appealing for industrial opportunities, he said.
Others aren’t so sure.
Alejandra Mier y Teran, executive director of the Otay Mesa Chamber of Commerce, has concerns over the Central Village and SunRoad’s proposal.
Residential developments improve infrastructure because neighboring residents demand it. In this part of Otay, Mier y Teran said, there aren’t neighbors to make those demands.
Mier y Teran also said an air-quality study would need to be done to make way for homes.
“We have an environmental justice issue,” she said.
The Central Village will be surrounded by industrial space, including a cement factory and food manufacturing and warehouses – the type of businesses zoning is meant to keep away from homes.
Linda Greenberg, an industrial real estate broker, is concerned as residential development moves east it’ll slowly edge out industry.
For example, she said, the industrial development around Central Village has to physically move its buildings farther away from neighboring property lines than it would if it was next to other industrial development.
Rita Mahoney, director of planning and land development at ColRich, was surprised to still hear these concerns.
The community debated industry versus residential development endlessly during the update process, she said. That’s why one residential community was cut from the plan.
Stakeholders also decided fees for new homes would improve roads, sewage facilities and other infrastructure, which would support industrial growth.
“It’s long been planned for,” she said.