HomeMy WebLinkAboutStaff ReportCITY OF NATIONAL CITY, CALIFORNIA
COUNCIL AGENDA STATEMENT
MEETING DATE: January 10, 2012
AGENDA ITEM NO.
ITEM TITLE:
Presentation on the Marina District joint planning process with the Port and authorizing staff to work
jointly with the Port District to issue a Request for Qualifications (RFQ) from parties interested in
developing the Marina District.
PREPARED BY: Raymond Pe, Principal Planne DEPARTMENT: Dev
PHONE:.336-4421
APPROVED BY:
EXPLANATION:
The San Diego Unified Port District and the City have jointly undertaken a land use planning study for
an area within the National City Marina District. The study area is generally bounded by Bay Marina
Drive to the north, Marina Way and Paradise Marsh to the east, the Sweetwater River flood control
channel to the south, and Tidelands Avenue to the west. The Port has land use authority over
approximately two-thirds of the defined study area; the City has authority over the remaining area. The
study analyzes the development potential in the study area, recommends a preferred land use
alternative for future development, and addresses the implementation of the preferred alternative. The
recommended preferred alternative proposes that some of the industrial designated lands in the study
area be converted to commercial land uses.
The background report, the study, and a market analysis are attached.
FINANCIAL STATEMENT:
ACCOUNT NO. Not Applicable
ENVIRONMENTAL REVIEW:
Not Applicable
ORDINANCE: INTRODUCTION:
FINAL ADOPTION:
APPROVED:
APPROVED:
Finance
MIS
STAFF RECOMMENDATION:
1. Accept and file the Marina District Planning Study.
2. Direct staff to work with the Port to develop an RFP for the implementation of the study recommendations and
development of the study area with flexibility to consider phasing or portions of the study area.
3. Direct staff to work with the Port on the development of parks and supporting facilities on the B-1 and B-3
parcels pursuant to the Harbor District Specific Area Plan and the approved Port CIP.
4. Direct City staff to consider the feasibility of relocating Granger Music Hall to a location within the study area.
BOARD / COMMISSION RECOMMENDATION:
Not Applicable
ATTACHMENTS:
1. Background Report
2. Marina District Vision Plan (Available in City Clerk' s Office)
3. Market Analysis (Available in City Clerk's Office)
ATTACHMENT 1
BACKGROUND REPORT
Background
There have been significant cooperative efforts between the San Diego Unified Port District (Port) and the City
in planning, funding, and building a variety of projects within the study area including Pepper Park, Pier 32
Marina, the Marina Gateway development, the Rail Depot, Railcar Plaza, construction of Marina Way,
improvements to Bay Marina Drive, and the new Aquatic Center. The Port and City have expended or
allocated nearly $32 Million for projects in the Harbor District area. This figure includes nearly $9 Million from
the CDC and $15 Million from the Port for completed projects. Current projects include $575,571 from the
CDC and $979,693 from the Port. Future projects have been allocated over $3.4 Million from the CDC and $3
Million from the Port. The implementation of the preferred alternative would compliment the ongoing efforts of
the Port and City to redevelop the study area to increase visitor -serving commercial uses and public access to
the waterfront while defining the land use transition between commercial and industrial areas.
In October 2010, the Port and the City agreed to jointly undertake a land use planning study for an
approximately 98-acre area within the National City Marina District. The City contributed funds to cover one-
third of the costs of the study. The study area is generally bounded by Bay Marina Drive to the north, Marina
Way and Paradise Marsh to the east, the Sweetwater River flood control channel to the south, and Tidelands
Avenue to the west. The Port has land use authority over approximately two-thirds of the defined study area;
the City has authority over the remaining area. The Port and City subsequently prepared a request for
proposals (RFP) for the study and issued the RFP in December 2010. Four consulting firms submitted
proposals in response in January 2011. The Port and City interviewed and evaluated the firms, selected the
preferred firm of Project Design Consultants (PDC), and conducted agreement negotiations with PDC. The
Port and City entered into a three -party agreement with PDC in May 2011.
The planning study began in March 2011 with a meeting to establish the study approach and to refine the
consultant's proposed scope of work. In March, data needs were assembled, stakeholders were identified,
and site visits/surveys were conducted. Between April and June, the consultant interviewed stakeholders. On
May 4, the first public workshop provided the public with an overview of the study objectives and solicited input
on issues, opportunities, constraints, and desirable land uses for the study area. On June 15, the second
public workshop introduced conceptual land use alternatives developed by the consultant based on public and
stakeholder comments, and a preference survey was conducted. On October 5, the third public workshop
presented the results of the public input, which included the survey results, workshop comments, and
correspondence received. The fourth public workshop was held on December 7, during which the preferred
land use alternative was presented. The public workshops were well -attended by a diverse range of
stakeholders including Port tenants, BNSF Railroad, the Environmental Health Coalition, outside agencies,
potential developers, and representatives of adjacent jurisdictions.
Study Summary
One of the major principles underlying the implementation of the vision plan is that there will be no net loss of
maritime industrial lands. This principle holds that for maritime industrial lands to be converted to non -maritime
uses, an equivalent replacement must be designated to maritime industrial to offset the change. For example,
if the National Distribution Center was to be redeveloped for commercial use, the same amount of non -
maritime industrial land would need to be designated for maritime industrial use.
The planning study analyzes the development potential in the study area (including a market study),
recommends a preferred vision for future land use development, and addresses the means for implementation
of the preferred land use alternative. The basis for the development of the preferred alternative included the
following objectives:
• Protect maritime uses
• Enhance the working waterfront
Attachment 1 — Background Report Page 1 of 2
• Increase public access to the waterfront
• Provide additional public amenities
• Establish additional visitor -serving uses
• Ensure compatibility of adjacent and transitional land uses
• Solicit public and stakeholder input to assist in the design of the plan
• Comply with environmental regulations and protect coastal resources
• Develop a plan that is financially feasible and provides a fiscal benefit to both the Port and the City
The resulting preferred land use alternative is a vision plan for the study area that generally recommends the
conversion of some industrial land use to commercial land use. These areas include portions of the blocks
north of Bay Marina Drive, the National Distribution Center (including San Diego County Child Protective
Services), and an area north of 32nd Street and east of Tidelands Avenue. However, any loss of maritime
industrial lands would be replaced.
The preferred alternative proposes the realignment of Tidelands Avenue to the area along the existing railroad
line west of the National Distribution Center. This realignment would serve to provide access to the adjacent
parcel for future potential development and would also serve to delineate the separation of industrial and
commercial land uses. A portion of Marina Way is also proposed for realignment to improve the ability to
develop adjacent parcels.
Three potential park sites are also proposed in the preferred alternative. One location north of Pepper Park
and the boat launch would allow for the expansion of Pepper Park. The other two locations are areas within
the existing Harbor District Specific Area Plan; these sites are already designated for park development in the
specific plan. One of these is located along Marina Way adjacent to Paradise Marsh on what is designated as
the B-1 parcel; the other is located near the southeast corner of the marina adjacent to Paradise Marsh on the
B-3 parcel.
Analysis
The preferred alternative would improve several undesirable land use conditions in the study area. Many of
the existing parcels in the area are odd -shaped, divided, incompatible with adjacent uses, or otherwise
constrained for development. The preferred alternative would result in more developable land areas, improve
buffering and delineation between land uses, and create a more substantial footprint for comprehensive
commercial development. In addition, the principal of no net loss of maritime industrial lands would insure the
continued protection of maritime uses.
The planning study/vision plan is intended to inform the Port and City of the potential for future land use
development in the study area. The study recommendations are not binding and require considerable
discretionary entitlements in order to implement the preferred alternatives. These are further complicated by
inter -jurisdictional land use authority as well as permit and discretionary authority of various other agencies,
particularly the California Coastal Commission and State Lands Commission. Furthermore, development of
the preferred land use alternative will ultimately be determined by market forces.
Recommendation
To further the implementation of the preferred land use alternative, staff recommends that Council:
1. Accept and file the Marina District Planning Study.
2. Direct staff to work with the Port to develop an RFP for the implementation of the study recommendations
and development of the study area with flexibility to consider phasing or portions of the study area.
3. Direct staff to work with the Port on the development of parks and supporting facilities on the B-1 and B-3
parcels pursuant to the Harbor District Specific Area Plan and the approved Port CIP.
4. Direct City staff to consider the feasibility of relocating Granger Music Hall to a location within the study
area.
Attachment 1 — Background Report Page 2 of 2
r
National City Bayfront
Marina District Vision Plan
National City, California
December 2011
Prepared For:
San Diego Unified Port District and City of National City
Prepared By:
PROJECT DESIGN CONSULTANTS
Planning I Landscape Architecture I Environmental I Engineering I Survey
Job No. 3887
Prepared By: CP
Checked By: CM
701 B Street, Suite 800
San Diego, CA 92101
619-235-6471
619234.0349 Fax
National City Bayfront Marina District Vision Plan
TABLE OF CONTENTS
1.0 INTRODUCTION 1
1.1 Vision Plan Study Area 1
1.2 Objectives 1
2.0 EXISTING CONDITIONS 1
3.0 PUBLIC OUTREACH AND PARTICIPATION 8
3.1 Noticing 8
3.2 Stakeholder Interviews 8
3.3 Public Workshops 8
3.4 Additional Comments 9
4.0 LAND USE ALTERNATIVES 9
4.1 Alternative A 9
4.2 Alternative B 11
4.3 Alternative C 13
4.4 Comparison of the Three Alternatives 15
5.0 PREFERRED ALTERNATIVE 18
6.0 LAND USE REGULATIONS AND DEVELOPMENT STANDARDS 22
6.1 San Diego Unified Port District 22
6.2 City of National City 22
6.3 Environmental Buffers 23
6.4 Land Use Transitions 23
7.0 IMPLEMENTATION PLAN 23
7.1 City of National City 23
7.1.1 General PlanAmendment 23
7.1.2 Harbor District Specific Area Plan (HDSAP) Amendment 24
7.1.3 Land Use Code and Official Zoning Map Amendment 24
7.1.4 Local Coastal Program (LCP) Amendment 24
7.2 San Diego Unified Port District 24
7.2.1 Port Master Plan 24
7.3 State Approvals 25
December 2011 i
National City Bayfront Marina District Vision Plan
LIST OF TABLES
Table 1, Alternative A 9
Table 2, Alternative B 11
Table 3, Alternative C 13
Table 4, Land Use Comparison 15
Table 5, Land Use Alternative Attributes 16
Table 6, Preferred Alternative 19
LIST OF FIGURES
Figure 1, Planning Area Boundary 2
Figure 2, Existing Land Uses 3
Figure 3, Existing Planning Documents 5
Figure 4, Existing Conditions 7
Figure 5, Alternative A 10
Figure 6, Alternative B 12
Figure 7, Alternative C 14
Figure 8, Preferred Alternative 20
Figure 9, Areas of Change 21
December 2011 ii
National City Bayfront Marina District Vision Plan
1.0 INTRODUCTION
1.1 Vision Plan Study Area
This vision plan is a cooperative effort between the San Diego Unified Port District and
the City of National City to develop a vision that may further enhance the Marina District
area of the National City bayfront (see Figure 1, Vision Plan Boundary). The study area
for this vision plan is generally bounded by Paradise Marsh, Marina Way, and Interstate 5
on the east; 22nd Street, 23rd Street, and Bay Marina Drive on the north; Tidelands
Avenue on the west; and the Sweetwater River Flood Control Channel on the south. This
area totals approximately 108 acres.
1.2 Objectives
The purpose of this study is to analyze the development and redevelopment potential of
the Marina District and identify opportunities to compliment and draw from the successes
of the recently completed Pier 32 Marina and Sycuan/MRW Marina Gateway hotel,
restaurant, and commercial development, while protecting adjacent maritime industrial
uses. Specifically, the objectives of this study are to:
• Protect maritime uses.
• Enhance the working waterfront.
• Increase public access to the waterfront.
• Provide additional public amenities.
• Establish additional visitor -serving uses.
• Consider compatibility of adjacent and transitional land uses.
• Solicit public and stakeholder input to assist in the design of the plan.
• Comply with environmental regulations and protect coastal resources.
• Develop a plan that is financially feasible and provides a fiscal benefit to both
the Port and the City.
2.0 EXISTING CONDITIONS
Currently, roughly 20% of the study area is designated for medium industrial uses and
35% of the site is designated for maritime industrial uses. Approximately 40% of the site
is designated for commercial use, but much of this commercial -designated land is used
for industrial purposes. Pepper Park constitutes approximately 5% of the site (Refer to
Figure 2, Existing Land Use).
December 2011 1
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Figure 2 - Existing Land Uses
Not To Scale
National City Bayfront Marina District Vision Plan
The San Diego Unified Port District manages the land west of the mean high tide line, the
National Distribution Center, and the Pier 32 Marina. This land is currently located
within the Port Master Plan. In addition, the Port District owns the properties identified as
B-1 and B-2 within the Harbor District Specific Area Plan (HDSAP). The HDSAP also
encompasses the existing Marina Gateway development, a railroad owned by the San
Diego and Arizona Eastern Railway, and land owned by San Diego Gas and Electric. The
remainder of the study area is under the jurisdiction of the City of National City, but lies
outside the boundaries of the HDSAP (refer to Figure 3, Jurisdictional Map).
Over the years, there has been significant cooperation between the City of National City
and the San Diego Unified Port District in terms of planning, implementing, and funding
a variety of projects within the study area including Pepper Park, Pier 32, the Marina
Gateway development, improvements along Marina Way and Bay Marina Drive, and a
new aquatic center. To compliment these efforts, there is a strong desire to study the
potential of redesignating portions of the study area from an industrial use to a
commercial use.
There are multiple challenges involved in developing the site with new uses, including:
• There are several successful maritime industrial uses currently located within the
study area and it is a vision plan objective to protect and enhance those uses. Any
time maritime industrial land within the Port jurisdiction is designated for a different
non -maritime industrial land use, an area equivalent to the re -designated land must be
established elsewhere for maritime industrial use.
• The San Diego Unified Port District has several leases with existing tenants which
cannot be terminated.
• There are several railroad spurs that run through the project site, which are utilized
for industrial purposes.
• Significant buffers and setbacks are required from Paradise Marsh, which is located
along the eastern boundary of the planning area.
• SDG&E owns land just to the east of the marina, which is occupied by electrical
transmission towers. SDG&E requires that this area remain unimpeded by other uses.
• The alignment of Marina Way creates an odd triangular -shaped parcel (Subarea B-1
of the HDSAP) that is difficult to develop due to its proximity to Paradise Marsh on
its eastern boundary (and the associated habitat buffers that must be maintained) and
Marina Way on its western boundary.
• Issues of compatibility between industrial, commercial, and recreational uses will
need to be evaluated.
December 2011 4
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Figure 3 - Existing Planning Documents
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National City Bayfront Marina District Vision Plan
Despite these challenges, there are also features of the study area that make the site
desirable for additional commercial/visitor serving uses including:
■ The establishment of the Sycuan/MRW Marina Gateway hotel and restaurant
development and the Pier 32 Marina, which have both been successful.
■ The existing Bayshore Bikeway that runs adjacent to the marina and is planned to be
continued along Tidelands Avenue north to San Diego.
■ The historic ties to the National City Depot and the Railcar Plaza.
■ Substantial effort has been made for many years by the San Diego Electric Railway
Association (SDERA) to establish a vintage trolley service on the tracks that run
along Marina Way providing tourists and residents easy direct access between all the
regional public assets along the Bayfront, including the Salt Works, commercial and
recreational facilities such as the Marina, and the Wetlands Preserves.
■ Views of Paradise Marsh and the Marina/Sweetwater Channel.
■ There is an opportunity to enhance and increase public access to the waterfront.
■ A new aquatic center is being located at Pepper Park.
■ Funding has been designated for public improvements including a new commercial
recreational area that may feature both parkland and visitor -serving commercial uses.
Refer to Figure 4, Existing Conditions, for an exhibit illustrating the above characteristics
of the project site.
December 2011 6
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Unif led Port
of Son Diego
oAE DISE MARSH
Figure 4 - Existing Conditions Map
Not To Scale W'n
National City Bayfront Marina District Vision Plan
3.0 PUBLIC OUTREACH AND PARTICIPATION
A public outreach and participation program was undertaken to solicit public input on the
issues, opportunities, constraints, and desirable land uses for the vision plan.
3.1 Noticing
Owners and tenants within the study area and within 300 feet of the study area were
mailed a notice identifying the intent of the vision plan and the dates, times, and location
of the scheduled public meetings. An article regarding the vision plan and public
workshops was posted on the Port District's website and ads were published in the Union
Tribune.
3.2 Stakeholder Interviews
An extensive list of stakeholders was provided by the Port District and the City of
National City identifying property owners and businesses within and adjacent to the study
area, Port tenants, non-profit organizations, public agencies, and associations. These
stakeholders were contacted and asked to participate in
interviews prior to the first public workshop. Seventeen
stakeholder interviews were conducted.
3.3 Public Workshops
Public workshops were held on May 4th, June 15th, and
October 5th to obtain public input on the vision for the
area. At the May 4th workshop, participants were
provided with an overview of the objectives of the
visioning process and the existing conditions within the
study area. They were asked to provide their ideas for
the future of the area by drawing and making notes on
large scale aerial maps. The input received in that
workshop was utilized to prepare the three preliminary
land use alternatives. At the June 15th workshop, the
three alternatives were summarized, a brief presentation
was given regarding the current and projected
economic outlook for the area, and participants were
asked a series of questions regarding their opinion on
the three alternatives. At the October 5th meeting, the
public input received regarding the three alternatives
was presented. The public feedback was considered in
the development of the preferred alternative, which was
presented to the public on December 7th
December 2011 8
National City Bayfront Marina District Vision Plan
3.4 Additional Comments
Interested parties were also invited to submit comments and input through either the Port
District or the City's websites or through written letters. Several emails and letters were
received, which also were considered when developing a preferred alternative.
4.0 LAND USE ALTERNATIVES
A variety of comments were received from stakeholders and members of the public,
which ranged from not making any changes to the project area to converting the entire
site to commercial and recreational uses. Three alternatives were developed to identify
minimal changes, moderate changes, and large scale changes to the existing land use and
circulation pattern for the study area.
4.1 Alternative A
Alternative A proposes the least amount of change within the study area. Under this
alternative, an area north of Bay Marina Drive, which is currently vacant, would be
changed from an industrial use to a commercial use. In addition, there would be an equal
exchange of commercial uses and maritime industrial uses north of 32nd Street. This
exchange would potentially create parcels that are better shaped for development and
would avoid the need to provide a replacement for maritime industrial uses on Port
District lands. There is also potential to increase parkland in the commercial areas. Refer
to Figure 5. Table 1, below, compares Alternative A to existing conditions.
TABLE 1
Alternative A
Land Use
Approximate Acreage
Existing
Conditions
Alternative A
Commercial
24
28
Industrial (City)
33
29
Maritime
Industrial (Port)
36
36
Total
93
93
December 2011 9
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of San Diego
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Figure 5 - Alternative A
Not To Scale W'n
National City Bayfront Marina District Vision Plan
4.2 Alternative B
Alternative B is a moderate approach to land use changes within the study area that
separates the industrial and commercial uses to minimize their potential impact on each
other. It proposes changing the industrial site north of Bay Marina Drive and a small 1-
acre industrial site between Marina Way and the railroad to a commercial use. It also
proposes to change the site currently occupied by the County of San Diego Child
Protective Services Department to a commercial use. Larger commercial sites would be
created north of 32nd Street and a portion of Marina Way would be realigned to the west.
The realignment of Marina Way would relieve some constraints to developing the
commercial area adjacent to Paradise Marsh creating a parcel configuration more suitable
for development. There is also potential to increase parkland in the commercial areas.
Refer to Figure 6. Under this alternative, maritime industrial land would need to be
replaced. Table 2, below, compares Alternative B to existing conditions.
TABLE 2
Alternative B
Land Use
Approximate Acreage
Existing
Conditions
Alternative B
Commercial
24
42
Industrial (City)
33
27
Maritime
Industrial (Port)
36
24
Total
93
93
December 2011 11
NATIONAL CITY
101.
Unif led Port
of San Diego
Figure 6 - Alternative B
Not To Scale
National City Bayfront Marina District Vision Plan
4.3 Alternative C
This alternative proposes the most significant changes. Tidelands Avenue would shift
east and an industrial site currently used by the National Distribution Center could
potentially become a commercial use. This alignment of Tidelands Avenue would
separate industrial and commercial uses to minimize their potential impact on each other.
The realigned Tidelands Avenue would also provide access to the new commercial use,
which could occupy what is now the National Distribution Center. This alternative also
proposes changing the industrial site north of Bay Marina Drive and a small one acre
industrial site to a commercial use. There is also potential to increase parkland in the
commercial areas. Refer to Figure 7. Under this alternative, maritime industrial land
would need to be replaced. Table 3, below, compares Alternative C to existing
conditions.
TABLE 3
Alternative C
Land Use
Approximate Acreage
Existing
Conditions
Alternative C
Commercial
24
56
Industrial (City)
33
22
Maritime
Industrial (Port)
36
15
Total
93
93
December 2011 13
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Figure 7 - Alternative C
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National City Bayfront Marina District Vision Plan
4.4 Comparison of the Three Alternatives
Table 4, below, identifies the approximate acreages of each land use for the three
alternatives in relation to existing conditions.
TABLE 4
Land Use Comparison
Land Use
Approximate Acreage
Existing
Conditions
Alternative A
Alternative B
Alternative C
Commercial
24
28
42
56
Industrial (City)
33
29
27
22
Maritime
Industrial (Port)
36
36
24
15
Total
93
93
93
93
Table 5, on the following page, identifies the attributes associated with each land use
alternative. Regardless of the degree of change proposed by each alternative,
amendments to the regulatory documents affecting the planning area would be required to
implement any one of the proposals.
December 2011 15
National City Bayfront Marina District Vision Plan
TABLE 5
Land Use Alternative Attributes
Attributes/Requirements for Implementation
A
B
C
Equal swap of maritime industrial and commercial land.
X
Requires the replacement of maritime land.
X
X
Creates more easily developable parcel configurations.
X
X
X
Contributes to more commercial land along the north side of Bay Marina Drive.
X
X
X
Provides more commercial uses along the south side of Bay Marina Drive.
X
X
Long-term leases within the National Distribution Center area makes this a long term plan.
X
X
Realigns Marina Way to create a larger, more usable commercial parcel north of the marina, which
is less constrained by setback requirements from Paradise Marsh.
X
Realignment of Tidelands Avenue may provide additional maritime industrial land in reclaimed
right-of-way.
X
Realignment of Tidelands Avenue provides a barrier between industrial and potential commercial
uses.
X
Requires no road realignments.
X
Requires no change to the Bayshore Bikeway.
X
X
Requires coordination with SANDAG on the relocation/reconstruction of the Bayshore Bikeway.
X
December 2011
16
National City Bayfront Marina District Vision Plan
TABLE 5, Continued
Land Use Alternative Attributes
Attributes/Requirements for Implementation
A
B
C
New railroad crossing required.
X
Potential for incompatible industrial uses adjacent to commercial uses.
X
X
The land east of Marina Way is constrained by setback requirements due to the adjacent Paradise
Marsh and current Marina Way alignment.
X
X
Requires coordination with the railroad/potential land acquisition for the one acre change from
industrial to commercial use within the City's jurisdiction.
X
X
Realignment of Marina Way may result in the need to relocate water, sewer, drainage, and electrical
utilities.
X
Realignment of Tidelands Avenue may result in the need to relocate water, sewer, drainage, and
electrical utilities.
X
Requires an amendment to the Harbor District Specific Area Plan.
X
X
X
Requires a General Plan Amendment/Zone Change.
X
X
X
Requires an amendment to the Port Master Plan.
X
X
X
Requires an amendment to the Local Coastal Program
X
X
X
Requires Coastal Commission approval.
X
X
X
Requires State Lands Commission approval.
X
X
X
Requires changes to lease agreements/easements within the Port jurisdiction.
X
X
X
December 2011
17
National City Bayfront Marina District Vision Plan
5.0 PREFERRED ALTERNATIVE
The preferred alternative is a combination of Alternatives B and C. Refer to Figure 8,
Preferred Alternative. It proposes to realign both Marina Way and Tidelands Avenue,
convert approximately 43 acres from an industrial (approximately 24 acres of which are
maritime industrial) to a commercial use, and expand Pepper Park. The Pepper Park
expansion area is designated commercial to allow for the establishment of
complementary commercial uses, such as food stands, in addition to parkland. Pepper
Park could be expanded by approximately 5 acres. In addition, there are other parks
designated within the Harbor District Specific Area Plan. Under this alternative, maritime
industrial land would need to be replaced. Figure 9, Areas of Change, identifies only the
areas that would change under the preferred alternative.
The preferred alternative is the culmination of a public process that involved several
stakeholders, many of which have differing viewpoints. Several interviews and
workshops were conducted to obtain input and all comments were considered. The
resulting plan satisfies the original objectives of the vision plan and addresses many of
the concerns expressed by those that participated in the process.
• There will be no net loss of maritime industrial uses. Any existing maritime
industrial land that is changed to a commercial use will be replaced.
• The working waterfront will be enhanced as additional development contributes
to more public improvements in the area. There may also be an opportunity to
allow for public viewing of certain working waterfront operations and to provide
educational experiences.
• Public access to the waterfront will be increased through the establishment of
additional parkland.
• The addition of commercially -designated land will allow for additional visitor -
serving uses and public amenities. Uses on Port lands must be water -dependent or
water -related visitor serving consistent with the Public Trust Doctrine.
• The "new" Tidelands Avenue would separate the industrial uses west of that
roadway from the commercial uses east of that roadway, helping to create a buffer
and greater compatibility of adjacent land uses. The proposed land uses also allow
for transitional and compatible development.
• Public and stakeholder input will be a continual part of the process as planning
documents are amended and development plans come forward.
• Environmental analysis will occur as part of the entitlement process to ensure that
environmental regulations are complied with and coastal resources are protected.
• The initial economic analysis indicates that the market and additional demand
will, over time, support the preferred land uses and that the proposed land re-
configurations are better sized to accommodate future development.
Certain provisions would need to be met (e.g. replacement land in the vicinity of the
National City Marine Terminal or Tenth Avenue Marine Terminal identified and
designated for maritime industrial use prior to or concurrently with the commercial re -
designation, new lease negotiations, funding obtained and market demand met, etc.) in
order for the land use changes to occur. These factors make the preferred alternative a
December 2011 18
National City Bayfront Marina District Vision Plan
long-range plan that would likely take several years to implement. Table 6, identifies the
approximate acreages of each land use for the preferred alternative and how it compares
to existing conditions.
TABLE 6
Preferred Alternative
Land Use
Approximate Acreages
Existing Conditions
Preferred Alternative
Commercial
24
67
Industrial (non -maritime)
33
13
Industrial (maritime)
36
13
Total
93
93
December 2011 19
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Figure 8 - Preferred Alternative
Not To Scale W'n
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OM Diego
-
PROPOSEDPREPS OFPOTEIM,ORANGE
FUTURE POTENTIAL ROADWAY PUGNMENT
Figure 9 - Proposed Areas of Potential Change
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Not To Scale 'Op
National City Bayfront Marina District Vision Plan
6.0 LAND USE REGULATIONS AND DEVELOPMENT
STANDARDS
6.1 San Diego Unified Port District
The Port Master Plan is the land use policy document for the physical development of
lands managed by the Port District. The land use designations within the Port Master Plan
that apply to the study area include Marine Related Industrial, Commercial Recreation,
Park/Plaza, and Promenade. Marine related industrial requires sites within close
proximity to water bodies to provide for direct access or linkages to waterborne products,
processes, raw materials, or large volumes of water. General uses for the marine related
industrial area include, but are not limited to, marine terminals, passenger terminals,
railroad switching and spur tracks, cargo handling equipment, berthing facilities,
warehouses, shipping offices, ship building, repair, and maintenance facilities, seafood
processing, canning, and packaging, and marine related support and transportation
facilities. The commercial recreation area generally focuses on visitor -serving uses such
as hotels, restaurants, convention centers, recreational vehicle parks, specialty shopping,
pleasure craft marinas, water dependent educational and recreational program facilities
and activities, and sportsfishing. Park/plaza is a use category that designates landscaped
urban type recreational developments and amenities. Users are generally drawn from the
region, so access to the site links with regional and statewide roadways, bicycle ways,
and mass transit. Recreational facilities frequently associated with parks include public
fishing piers, boat launching ramps, beaches, historic and environmentally interpretive
features, public art, vista areas, scenic roads, bicycle, and pedestrian ways. Promenade
indicates the shoreline public pedestrian promenade -bicycle route system that is
improved with informational signage and other street fixtures, works of art, and seating.
A variety of route locations is encouraged to extend the pedestrian and bike environment
through parks, commercial development, and by the working port areas.
Uses in the area are also guided by the transition zone policy, which aims to insulate and
protect the integrity and environmental health of residential areas and concurrently
preserve the maritime industrial jobs center. The transition zone is comprised of uses
including, but not strictly limited to, office space and greenbelt area adjacent to
residential areas, bordering streets, transit corridors and boulevards, and parking and
high -quality maritime administrative office facilities. In National City, the transition zone
may also include existing industrial areas, existing businesses, and other appropriate land
use designations including retail/commercial businesses, recreational areas, and visitor
serving businesses.
6.2 City of National City
Areas within the City's jurisdiction are governed by the General Plan, Local Coastal
Program, Harbor District Specific Area Plan (HDSAP), and Land Use Code. The HDSAP
identifies the regulations associated with the Tourist Commercial zone for subareas B-1,
B-2, and B-3. Although the HDSAP may be amended to implement the preferred
December 2011 22
National City Bayfront Marina District Vision Plan
alternative, the development standards for these areas are anticipated to be similar to what
they are today. Habitable structures must maintain 200 foot setbacks from the National
Wildlife Refuge Boundary. Public parks are designated at the southern end of B-3 and the
northern end of B-1. In addition, consideration is given to extending a park along the
entire westerly side of subarea B-3. Subarea B-3 may also be used for screened
automobile parking or dry boat storage, but will not contain any structures. Subareas B-1
and B-2 are designated for more intense tourist commercial type development such as a
hotel, restaurants, and boating and marina related support uses. The commercial areas
within the City's jurisdiction but outside of the HDSAP may be integrated into the
HDSAP in the future and be designated Tourist Commercial or be governed by one of the
City's commercial zones.
6.3 Environmental Buffers
Setbacks are required from Paradise Marsh and may impact future development of
Subarea B within the HDSAP. Approved plant species for habitat buffer areas are
identified in the HDSAP.
6.4 Land Use Transitions
In the preferred alternative, the movement of Tidelands Avenue to the east provides a
buffer between industrial and commercial uses. Additional consideration should be given
to screening industrial uses from commercial uses as the area is developed or
redeveloped. If Tidelands Avenue is not realigned, additional transitions/buffers should
be implemented in order to avoid potential negative impacts between commercial and
industrial uses. Such transitions/buffers may include less intense industrial development
adjacent to commercial uses, larger setbacks, and screening.
7.0 IMPLEMENTATION PLAN
This vision plan is not a "project" pursuant to the California Environmental Quality Act
(CEQA). It is comprised of land use recommendations only, which will require
amendments to existing regulatory documents such as the Port Master Plan, National City
Local Coastal Program, Harbor District Specific Area Plan, etc. to implement. These
subsequent implementation actions will require environmental review pursuant to CEQA.
The implementation of the preferred land use alternative (or any part thereof) may require
a combination of any of the following or similar actions, as well as other discretionary
actions not specifically listed below. The regulatory changes identified below will likely
take years to implement and will require environmental review.
7.1 City of National City
7.1.1 General PlanAmendment
• Amend the Land Use Element to add a land use designation that would allow
appropriate commercial land uses.
December 2011 23
National City Bayfront Marina District Vision Plan
• Amend the land use designation north of Bay Marina Drive from Medium
Manufacturing -Coastal Zone to an appropriate designation that would allow
commercial land uses.
• Amend the land use designation along and west of Marina Way from Medium
Manufacturing -Coastal Zone to an appropriate designation that would allow
commercial land uses.
• Amend the Circulation Element as needed to reflect major changes to the adopted
circulation system/policies.
7.1.2 Harbor District Specific Area Plan (HDSAP) Amendment
• Amend the HDSAP boundary to include the area north of Bay Marina Drive and
apply the Tourist Commercial zone.
• Amend the HDSAP boundary to include the area west of Marina Way and apply
the Tourist Commercial zone.
• Amend to reflect major changes to the adopted circulation system/policies.
• Amend to apply specific regulations and standards to areas added to the HDSAP.
• Amend the HDSAP as necessary to resolve plan inconsistencies and clarify
jurisdictional authority.
7.1.3 Land Use Code and Official Zoning Map Amendment
• Amend the Land Use Code to add a zone classification that would allow
appropriate commercial land uses.
• Amend the Official Zoning Map to change the zone north of Bay Marina Drive
from Medium Manufacturing -Coastal Zone to an appropriate zone that would
allow commercial land uses.
• Amend the Official Zoning Map to change the zone along the west of Marina
Way from Medium -Manufacturing -Coastal Zone to an appropriate zone that
would allow commercial land uses.
7.1.4 Local Coastal Program (LCP) Amendment
• Amend the LCP to reflect amendments to the General Plan, Land Use
Code/Official Zoning Map, and/or Harbor District Specific Area Plan.
7.2 San Diego Unified Port District
7.2.1 Port Master Plan
• Identify the Pepper Park expansion.
• Redesignate the National Distribution Center and land north of 32nd, west of the
Mean High Tide Line, and east of the realigned Tidelands Avenue from Marine
Related Industrial to Commercial Recreation or other similar land use, as leases
and the economy dictate.
• Illustrate the potential realignment of Tidelands Avenue.
• Amend the Port Master Plan as necessary to resolve plan inconsistencies and
clarify jurisdictional authority.
December 2011 24
National City Bayfront Marina District Vision Plan
7.3 State Approvals
• Changes to the HDSAP, LCP, and Port Master Plan will require Coastal
Commission approval.
• State Lands Commission approval is needed if new land is acquired for maritime
industrial uses.
December 2011 25
MARKET ANALYSIS
UNIFIED PORT/NATIONAL CITY MARINA DISTRICT VISION PLAN
PREPARED FOR PROJECT DESIGN CONSULTANTS
JOHN It BUINS
I�EAI. ESTATE CONSULTING
4250 Executive Square, Suite 540 San Diego, CA 92037 I 858-558-8384 I www.realestateconsulting.com
BACKGROUND AND OBJECTIVE
JOHN BUIkITS
REAL ESTATE CONSULTING
BACKGROUND:
Project Design Consultants ("PDC") has been retained by the City of National City and the Port of San Diego to create a vision
plan for the future Marina District in National City. As part of the design process, PDC requires assistance in determining the
market viability of the land uses in the Preferred Alternative.
OBJECTIVE:
To provide the planning team with analysis of the market potential for the Preferred Alternative plan for the Marina District Vision
Plan, based on historic, current and expected market conditions by sector. Our analysis builds on the research conducted for
the Port and City in late 2009, with an update of key market conditions, conclusions and demand projections.
CONTACT INFORMATION:
This analysis was prepared by John Burns Real Estate Consulting. It has been commissioned by Project Design Consultants,
on behalf of the Marina District Vision Plan team.
Peter Dennehy, Vice President, served as Project Manager and managed the day-to-day operations of the analysis. Adam
McAbee, Senior Manager, also assisted in the creation of this analysis. Follow-up questions should be directed to us at:
4250 Executive Square, Suite 540
La Jolla, CA 92037
858.558.8384
www.realestateconsulting.com
TABLE OF CONTENTS
JOHN BUIkITS
EXECUTIVE SUMMARY
KEY CONCLUSIONS
ECONOMIC/DEMOGRAPHIC UPDATE
HOTEL MARKET UPDATE
COMMERCIAL MARKET UPDATE
COMMERCIAL DEMAND UPDATE
LIMITING CONDITIONS
REAL ESTATE CONSULTING
4
12
17
28
37
53
66
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JOHN IIBUR S
kEAL ESTATE CONSULTING
EXECUTIVE SUMMARY
4
INTRODUCTION/LOCATION
JOHN k5 BURNS
DEAL ESTATE CONSULTING
The San Diego Unified Port District and the City of National City are undertaking a cooperative effort to develop a vision plan that may
further enhance the Marina District area of National City.
National City's coastal location, easy access, and proximity to the Navy, Downtown San Diego, the airport, both light and heavy rail and the
U.S./Mexico border make it an ideal location for commercial use. The path of growth to the north starts in Downtown San Diego and has
pushed into the East Village, and ultimately into Barrio Logan, where it is ultimately blocked on the south by U.S. Navy facilities. To the
south of National City is the South San Diego Bay National Wildlife Refuge and the proposed Chula Vista Bayfront master plan, which may
ultimately be developed with a master planned project of office, hotel, retail and residential uses.
Although the study area has historically been heavily marine -industrial in nature, the City believes there is an opportunity to redevelop
some sites to better serve the local and tourist population bases and generate additional local sales tax revenue. The catalyst to this
development is not only the 250-slip Pier 32 Marina (the first San Diego County marina to open in 15 years), but also the 173-room Best
Western Hotel and Buster's Restaurant (completed in 2009, known as the Sycuan/MRW Marina Gateway development). With these uses
already in place and the continued improvement of the area taking place via increased landscaping, themed lighting, etc., the marketing
"window" has improved significantly and is hoped to lend well to the creation of additional new uses that meet these needs.
The vision plan process had the following key objectives:
• Protect maritime uses
• Enhance the working waterfront
• Increase public access to the waterfront
• Provide additional public amenities
• Establish additional visitor -serving uses.
• Consider compatibility of adjacent and transitional land uses.
• Solicit public and stakeholder input to inform the selection of a preferred plan.
• Comply with environmental regulations and protect coastal resources.
• Develop a plan that is feasible and provides a fiscal benefit to both the Port and the City.
Through this process, a Preferred Alternative has been selected. This Preferred Alternative proposes to change approximately 43 acres
from an industrial to a commercial land use designation, and expand Pepper Park. The Pepper Park expansion area is designated
commercial to allow for the establishment of complementary tourist commercial uses, such as food stands, in addition to parkland. Pepper
Park can be expanded by nearly 5 acres under this alternative, creating additional parkland for the City and region.
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INTRODUCTION/LOCATION
JOHN k5 BURNS
The land uses and maximum square footage that could be developed in the Preferred Alternative is shown below.
IZ,EAL ESTATE CONSULTING
Map
Area Implied
Ke Area Land Use (AC) Est. FAR Square Feet
1 West of Pier 32 Open Space/Park 3.6 N/App. N/App.
Marina
2 West of Pier32 Commercial (within 1.0 0.25 10,890
Marina future park)
3 West of Industrial 21.8 0.50 474,804
Tidelands
4 North of Bay Commercial 2.9 0.75 94,743
Marina Drive
5 West of Marina Commercial 9.5 0.75 310,365
Way
6 West of Marina Commercial 13.5 0.50 294,030
Way
7 West of Marina Commercial
Way/North of
32nd St.
4.8 0.75 156,816
8 East of Marina Commercial 8.6 0.75 280,962
Way
9 West of Open Space/Park 6.0 N/App. N/App.
Paradise
Marsh
The Preferred Analysis for the Marina District Vision Plan Area proposed the eventual redevelopment of what is primarily an industrial area
with additional Commercial development, likely to be some mix of office, retail and park and recreational uses, in combination with the
potential addition of Industrial uses.
The purpose of this market analysis was to test the market -based implications for the Preferred Alternative land use plan. Our report
incorporates key findings and updates conclusions from a more comprehensive analysis of supply/demand factors affecting the potential to
redevelop the area with various land uses that was completed for the Port and City by our firm in Fall 2009 (this Scope of Work did not
include a complete update of the 2009 report). The 2009 report was provided to us as a reference by the planning team.
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KEY CONCLUSIONS
JOHN BUIkITS
REAL ESTATE CONSULTING
The purpose of this section is to summarize the key findings from our research, and to outline our conclusions on the market
viability associated with the Preferred Alternative.
A. Summary
Overall, our research and analysis indicates that market support and additional demand generated by population and
employment growth in the region and National City area will support the all of the proposed commercial land uses and
the build -out of the Preferred Alternative for the Marina District study area over time.
Available land in a central, bay -oriented location with good access and visibility is quite limited in San Diego County and a new
offering of commercially -zoned land with these advantages should meet with market demand where offered. The challenges of
the plan are primarily associated with current and near -term market conditions — there is a distinct lack of near -term demand for
new hotel units in the area, and, while the market for both retail and office space has stabilized and improved somewhat in 2011
since our late 2009 report was conducted, commercial market conditions are still weak and likely would not support large
quantities of new supply in the near -term. Over time, as the economy improves, the demand potential for all the
commercial uses contemplated in the Vision Plan improves.
The 2009 analysis that was our starting reference point was conducted at a time when the overall San Diego County economy
was in a recession and the near -term market potential for any development was challenging. The hotel that was built in the
study area was new. In addition — and importantly — the 2009 analysis was limited to small, non-contiguous sites that presented
challenges in attracting users and/or achieving a significant mass to attract outside demand, new office , retail, hotel or industrial
users
Since then, the regional economy has stabilized and started to improve and the market outlook for various commercial uses has
generally gotten better (although any development in the study area is still some years out and requires further planning). The
Preferred Alternative significantly re -arranges the study area and allows for some larger areas that will accommodate a wider
variety of potential commercial uses.
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KEY CONCLUSIONS
JOHN k5 BURNS
Each land use type faces a variety of opportunities and challenges as summarized below:
IkEAL ESTATE CONSULTING
Use
Opportunities
Challenges
Hotel
•
Proximity to tourist destinations and job
•
No excess demand for new hotel rooms in near -term
nodes such as Downtown SD, 32nd St
Naval Station, shipyards, etc.
•
Proximate to Downtown San Diego competitive supply
and planned Chula Vista Bayfront to south.
•
Water -oriented setting
•
Limited tourist draw in place and the Marina Gateway
•
Some visibility from 1-5
hotel primarily attracts business users from area
•
New hotel in study area performing
well
businesses.
Retail/
•
Potential to orient to the freeway
•
Limited excess demand from area households
Restaurant
•
National City retail has draw to greater
•
Buster's Restaurant still experiencing marginal results
regional population — existing uses
•
Planned Sudberry retail center a mile away
include a regional mall (Plaza Bonita)),
car retailers and "big box" concepts like
•
Retailers in general are limiting expansion plans to
best locations with other retail to provide synergy
Wal-mart, Target, etc.
•
Vision plan area located off of freeway, but should
•
Significant area daytime employment
base
have some visibility.
•
Areas 5 to 8 in Preferred Alternative
would accommodate larger retail users
that would draw from wider region if a
unique concept were offered.
Office
•
Potential to serve surrounding
industrial base
•
Highly competitive market conditions, with falling rents
and high vacancy
•
Some demand potential for small
amount of office annually in next 5
•
New office space at Marina Gateway is still vacant and
market is weak.
years — averaging 17,000 SF per year.
•
Unfavorable broker opinion (2009)
Industrial
•
Congruous with surrounding land uses
•
Statistical demand exists
•
Brokers favorable in 2009.
Park/ Public
•
National City needs more parks
•
Limits revenue potential
Rec. Facility
•
Creates an attractive link to the marina
from a public perspective
•
Limited immediate-area/weekend population to utilize
the park
•
Can be tied to existing and current
aquatic program
•
Need facility with regional drawing power — build on
marina and aquatic programs to make this "the place
to experience the South Bay "
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KEY CONCLUSIONS
JOHN k5 BURNS
DEAL ESTATE CONSULTING
In reality, the implementation of the vision plan would take place over time, meaning that current market conditions, which are
stable to improved, for most of the candidate land uses will be less relevant and the project can be developed in phases, with
flexibility and as development potential appears.
Based on the area sizes and zoning conditions, the Preferred Plan could generate up to +/-475,000 square feet on industrial
space (+/-352,000 SF would replace existing space, resulting in expansion by up to +/-122,000 SF) and up to 1.147 million SF
of Commercial space, which could conceivably be a mix of retail, hotel and office space over time. These estimates of build out
are purely an estimate of maximum scale at this time, with final numbers dependent on the ultimate outcome of the planning
process to come as to how much of these land uses are developed and at which locations (we are not analyzing any specific
land use proposal or end -user).
Based on the projected market demand for each of the possible land uses, the Marina District Vision Plan Area could be fully
built out within the next 10 to 15 year timeframe, with the strongest near -term potential for additions or re -locations of the
Industrial space, and medium to long-term (5 to 15 years) potential for office, retail and hotel uses.
The achievement of this potential plan will depend on the securing of development partners, actual market conditions, etc, but
represents the potential to re -work and enhance the National City waterfront. The area sizes, locations and potential to develop
the area in phases over time will give the City, Port and potential development -partners the flexibility to adapt to changing
market conditions and opportunities. In that respect, the Preferred Alternative Plan results in area sizes that are more "develop-
able", will accommodate a variety of commercial uses and have the potential for critical mass, synergy and to move the image
of the area forward.
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KEY CONCLUSIONS
Specific conclusions for the various Vision Plan areas are outlined below.
JOHN k5 BURNS
IkEAL ESTATE CONSULTING
Are a
Land Use
Approximate
Square Feet.
Implications from Demand
Timing
1 Open Space/Park
2 Commercial (within
future park)
3.6 National City is under -supplied in terms of park space, and the need will continue to grow.
10,890 This is the proposed expansion of an existing/temporary facility.
Immediate
Immediate
3
Industrial
122,804 While the total space planned for this parcel is 474,804 square feet, approximately 352,000 square feet
would be simply replacing existing space. The 122,804 square feet shown here is the new space that
will be added to the market. Based on our demand model's estimated 34,000 square feet of demand for
industrial space at the Subject going forward (and the input from local brokers that industrial space in
this area will always be in demand), this implies that this amount of new space could be absorbed
within roughly three to four years.
Near -Term, 3-4
Year Buildout
4 Commercial
94,743 Our demand models suggest demand for roughly 17,000 square feet of office space per year at the
Subject Property. Assuming that half (47,372) of the 94,743 square feet shown here are for office, then
this implies that the new space could be absorbed within two to three years. The challenge, however,
is that this demand estimate is based on job growth projections, and local brokers indicate very soft
office market conditions today (and the office space at Marina Gateway remains vacant after several
years). We therefore assume that any new office space in this location would be built over the long
term. The remaining retail space could include restaurant space (given the proximity to the freeway),
though demand for restaurant space in this area is also limited in the near term.
Medium -Term
(5-10 Years)
r 5/6/7 Commercial
761,211 This area could accommodate a variety of commercial uses, including mixed -use office, retail and
restaurants in Area 5, larger commercial uses (including "big box" retailers) in Area 6 and marina -
oriented specialty commercial uses in a "Seaport Village" type project (Areas 7 and 8). There is some
demand for certain retail categories in the 5-mile, 10-mile and 20-mile radius of the site and this will
improve with the growth of the region.
Medium -Term
(5-10 Years)
8 Commercial
9 Open Space/Park
280,962 This is the most logical location for a hotel at the Subject Property, if one were to be developed (good
freeway visibility and proximity to marina). The challenge, however, is that demand for new hotel units
in this area will not likely exist for at least another 10 years.
National City is under -supplied in terms of park space, and the need will continue to grow.
Long -Term
(10+ Years)
Immediate
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PREFERRED LAND USE SCENARIO
JOHN IBUR S
REAL ESTATE CONSULTING
The long-term plan for the Subject Property includes additional parks, industrial space and commercial space.
ram
* w, ,,.
Ilui ...... IM.4•1.0.0
Source: PDC
Map
Ke Area
Land Use
Area Implied
AC Est. FAR S • uare Feet
1 West of Pier 32
Marina
Open Space/Park 3.6 N/App. N/App.
2 West of Pier 32
Marina
Commercial (within 1.0 0.25 10,890
future park)
3 West of
Tidelands
Industrial
21.8 0.50 474,804
4 North of Bay
Marina Drive
Commercial
2.9 0.75 94,743
5 West of Marina
Way
Commercial
9.5 0.75 310,365
6 West of Marina
Way
Commercial 13.5 0.50 294,030
7 West of Marina
Way/North of
32nd St.
Commercial
4.8 0.75 156,816
8 East of Marina
Way
Commercial
8.6 0.75 280,962
9 West of
Paradise
Marsh
Open Space/Park 6.0 N/App. N/App.
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JOHN BUR S
kEAL ESTATE CONSULTING
KEY CONCLUSIONS
12
MARKET UPDATE
This table summarizes how the market has shifted since our original research in September 2009.
MARKET CONDITION UPDATE
San Diego County and the National City Competitive Market Area
2009 Study vs. 2011 Vision Plan Analysis
JOHN IBUI�NS
kEAL ESTATE CONSULTING
Sector
Potential
Use
Area
2009 Conditions
2011 Conditions Change
Key Implications from 2009 Study
Local Brokers
Market Trends
Statistical Demand
Existing Supply
Economy
SD County - Bottom of the economic
cycle
- Roughly 67,300 jobs lost
in 2009
- Unemployment of 9.6%
- Stabilizing economy
- 24,700 jobs gained YOY
- Unemployment of 10.2%
- By 2015, all of the jobs
lost during the recession
should be recouped, and
the overall employment
base will exceed the last
peak.
Improved
Office
- Offices
- Shipping offices and custom facilities
SD County - Class A rent: $2.90/SF
- Vacancy: 17.6%
National City - Class A rent: $2.57
- Vacancy: 30.6%
- Class A rent: $2.53/SF
- Vacancy: 17.7%
- Class A rent: $2.20
- Vacancy: 19.2%
Stabilizing
Agreed that this plan area could
attract some users related to
local industrial/Naval operations,
but also indicated a distinct lack
of demand in the market at the
time.
Falling rents, rising
vacancy.
Our models indicated
demand for approximately
20,000 SF per year at the
Subject.
There was plenty of
available existing office
supply in the market at
the time, including
vacant space at Marina
Gateway.
Industrial - Boat building/repair, dry storage, etc.
- Marine terminals
- Cargo handling equipment
- Warehouses, silos and fueling facilities
- Bulk liquid storage tanks and pipelines
- Ship building, repair and conversion yards
- Marine rails, lifts and grating dots
- Steel fabrication and foundry
- Marine machinery storage/repair/maint.
- Kelp and seafood processing/packaging
- Marine related support/transportation
- Assembly/light manufacturing/processing
- R&D
- Building supplies/equipment sales/rental
- Industrial equipment/machinery sales/rental
- Waterfront related industries
- Wholesaling, warehousing and distribution
- Medium manufacturing/processing
- Plant nursery
- Parking structure/fleet
- Self -storage facility (mini -warehouses)
- Accessory eating places, offices, goods and
services (retail)
SD County -Asking rent: $0.92/SF
- Vacancy: 11.2%
- Asking rent: $0.87/SF
- Vacancy: 11.0%
National City -Asking rent: $0.91
- Vacancy: 1.9 %
- Asking rent: $0.63
- Vacancy: 5.2%
Stabilized
Most prodded support for the
continued demand for new
industrial space in this area.
Stable rents, limited Our models indicated
vacancy. demand for approximately
69,000 SF per year at the
Subject.
There was a very limited
level of industrial supply
in National City at the
time.
Retail
- Restaurants
- Commercial retail
- Specialty shopping (ice cream, sandwiches,
clothing, gifts, etc.)
-Commercial retail
- Mixed use
SD County -Asking rent: $2.14/SF -Asking Rent: $2.03 Improved
- Vacancy: 5.9% (2H'09) - Vacancy: 5.5% (2H'10)
So. County: - Asking rant: $2.37 (21109) - Asking rent: $2.23 (2H'10)
- Vacancy: 9.6% (21109) - Vacancy: 8.6% (2H10)
Most indicated that this area
needed new restaurants, etc.,
though they also indicated that
sites near the marina would be
more challenging due to their
access/risibility. They also
indicated an opportunity for a
destination -based retailer
(improved opportunity now given
the larger retail parcel sizes).
Competitive, with
diminishing demand.
Location has no
surrounding HH base,
limited housing being
built in National City.
Businesses would be
additional demand.
Our demand models
indicated a surplus of
supply (i.e. no new
demand) for all retail uses
except something similar
to a Home Depot.
At the time, the Marina
Gateway sites would
need to be leased before
opportunities to the west
or south would arise.
www.realestateconsulting.com 13
MARKET UPDATE (CONT'D.)
This table summarizes how the market has shifted since our original research in September 2009.
MARKET CONDITION UPDATE
San Diego County and the National City Competitive Market Area
2009 Study vs. 2011 Vision Plan Analysis
JOHN I5BUPNS
REAL ESTATE CONSULTING
Sector
Potential
Use
Area
2009 Conditions
2011 Conditions Change
Key Implications from 2009 Study
Local Brokers
Market Trends Statistical Demand Existing Supply
Hotel
- Lodging facilities
SD County - RevPar: $72.01
- Vacancy: 38.0%
- RePar: $80.54
- Vacancy: 31.9%
Comp Set - RevPar: $46.34
- Vacancy: 35.1%
- RevPar: $44.43
- Vacancy: 37.5%
Regional
Improving,
Local
Declining
N/App.
Falling rents, rising Good site for a hotel, but The new Best Western
vacancy. insufficient demand for the Manna Gateway (City
coming decade. land) had just opened at
the time.
Park/Recreation - Pleasure craft marinas
- Educational/recreational program facilities
- Public parks and open space reserves
- Sportfishing
Granger Hall
Civic/fraternal/community/cultural facilities
RV park/campground
Event Center
There is a need for more parks and recreational opportunities in National City and the San Diego region. The
location on the bay and proximity to Downtown San Diego, Interstate 5 and San Diego Trolley may be logical
for other recreation uses (i.e. a special -use arena) and or expansion of the watrfront programs or manna.
Other
a
Passenger terminals
RR switching & spur tracks
Berthing facilities
Power generation plants
Aquaculture
Sources:
Economy: John Bums Real Estate Consulting
Office: Grubb & Ellis
Industrial: Grubb & Ellis
Retail: Cassidy Turley
Hotel: Smith Travel Research
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VACANCY RATES BY LAND USE — Q2 2009 vs. Q1 2011
JOHN IBUR S
REAL ESTATE CONSULTING
40.0%
35.0%
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
VACANCY COMPARISON BY LAND USE: SAN DIEGO COUNTY VS. NATIONAL CITY AREA*
■ San Diego County Q2'09
San Diego County Q1'11
■ National City Q2'09
■ National City Q1'11
Pr
Industrial Off ice* Retail* Hotel*
*Retail data reported semi-annually (second halfof2009 vs. 2010 shown here) and reflects the County vs. the overall South Bay. For the Office sector, the two
National City time periods reflect slightly different geographic definitions. For Hotel, the National City definition is forthe Competitive Set used in our 10/09 report.
Sources: See Market Update summary page
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AVERAGE RENT BY LAND USE — Q2 2009 vs. Q1 2011
JOHN I5BUPNS
REAL ESTATE CONSULTING
$90.00
$80.00
$70.00
$60.00
$50.00
$40.00
$30.00
$20.00
$10.00
$0.00
AVERAGE ANNUAL RENT/SF COMPARISON BY LAND USE: SAN DIEGO COUNTY VS. NATIONAL CITY AREA*
■ San Diego County Q2'09
San Diego County Q1'11
■ National City Q2'09
■ National City Q1'11
$7.6
711
$72.
01
46.34 $44.43
Industrial (Wh/D) Office (Class A)* Retail* Hotel (RevPar)*
*Retail data reported semi-annually (second halfof2009 vs. 2010 shown here) and reflects the County vs. the overall South Bay. For the Office sector, the two
National City time periods reflect slightly different geographic definitions. For Hotel, the National City definition is forthe Competitive Set used in our 10/09 report.
Sources: See Market Update summary page
www.realestateconsulting.com
JOHN IIBUR S
kEAL ESTATE CONSULTING
ECONOMIC/DEMOGRAPHIC UPDATE
17
ECONOMIC/DEMOGRAPHIC OVERVIEW
JOHN k5 BURNS
DEAL ESTATE CONSULTING
The purpose of this section is to provide an overview of the economic and demographic characteristics that exist in the United States, the
San Diego County region and the local area today. Market forces that will have the potential to influence future development in the project
area will include:
• A growing Port of San Diego and its associated land requirements.
• Population and employment growth from the existing National City and San Diego County community.
• Regional tourism and visitors
The Economy:
The conditions and future outlook for the San Diego County economy have started to improve since our late 2009 analysis.
As 2011 comes to an end, the U.S. economy continues to show slow growth across many of 100+ economic indicators that we monitor on
an ongoing basis, but in general, the rate of expansion still falls vastly short of past recoveries, as evidenced by the following table
comparing the unemployment rate reduction over time.
Recession End of
Date Recession
Unemployment
9
Months
After
18-27
Months
After
Rate
Months
After
Overall
Change
Nov. 1973 -
Mar. 1975
8.6%
8.2%
7.6%
7.2%
-1.4%
Jul. 1981 - Nov.
1982
10.8%
9.5%
7.4%
7.2%
-3.6%
Dec. 2007 -
Jun. 2009
9.5%
9.7%
9.4%
9.1 %
-0.4%
The unemployment rate, which is a focal point for consumers as well as policy makers across the board, remains stubbornly high.
In fact, dating back to 1948, the current post -recession improvement in unemployment currently lacks all other recovery phases for
downturns that have lasted longer than twelve months. Moreover, the unemployment rate for all population cohorts remains far
above the historical average, namely the young and uneducated.
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ECONOMIC/DEMOGRAPHIC OVERVIEW
JOHN k5 BURNS
DEAL ESTATE CONSULTING
The severity of job losses in the U.S. in the recent economic downturn is similar to the regional downturns in both Southern
California and New York through the early 1990s. During this time, Southern California lost 7% of its employment base from
1991 to 1994 and didn't recover all of the lost jobs until 1997. New York also experienced job losses totaling almost 8% between
1991 and 1992 and did not return to the previous peak level until 1999. The result is that while the economy is growing again, it
will be a protracted recovery and most land use sectors will not make development sense in the near -term (but improve over
time).
Here are some notable developments regarding overall U.S. economic growth:
Job Growth is Positive and is Picking Up: The U.S. economy added 103K jobs in September, up from 57K in August.
However, subtracting out the one-time addition of 45K Verizon workers returning from strike, payrolls were up a more modest
58K in September. The unemployment rates is unchanged at 9.1 %, while the U-6 (a broader measure of unemployment that
covers part-time workers who would like full-time work and those who have given up looking for work), increased from 16.2% to
16.5%. In addition, the average length of unemployment in the labor force rose from 40.3 weeks in August to 40.5 weeks in
September, a new record high.
Personal Income Still Falling: While still up year -over -year, personal income fell sequentially in August for the first time since
October 2009. Moreover, real personal income excluding government transfers was down sequentially for the second month in
a row. This metric is one of the four variables included in the NBER recession dating process.
U.S. Economy Expanding at Modest Clip: The U.S. economy grew at a 1.3% annual rate during 2Q11, an upward revision
from the advance estimate of 1.0%. For 3Q11, the growth rate increased to 2.5%. Retail sales have also shown good growth in
recent months.
The U.S. economy added 103K jobs in September, up from 57K in August. Year -over -year job gains have now been positive for
the past 13 months as the employment market has added roughly 1.49 million non -farm payroll jobs in the last year. As such,
annualized job growth increased from 1.09% to 1.12%. Annual job losses continue in Government (-327K), Information (-42K),
and Financial Activities (-11 K). Sectors with strong positive year -over -year (YOY) job growth include Professional and Business
Services (+549K); Education and Health Services (+449K); as well as Trade, Transportation and Utilities (+321K).
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ECONOMIC/DEMOGRAPHIC OVERVIEW
JOHN BU�NS
REAL ESTATE CONSULTING
Similar to the national economy, economic conditions in San Diego County have improved. Total non -farm wage and salary
employment in San Diego County increased by 13,500 (1.1 %) in the past 12 months, and job growth is projected to increase to
20,000 to 26,000 jobs per year in the 2012-2014 period. By 2015, the County will have regained jobs lost in the Downturn and
gone on to add new jobs. In National City specifically, SANDAG expects jobs to grow at a rate of 0.8% (or 189 jobs) per year
through 2030.
Demographic Trends: San Diego is a desirable place to live, and it will always experience population and household growth.
San Diego County has continued to add population in the downturn, with a regional population base of 3.1 million residents, and
adding 26,000 to 30,000 new residents per year (0.8% per year).
This rate of growth is similar but slightly lower than the 1.3% rate expected in the City of National City through 2015, though the
population in National City tends to be much younger and less affluent than the county overall.
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EMPLOYMENT GROWTH
JOHN I5BUPJS
REAL ESTATE CONSULTING
Job losses have eased significantly in the last year in San Diego, and employment stabilization should occur in 2011, albeit at a
low rate of growth. Employment conditions are expected to improve over the next several years, adding 55,000 jobs by 2014.
EMPLOYMENT GROWTH
0.0o0
W& Current Growth: 11,200 (0.9%)
40,00D
20000
0
-20,000
-40,000
-60,000
-80,000
•
two,-Nvrp.-,:0-. s4-N 5o ila.n.
�OGC)GOF}e1 _F
W&S Empbyment Growth Labor Force Growth W&S Projection
12-MONTH EMPLOYMENT GROWTH
we,s Current Growth: 11,200 (0.9%)
40,000
nnn
0
.2nmon
-40,0b0
-anon
-80,000
ai c
C
0 0
o c' o o a o o
W&S Employment Growth Labor Force Growth
0
o U 2
• Payroll employment losses have eased in the San Diego market in the last year, and the metro area is
now showing positive year -over -year growth. San Diego averaged a loss of 11,200 jobs (-0.9%) in 2010,
with conditions improving by year-end. Job growth will likely be positive in 2011, but at a low rate of 0.8%,
or 10,000 jobs. San Diego lost 6.8% of its 2007 peak employment by the time job losses subsided.
• The labor force data is also showing positive job growth in the last year. The labor force survey measures
the change in the employment level based on where people live rather than where they work.
• The unemployment rate is high at 9.6%, although this is down from one year ago. While positive job
growth is expected for 2011, it may take some time for the unemployment rate to return to normal levels.
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POPULATION & HOUSEHOLD GROWTH
National City has +/-55,000 residents in +/-15,000 households. The wider 1
County, parts of City of San Diego and Coronado is has a population of 1
households that will support commercial uses..
2010 Population
3,500,000
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
3,120,279
San Diego County
10-MileRadius
1,200,000 •
1,000,000 -
800,000
600,000 -
400 000
200.000 -
San Diego County
2010 Households
National City
10-MileRadius
Source: ESRI
0-mile radius area,
.2 million residents
JOHN IBURJS
REAL ESTATE CONSULTING
which includes most of South
and is adding population and
30,000
25,000
20,000
15,000
10,000
5,000
0
Expected Annual Population Growth (2010-20151
25,263
1.3
-
0.8%
0.7
oAnnual Increase
t %Annual Chan ge
8,942
700
1 k i
S6
0.0\e9°
ocA
mad,
, 0,000e
1.4%
1.2%
1.0 %
0.8 %
0.6%
0.4%
0.2%
0.0%
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
Expected Annual Household Growth (2010-20151
6,44b
0.8%
07%
0.4%
`
3,026
On crease
t%Annu%Annual Chan
58
covld
�,e9°
San
0,9 %
0.8%
0.7%
0.6%
0.5%
0.4%
0.3%
0,2 %
0.1%
0.0 %
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MEDIAN AGE
JOHN I5BUPJS
National City is relatively young when compared to the County and the 10-mile radius.
REAL ESTATE CONSULTING
1-
0
0
35.0
34.0
33.0
32.0
30.0
29.0
28.0
27.0
26.0
San Diego County
MEDIAN AGE
San Diego County, National City & 10-Mile Radius: 2010
National City
10-Mile Radius
Source: ESRI
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POPULATION BY AGE DISTRIBUTION
JOHN I�BUI�NS
National City has larger percentages of population in younger age cohorts.
Source: ESRI
REAL ESTATE CONSULTING
25.0% -
20.0%
15.0% —
10.0% —
5.0% —
0.0%
Under 15
15 to 24
Population Age Distribution
25 to 34
35 to 44
45to54
Retirement
Home Buyers
55 to 64
Over65
OSan Diego County
DNational City
010-Mile Radius
Percentage of Population by Age Distribution
Under 15 15 to 24 25 to 34 35 to 44 45 to 54 55 to 64 Over 65
20.1% 15.5% 15.0% 13.6% 14.0% 10.4% 11.4%
San Diego County
National City
22.7% 20.4% 15.3% 11.7% 10.8% 8.1 % 11.0%
10-Mile Radius
20.2% 17.2% 16.5% 13.6% 12.9% 9.3% 10.4%
Population by Age Distribution
Under 15
San Diego County 627,176
15 to 24
483,643
25 to 34
468,042
35to44
424,358
45to54
436,839
55to64
324,509
Over 65
355,712
National City
12,844 11,543 8,657 6,620 6,111 4,583 6,224
10-Mile Radius
251,460 214,115 205,401 169,300 160,586 115,771 129,465
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AVERAGE HOUSEHOLD SIZE
JOHN I5BUPJS
National City households tend to be larger than that of the county overall.
Source: ESRI
REAL ESTATE CONSULTING
Average Size
3.50
3.00 -
2.50
2.00
1.50 -
1.00
0.50
0.00
AVERAGE HOUSEHOLD SIZE
San Diego County, National City & 10-Mile Radius
2010
2.77
3.43
San Diego County
2.81
National City 10-Mile Radius
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MEDIAN HOUSEHOLD INCOME
JOHN I5BUPJS
The median income in National City is $41,197, which is lower than the County and the 10-mile radius.
REAL ESTATE CONSULTING
(
$60,000
$50,000
$40,000
$30, 000
$20,000
$10,000
$0
San Diego County
National City
10-Mile Radius
i
Source: ESRI
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ETHNICITY
JOHN IBUR S
REAL ESTATE CONSULTING
National City also has a higher portion of Hispanic and Asian households relative to the county and 10-mile radius.
Source: ESRI
50.0%
45.0%
40.0%
35.0%
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
San Diego County
National City
10-Mile Radius
0 White Alone 0 Black Alone °American Indian Alone ■ Asian or Pacific Islander Alone
Hispanic Origin
Percentage of Population (Aged 5+) by Race/Ethnicity
San Diego County
National City
10-Mile Radius
White Alone Black Alone
47.4% 3.7%
20.3% 2.7%
35.0% 5.6%
American Indian
Alone
0.7%
0.6%
0.6%
Asian or Pacific
Islander Alone
8.3%
12.1%
9.0%
Some Other Two or More
Race Alone Races
11.6% 4.1%
22.3% 3.3%
15.2% 4.2%
Hispanic Origin
24.2%
38.8%
30.5%
Population (Aged 5+) Distribution by Race/Ethnicity
San Diego County
National City
10-Mile Radius
White Alone Black Alone
1,950,174 152,894
18,729 2,490
626,160 100,833
American Indian
Alone
28,083
509
9,959
Asian or Pacific
Islander Alone
343,231
11,204
161,831
Some Other Two or More
Race Alone Races
477,403 168,495
20,597 3,056
271,378 74,691
Hispanic Origin
995,369
35,874
545,245
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JOHN IIBUR S
kEAL ESTATE CONSULTING
HOTEL MARKET UPDATE
28
HOTEL MARKET OVERVIEW
JOHN BU�NS
REAL ESTATE CONSULTING
The purpose of this section is to outline historical and current trends in the hotel market in the greater San Diego area, both
overall and on a submarket level. Market data is shown in Slides 40 to 45.
Compared to our analysis in late 2009, the hotel industry in San Diego County (overall) has stabilized somewhat, but
the hotel sector in the National City competitive market is still declining.
After four years of steady performance in 2004-2008, the National City hotel market began to deteriorate in mid-2008. The
market was hit by a decrease in demand, caused by the oncoming economic recession. Then in mid-2009, the market was
impacted by an increase in supply, with the introduction of the new 173-room Best Western Marina Gateway hotel. The
combination of these market forces has resulted in a steep decline in market performance that has not reversed. Occupancy,
daily rates and revenue per room have all declined in the National City competitive market in recent years.
It is projected that the local market occupancy level, which had been above 70% every year since 2004, is at under 62% in
2011.It is expected that it will be 10+ years until there is sufficient demand to add new hotel rooms. It is the lack of demand that
is the limiting factor in this market, not the general location. Demand would be improved by additional businesses in the project
area and development of attractions that would appeal to tourists visiting the region.
The existing competitive hotel market in South San Diego County consists of 11 properties, with a total of 1,200 rooms. The
competitive set includes limited -service facilities in National City (notably the 173-room Best Western Marina Gateway), Chula
Vista and the Otay Mesa area near the U.S./Mexico border.
The historical Occupancy, Average Daily Room Rates (ADR), and Revenue Per Available Room (RevPar) for the San Diego
County and South San Diego County market since 2005 has been as shown in the following tables. This data generally shows
improvement in the overall San Diego County hotel market, but the competitive National City area has not yet shown a
turnaround in occupancy, room rate or revenue per room.
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HOTEL MARKET OVERVIEW
JOHN BU�NS
REAL ESTATE CONSULTING
The historical Occupancy, Average Daily Room Rates (ADR), and Revenue Per Available Room (RevPar) for the San Diego
County and South San Diego County market since 2005 has been as shown in the following tables.
This data generally shows improvement in the overall San Diego County hotel market, but the competitive National City area
has not yet shown a turnaround in occupancy, room rate or revenue per room.
HOTEL OCCUPANCY
San Diego
Competitive
County
Supply
2005
72.1 %
71.2%
2006
73.1 %
75.4%
2007
72.7%
71.4%
2008
69.2%
71.0%
2009
62.8%
64.4%
2010
66.6%
64.0%
Jan -April '10
63.3%
64.0%
Jan -April '11
65.9%
61.1
HOTEL: Average Daily Rate
San Diego
Competitive
County
Supply
2005
$122
$73
2006
$131
$78
2007
$139
$83
2008
$143
$80
2009
$125
$72
2010
$122
$74
Jan -April '10
$116
$70
Jan -April '11
$122
$71
HOTEL: RevPAR (Per Room)
San Diego
County
Competitive
Supply
2005
2006
2007
2008
2009
2010
$88
$96
$101
$99
$78
$81
$52
$58
$59
$57
$46
$47
Jan -April '10
$73
$44
Jan -April '11
$80
$44
The National City hotel market was generally healthy and growing during the 2004-2007 period. In 2007, the market
successfully absorbed the new 99-room Holiday Inn Express in Otay Mesa, but by mid-2008, the economic recession
had taken hold, and demand began to contract. This decline in rooms sold accelerated into mid-2009, when the 173-
room Best Western Marina Gateway opened in National City.
All indications are that the new hotels are being well -received by the marketplace, but this is only a relative measure, as
the entire economic pie has been shrinking rapidly since mid-2008. Thus, the newer properties are merely stealing
market share from the older ones. In 2011 to -date, hotel occupancy in the competitive set has averaged 61.1%, versus
64.0% in the same period of 2010.
Historically, hotel room demand has increased at about 3% annually. We projected this level of growth beginning in
2011, to see how long the market would take to recover from its current malaise. Even assuming no new additions to
the supply of hotel rooms in the market for the next decade, it would be ten years before the market is capable of
supporting an additional 100-room property.
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HOTEL MARKET OVERVIEW
JOHN BU�NS
REAL ESTATE CONSULTING
The 2009 analysis identified eight other proposed additions to the hotel supply in the South San Diego County market. None of
these have been built yet, and with the current depressed level of market performance in the National City competitive area, we
do not expect any of these to be developed in the foreseeable future. If any of them were built, it would likely further extend the
period before the market could support additional hotel rooms in the Vision Plan area.
In addition, there are up to 3,500 hotel rooms planned in the Chula Vista Bayfront project, which could ultimately be a dominant
project in the South County region.
The proposed sites in the Vision Plan area could support hotel development at some point in the future, when the market has
recovered enough to support such additional rooms.
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SUMMARY OF EXISTING COMPETITIVE HOTELS
JOHN BUK\JS
REAL ESTATE CONSULTING
There are approximately 1,200 hotel rooms in the area that provide insight into local demand for room nights — the most
important of which is the Best Western Plus Marina Gateway Hotel, which opened in mid-2009.
SUMMARY OF EXISTING COMPETITIVE HOTELS
San Diego County, California
July, 2011
Name
City Zip Code Open Date Number of Rooms
Days Inn San Diego S Bay Chula Vista
La Quinta Inn San Diego Chula Vista
Ramada San Diego South Chula Vista
Best Western Plus Otay Valley Hotel
Best Western Plus Marina Gateway Hotel
Clarion Hotel South Bay National City
Howard Johnson Express National City
Super 8 National City Naval Base Area
Comfort Inn 1805 Naval Base
Comfort Suites Otay Mesa
Holiday Inn Express & Suites San Diego Otay Mesa
Source: Smith Travel Research
Chula Vista, CA
Chula Vista, CA
Chula Vista, CA
Chula Vista, CA
National City, CA
National City, CA
National City, CA
National City, CA
National City, CA
San Diego, CA
San Diego, CA
91910
91910
91910
91911
91950
91950
91950
91950
91950
92154
92154
Jun-83
Dec-86
Jun-78
Jul-90
Jun-09
Jun-89
Jun-78
Jun-78
May-85
May-00
Jan-07
106
142
97
118
172
180
64
56
91
75
99
Total: 1,200
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LOCATION OF EXISTING COMPETITIVE HOTELS
These are the newer hotels in the local area.
JOHN IBUI�NS
kEAL ESTATE CONSULTING
esrans
United Slates Naval Air ' `�.'-
Station North Island !/
Sea N Air
Golf Course North rslani
Ocean
Cprenado
Goli Course
Coronado
Imperial
Beach Naval
Air Station
Tijuana Riu National
Estuarine Reserue
Border
d
�.a• ihnsl AvP 1
Super 8
425 Roosevelt Ave
National City, CA 91950
States Naval
Station
Howard Johnson Express
521 Roosevelt Ave
SOP National City, CA 91950
United States Naval
Amphibious Base
Best Western Plus Marina Gat...
B00 Bay Marina Dr
National City, CA 91950
Days Inn
699E 5t
Chula Vista, CA 91910
Palm Ave
Clarion Hotel South Bay
700 National City Bvd
National City, CA 91950
Comfort Inn
1645E Plaza Blvd
National City, CA 91950
Ramada Inn
91 Bonita Rd
Chula Vista, CA 91910
United Slates
Naval Radio
Station
Palm City
Harbo
Side
Bnperial Diego
)each He 0
South Bey -
Park
rL_ _�9a5
25
hula Vista Municipal
e, GOV Course
Glen Abbey
Cemetery
La Quinta Inn
150 Bonita Rd
Chula Vista, CA 91910
le Perk
Best Western Plus Otay Valley
4450 Main 5t
_,ye Chula Vista, CA 91911
1
San Diego
Sweebvater
R @server
S A N DIEG
mo
Mu
Airport
Eastlake
Country
Club
Comfort Suites
2351 Gtay Center Dr
San Diego, CA 92154
Salt Creek
Golf Club
Lower OW
Reservoir
Holiday Inn Express
2296 Niels Bohr Ct
San Diego, CA 92154
•
Source: Smith Travel Research
www.realestateconsulting.com 33
OCCUPANCY
JOHN IBURJS
IZ,EAL ESTATE CONSULTING
Hotel occupancy in the local area and county -wide declined consistently from 2007 to 2010, and the market is still struggling to
stabilize.
ANNUAL HOTEL OCCUPANCY
San Diego County vs. Competitive Set
2003 to 2011 (YTD Apr.)
78.0%
76.0%
74.0%
72.0%
70.0%
68.0%
.A.
66.0%
-
-
--San Diego County
Competitive Supply
64.0%
-
62.0%
60.0%
2005 2006 2007
2008 2009
2010
2010 YTD Apr
2011 YTD Apr
Source: Smith Travel Research
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AVERAGE DAILY RATE (ADR)
JOHN IBURJS
REAL ESTATE CONSULTING
Typical room nights are also down relative to a few years ago, even in the Subject's competitive market area where prices are
generally much lower.
ANNUAL AVERAGE DAILY RATE (ADR)
San Diego County vs. Competitive Set
2003 to 2011 (YTD Apr.)
$150
$140
$130
$120
$110
$100
San Diego County
Competitive Supply
$90
$80
$70
$60
2005
2006
2007
2008 2009
2010
2010 YTD Apr 2011 YTD Apr
Source: Smith Travel Research
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REVENUE PER AVAILABLE ROOM (REVPAR)
JOHN IBURJS
II,EAL ESTATE CONSULTING
Once vacancy is factored in, the annual Revenue per Available Room in the county and in the competitive market area also
reflects less than favorable market conditions.
ANNUAL REVENUE PER AVAILABLE ROOM (REVPAR)
San Diego County vs. South Bay and Competitive Set
2003 to 2011 (YTD Apr.)
$110
$100
+ San Diego County
—`',-- Competitive Supply
$90
•
$80
$70
$60
$50
$40
$30
2005
1
2006
1
2007
1
2008
1
2009
1
2010
2010 YTD Apr 2011 YTD Apr
Source: Smith Travel Research
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JOHN IJBUS
kEAL ESTATE CONSULTING
COMMERCIAL MARKET UPDATE
37
COMMERCIAL MARKET OVERVIEW
JOHN k5 BURNS
fkEAL ESTATE CONSULTING
The purpose of this section is to outline historical and current trends in the commercial real estate market in the greater San Diego area,
both overall and on a submarket level. Items discussed include rents, vacancy, absorption, sales, etc., as summarized in the following
sections. Market data for the retail, office and industrial markets is shown in Slides 46 to 56.
A. Retail
Of all commercial land uses summarized in this section, the retail sector has fared the best in the recent down economy. The retail space
vacancy rate (all types) in the County stands at 5.4% in Q1 11, compared to almost 14.4% for office space and 10.7% for industrial space.
In National City, Walmart has expanded its location to a Supercenter, the redevelopment of Plaza Bonita continues and the cities of
National City and Chula Vista are in the process of co -developing a 25-acre parcel of land with Sudberry Properties on the north side of
Highway 54 into a 270,000 square foot retail/commercial center anchored by a Lowes home improvement store. This is all a promising sign
given all of the economic uncertainty that exists today, but a highly competitive market for any new retail proposed to the west of the
freeway in the project area. There is no residential population in the study area west of the freeway (there are some residents fairly close to
the study area, to the east of Interstate 5), a retail project would need to address area businesses, and attract retail users from outside the
immediate area (i.e. with a unique concept, retailers or mix of users, etc.).
The following points summarize current retail market trends in San Diego County:
• The total amount of Gross Leasable Area (GLA) in San Diego County is at 137.8 million SF, with 7.3 million SF of vacant space (5.4%).
Over the past four years, the overall San Diego County market has seen a decrease in the vacancy rate.
• The total amount of Gross Leasable Area (GLA) in San Diego County is at 57.175 million SF, with 2 million SF of vacant space (3.6%).
This is for General retail space only, which represents about 40% of all retail space in the County. According to CoStar, this includes
"single -tenant freestanding general-purpose commercial buildings with parking; many single retail buildings fall into this use code,
especially when they don't meet any of the more detailed use code descriptions." A building like the Busters restaurant at the Marina
Gateway project falls into this category.
• Other identified retail categories in San Diego County include Malls (14.3 million SF, 2.9% vacancy), Power Center (9.9 million SF, 6.4%
vacancy), Community, Neighborhood and Strip Shopping Centers (54.68 million SF, 7.7% vacancy) and Specialty Center (1.56 million
SF, 3.0% vacancy). A Power Center is a center that consists of several freestanding (unconnected) anchors and minimal small,
specialty tenants — it usually dominated by several large anchors. A Specialty Center combines Airport Retail, Outlet Centers and
Theme/Festival centers that are typically oriented to tourists (i.e. Seaport Village in Downtown San Diego).
• The preferred plan now being envisioned for the Marina District offers up to 20-acre areas that could accommodate larger retail projects
(among other land uses).
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COMMERCIAL MARKET OVERVIEW
JOHN I BUNS
REAL ESTATE CONSULTING
• The South Bay Submarket (where National City is located) has 6.0 million SF of general retail space (5% vacant), 2.6 million
SF of Mall space (1.6% vacant), 1.2 million SF of power center space (less than 1 % vacant), 8.7 million SF of shopping center
space (6.2% vacant) and Specialty Center 533,000 SF, 0.7% vacant — this category is the outlet center in San Ysidro).
• The average Asking Rent for General retail space in San Diego County fell over 17% from a recent peak of over $27 per
square foot in the third quarter of 2007 to $22.25 per square foot in the first quarter of 2011. Rental rates are still down from
year ago levels.
• When considering Total Retail Space in the South Bay Submarket (trend information is not provided for General retail
space on a submarket level), overall supply is at 19.1 million SF, with vacancy of 4.7%. The average rent fell 13% from its
peak of $23.41 per square foot in the third quarter of 2007 to $20.24 per foot in the first quarter of this year. There has been
limited recent construction of retail in San Diego County, with only 31,000 SF under construction county -wide in Q1 2011, and
about 6,000 SF in South Bay.
• Total Retail Sales in San Diego County hit bottom in 2009, and have increased through 2010. Retail sales peaked in 2007,
and then started to decline with 2% to 12% annual declines in fiscal years 2008-2010. Now, sales are again climbing, with a
total of 10.3 Billion in 2010, up 6.1 % from 2009.
• In National City, sales peaked at $1.59 billion in 2006 (up 35% from 2000), and may have fallen to as low as $1.1 billion in
2009. From 2000 to 2006, National City generally captured 3.3% to 3.5% of total county sales, but this capture rate fell to only
2.7% through Q1 2011. The primary National City retail sales categories are motor vehicles and parts (34%), general
merchandise (13%) and eating & drinking places (11%).
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COMMERCIAL MARKET OVERVIEW
JOHN k5 BURNS
A. Retail (continued)
DEAL ESTATE CONSULTING
• The City reports that the reduction in city-wide retail sales is related less to a reduction in retail sales (although the
recession has impacted those), and more to the impact of a lasting decline in sales of trusses by Dixieline/Probuild
and this skew on sales in just the City.
Overall, the retail market in San Diego has stabilized somewhat from the economic downturn, presenting
opportunities for the development of well -located retail concepts. There is demand for new space of various
types over the next five years in the 5, 10 and 20-mile radius from the subject site within which demand for
specific retail types would typically emanate. At the same time, the retail industry is changed and many large -box
retailers have scaled back business or gone out of business as consumers re -think how they are spending dollars (i.e.
Borders). Key to success of new retail locations is area demographics, the size and type of local employment base,
competition, draw/access patterns and synergy of other uses. The Preferred Alternative improves the opportunity to
meet the needs of various commercial uses by offering larger, contiguous areas and areas that orient to the Bay,
marina, park and recreation uses.
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COMMERCIAL MARKET OVERVIEW
JOHN k5 BURNS
B. Office
DEAL ESTATE CONSULTING
As mentioned above, vacancy for office space in San Diego County is highest among the three commercial land uses discussed here — a
clear result of a down economy. In a region struggling with high levels of job loss and downsizing, there has been very little new office
construction in recent years. The South Bay (and National City) is one of the smaller office concentrations in the county. The following
points summarize regional and local office market trends:
• Over the past five years, San Diego County has lost 8.70% of its office -employment jobs, while at the same time posting an 8.6%
increase in inventory. The result was an increase in office vacancy.
• The Total Rentable Square Feet (TRSF) of office space in San Diego County continued an upward trajectory from 2001, rising from 93
to 110 million square feet in Q1 2011. The South Bay submarket (where National City is located) represents only 9% of this total, or 10.3
million square feet (most of which is Class C). Of the 10.3 million square feet in South Bay, just 686,000 SF is considered Class A, and
this space has a 41% vacancy rate.
• The average Asking Rent for office space overall peaked in the second quarter of 2008 at $32.16 per square foot, but has since fallen
20% to $25.62 per square foot through the first quarter of 2011. While the amount of Class A space in the South Bay Submarket is one of
the smallest in the county, it is also the second cheapest for Class A space at $29.24 per square foot. The overall average (all class
types) in the South Bay is currently at $22.79 per foot, which is down 15% since the peak in late 2007.
• Average Vacancy for San Diego County office increased considerably from 2005 as the economy peaked and starting to decline,
reaching a high of nearly 16%. It has declined somewhat in the past year, aided by a slowdown of new construction, an improving
economy (especially in key North County areas), and low lease rates that are prompting businesses to trade locations to lower costs of
occupancy. The South Bay is home to the highest vacancy rates for Class A space among of all the submarkets (in spite of its relative
affordability) at over 41 %. However, much of this area's space is Class B and C, yielding an overall average vacancy closer to the county
average at 14.6%.
Current market conditions do not imply an opportunity for the successful absorption of new office space in the County or the
Submarket, and conditions will not likely improve until the economy picks up further and local jobs are added. At the same time,
redevelopment activities in Downtown San Diego and Barrio Logan are "re -locating" some employment and the National City waterfront
area, which offers some of the only remaining marine -industrial land in the region, is a logical expansion area that could support built -to -suit
office (and industrial) additions despite an otherwise weak regional commercial market.
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COMMERCIAL MARKET OVERVIEW
JOHN BU�NS
C. Industrial
REAL ESTATE CONSULTING
Industrial space does not benefit from the strong demand that retail space does, but it also is not currently subject to the major
decline in demand that the office market is faced with. Industrial and manufacturing uses, often related to maritime activities and
trade are the best established current land use in the Marina District area at this time. The following points summarize industrial
trends.
• The Total Rentable Square Feet (TRSF) of industrial space in San Diego County also increased consistently from 2001 to
2008, rising from 177 to 193 million square feet. There has been little development in the past few years. The South Bay
Submarket (where National City is located) represents 16.3% of this total, or 31.5 million square feet — the third largest
submarket in the county.
• The average Asking Rent for industrial space overall peaked in the second quarter of 2008 at $12.23 per square foot, but has
since fallen 29% to $9.59 per square foot through the first quarter of 2011. While the amount of this space in the South Bay
Submarket is one of the largest in the county, it is also the least expensive submarket at $6.78 per square foot.
• Average Vacancy for industrial increased considerably from 2005 to date, peaking at about 11 % for most of 2009/2010. The
industrial vacancy rate was at 10.7% at the end of first quarter 2011, after several quarters of positive net absorption. In spite
of the South Bay's inexpensive rents, it had the highest vacancy among the county's submarkets in first quarter 2011 at
13.9%.
• National City specifically, has 4.1 million SF of industrial space in 288 buildings. The City has a 7% vacancy rate (versus 10.7
county -wide) and lease rates that average $8.25 versus $9.59 in the overall county.
Industrial market conditions in San Diego County have also declined in the past few years, but are starting to show
signs of improvement. An area like National City will always be attractive for this type of space due to its access to the port, to
Downtown San Diego (where redevelopment is reducing land availability for maritime uses), the Navy, the airport, local
freeways and rail lines. Some existing area tenants are developing new business areas and others are committed to expanding
as business conditions improve.
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RETAIL SPACE TRENDS
JOHN IBURJS
REAL ESTATE CONSULTING
Total retail space in San Diego County has generally continued to rise over the past few years, while retail supply in the South
Bay appears to have reached a plateau.
8,940 —
8, 930 —
8, 920 -
v 8,910 —
m 8, 900 =
c 8,890
18,880
E 8,870
Z 8,860
8, 850
TOTAL GENERAL* RETAIL SPACE
I I I I I III
Numberof Buildings
—0— Gross Leasable Area
II.I.I.I.I.II
— 57,500,000
57,000,000
— 56,500,000.
— 56,000,000 m
— 55,500,000.
— 55,000,000 2
54,500,000
N- N- N- CO CO CO CO m rn rn rn o_
0 0 0 0 0 0 0 08 8 0 0 0
0
4, 000
3,500
3,000
u 2, 500
a2, 000
'51,500
-1,000
:y 500
9
E 0
z
TOTAL GENERAL* RETAIL SPACE BY SUBMARKET
— 25,000,000
Numberof Buildings
—0—Gross Leasable Area
�rkra\ Sallo��G°J�tyEaSiC,0 5°J���ahrsa� \e0 �5 G°O• 0(
— 20,000,000
— 15,000,000g
4
— 10,000,0002
— 5,000,000 d
J
0
0
1,640
01,635
1,630
51,625
-1,620
t1,615
E1,610
Z1,605
1,600
SOUTH BAY TOTAL RETAIL SPACE
i I I
Numberof Buildings
— --Gross Leasable Area
I I I I I I I I 1 I I I I I
r— r— Co Co Co CO 0) 0) 0) o) 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0
CV C) <}' CV N) d' CV C) 4. N C) ct
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 a
19,200,000 ,y)
19,100,000 m
19,000,000
18,900,000 '
18,800,000 fu
18, 700, 000
18,600,000 �g
18, 500, 000 ~
Numberof Buildings
—0—Gross Leasable Area
hilliffitillIRIRAh...._.
`General retail is defined as single -tenant , free-standing general purpose commercial buildings with parking.
Source: CoStar
6,000,000
5,000,000
m
4,000,000
3,000, 0000
2,000,0002
1,000, 000.
0 c
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RETAIL RENT AND VACANCY TRENDS
JOHN I5BUPJS
REAL ESTATE CONSULTING
Retail rents in both the county and in the South Bay continue to decline, while vacancy appears to have stabilized somewhat.
Quoted Lease Rates
$30.00
$28.00
$26.00
$24.00
$22.00
$20.00
$18.00
$16.00
$14.00
$12.00
$10.00
AVERAGE RENT VS. AVERAGE VACANCY FOR GENERAL* RETAIL
SPACE
0 0 0
0 0 C
0
ICI
CO CO CO O rn 0) rn o 0 0 0
0 0 0 0 0 0 0
! ENE Quoted Rates
4.5%
-4.0%
- 3.5%
3.0%
2.5% c>i
2.0% v
as
1.5%>
1.0%
0.5%
0.0%
AVERAGE RENT VS. AVERAGE VACANCY BY SUBMARKET
$35.00
$30.00 -
ia
IX $25.00 -
a)
A $20.00 -
a)
v $15.00 -
O $10.00 -
a $5.00 -
$0.00
• °0\e9° �\eg° G°mod°t
N°��sa
Quoted Rates
-0- Vacancy
S°U30 N°�rG°°r<y �aS�G°urty
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
as
c
m
Source: CoStar
Quoted Lease Rates
$28.00
$26.00
$24.00
$22.00
$20.00
$18.00
$16.00
mIN
SOUTH BAY SUBMARKET AVERAGE RENT VS.
AVERAGE VACANCY FOR TOTAL RETAIL SPACE
Quoted Rates
-0-Vacancy
1 1 1 1 1 I•I•I•I•I•I•I•I•I
- 6.0%
- 5.0%
- 4.0%a
- 3.0%(13
2.0%>
- 1.0%
1 0.0%
roo co co co cc cc rn cc o 0 0 o
PPPPPPPP PPP
(N a) 'c}' N a) it N M <1- N a)
C7 C7 0 0 0 C7 C7 0 C7 0 0 C7 0 C7 C7 0
Quoted Lease Rates
$45.00
$40.00
$35.00
$30.00
$25.00
$20.00
$15.00
$10.00
$5.00
$0.00
AVERAGE RENT VS. AVERAGE VACANCY
,
BY AREA (Q1'11)
- 7.0%
- 6.0%
- 5.0%
- 4 . 0 % cTi
- 3.0% v
ns
Quoted Rates
Vacancy
I I IN
I I - 2.0% >
1.0%
SIN 0.0%
oaao�`ao Q �e a� o J`o a\o `ac�yQ Moore �P50. yea c�a.� y�5'aNa9. a° a coo oeyao �� y� as ao� ate J.�G
Go��o°�o�o Ga`rQ-ay oo �o940,4•Qoea4s`,,v- 4
aooe Q'S,ze,g'Ooo'44tao /
GaarGa���
GQ�O\�a5 e
aA
ego mac
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RETAIL ABSORPTION
JOHN BUK\JS
II`EAL ESTATE CONSULTING
Over the past four quarters, retail space in San Diego County overall is generally being absorbed. In the South Bay, however,
there has been a decline in demand.
400,000
300,000
200,000
100,000
0
(100,000) =/
(200,000)
(300,000)
NET ABSORPTION (RBA)
❑ San Diego Overall
■ South Bay
r` CO co CO co O 0) rn 0) O O O O r
O O O O O O O O O O O r r r r r
- - - - - - - - - - - -
N (Y) r N C*7 r N C*� r N CY) r
O 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
*SD Overall=General Retail; South Bay = Total Retail
Source: CoStar
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RETAIL SALES
JOHN I5BUPJS
REAL ESTATE CONSULTING
Retail sales, which are ultimately the driver of demand for new retail space, are down to the lowest level in the past decade in
National City. In the first quarter of 2010 (the latest available data), the Motor Vehicles & Parts sector commanded the highest
portion of overall activity (due to the presence of the National City Mile of Cars regional auto shopping mall).
Annual Sales
$1,800,000
$1,600,000
$1,400,000
$1,200,000
$1,000,000
$800,000
$600,000
$400,000
$200,000
$0
NATIONAL CITY RETAIL SALES
National City Retail Sales
% Capture of County
2000 200\ 20022- 200 2006 2006 2001 `200$ 7--CPC-
— 4.0%
— 3.5%
— 3.0%
— 2.5%
— 2.0%
— 1.5%
— 1.0%
— 0.5%
0.0%
Percent Capture of County
Source: California Employment Development Dept. (EDD)
National City Retail Sales by Business (2010 Q1)
Other Retail
6%
Service Stations
7%
General
Merchandise
13%
Food
3%
Home
Furnishings
Building & Appliances
Materials 1%o
2%
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OFFICE SPACE TRENDS
JOHN IBURJS
IkEAL ESTATE CONSULTING
There has been very little new office space built anywhere in San Diego County since 2008. The South Bay (and National City)
are among the smallest office markets in the county.
Number of Buildings
5,400 —
5,300
5,200
5,100
5,000
4,900
4,800
TOTAL OFFICE SPACE
Number of Buildings
Rentable Building Area
— 95,000,000
— 90,000,000
c3 04 4CS) (9Ix Q1 0A 004 O�' .O°' ,O°' ,O�' .NO
°L 0 Cr 0- 0 C• 01' 04
85, 000, 000
115, 000, 000
110,000,000 it
105,000,000
100,000,000 m
cad
c
m
ce
0
TOTAL OFFICE
SPACE BY SUBMARKET AND CLASS
30,000,000
25,000,000
20,000,000
15,000,000
10,000,000
5,000,000
0
a`SaPQG0000 m0• ‘A
erica G 5a 59 I�2C`aoc
Genic 400c eVo Nwi`1
°ClassC
■Class B
oClassA
Source: CoStar
1,185
is 1,180
1,175
•• 1,170
m 1,165
1,160
.0 1,155
g 1,150
Z 1,145
1,140
1,135
SOUTH BAY SUBMARKET OFFICE SPACE
Number ofBuildings
Rentable Building Area
I I I I I I I INI MI E •I•I•I■I
h h 01 4' O`b Ovb .4°' ,0 0 ,O .,,4
10, 400, 000
10, 300, 000
10, 200, 000
10,100, 000
10, 000, 000
9,900,000
9,800,000
Total Rentable Square Feet
Num berof Buildings
—0—Rentable Building Area
16,000,0001
14,000,000 u-
12,000,000
10,000,000
8,000,000 m
6,000,000 d
4,000,000
2,000,000
0
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OFFICE RENT AND VACANCY TRENDS
Office rents in both the county and in the South Bay appear to ha
while still high - appears to be stabilizing. Rents in National City
county, but vacancy is among the highest of all areas in the region.
Quoted Lease Rates
$34.00
$32.00
$30.00
$28.00
$26.00
$24.00
$22.00
$20.00
1,
AVERAGE RENT VS. AVERAGE VACANCY
Quoted Rates
+Vacancy
l•I�I IElEI I•l I
Ocg, 00 OOA 40< 44, 01 00'b �os 00 0 OO AO �O NO
'1. `L `I. `I. `>, `L `L C~ 61' Cab ct` c?` C}�
16.0%
15.0%
14.0%
13.0%
12.0% c
11.0% cf6i
10.0% >
9.0%
8.0%
7.0%
6.0%
NET ABSORPTION BY SUBMARKET AND CLASS (Q1'11)
200.000 -(
150,000
100,000 1'
50,000 t
0
(50,000) 1/
(100,000) -1'
(150,000) I
sT
0.10.1031
Genic z \ SarOGo O0,44 hGsnit°G�taodot
\ h Z
�o�
DCIassC
■Class B
DCIassA
Source: CoStar
JOHN I�BUI�NS
kEAL ESTATE CONSULTING
ve dropped enough over the past few years that vacancy -
specifically are generally low relative to other areas of the
Quoted Lease Rates
$28.00
$26.00
$24.00
$22.00
$20.00
$18.00
$16.00
SOUTH BAY SUBMARKET AVERAGE RENT VS. AVERAGE VACANCY
!! I
O QL otec Rates
-4- Vacancy
(P 04' •OQ sOcb O°' C)< OC' 4' ,�O \O N0 N4 .N
0, CEO Cry 0, C CIO 0, 0 0 0- Cyr 0 o,
16.0%
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
Quoted Lease Rates
$50.00
$45.00
$40.00
$35.00
$30.00
$25.00
$20.00
$15.00
$10.00
$5.00
$0.00
1�1
AVERAGE RENT VS. AVERAGE VACANCY BY AREA (Q1'111
11
Quoted Rates
t Vacancy
1 1 1 1-1 1 1 1 I1 1 11111
1111 111 1
- 40.0%
- 35.0%
- 30.0%
- 25.0%
- 20.0%
- 15.0%
10.0%
5.0%
0.0%
Q` e° cesc a°°G` eaa°`�.4, ,,ac�`4� 4,..m. �.pc cfr,,ao zae ya ce�c9 ��° za5 e5zay` Aca4_ °y�e
G G„�oa� yea J�Q-c m o �cc e QJ,. �' \Q'.�O�aoG
,�°k, . �mG o G g �,�.QQ O O f5 Fi�\Q, ye °<<e 0o C2 a`°(C \4eeat J �5e`'e4�°,``+5
a°�O q' SAL''' 5 0,,b ,Q`°A,�, CP` g G�e�55o �F- �a el�
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OFFICE RENT AND VACANCY TRENDS BY CLASS
JOHN I5BUR TS
REAL ESTATE CONSULTING
Vacancy for Class A space is the highest in South Bay, suggesting value is a more important driver, though rents are still among
the lowest of all submarkets there.
45.0%
40.0%
35.0%
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
CURRENT (Q1'11) VACANCY BY SUBMARKET
ClassA —
M Class B —
ClassC —
■
SoUt `0 �� ��d \y Go�doO° a Sa�O`c0sa�O`e10 G°ado<cp oGe ° 000
N Ger N°°fir
Source: CoStar
$40.00
$35.00
$30.00
$25.00
$20.00
$15.00
CURRENT (Q1'11) ASKING LEASE RATES BY SUBMARKET
ClassA
t Class B
Class C
•
�do1 �d°C ao< �\e9° rga`i io \eg° roe .41
5 CP 1$ Go Go;Sar So- po`Nr ges\ G°1° «a\
Nam' NGec\<.4 1\rC,e°
N°
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INDUSTRIAL SPACE TRENDS
Industrial space growth reached a peak in early 2009, both c
largest industrial submarket in San Diego County, National
region based on total rentable square feet.
JOHN IBURJS
REAL ESTATE CONSULTING
ounty-wide and in the South Bay. While the South Bay is the third -
City is considered a mid -sized market among other areas in the
8,800
8,700
8,600
a 8,500
'9 8,400
- 8, 300
d 8,200
£ 8,100
z 8, 000
7, 900
7,800
TOTAL INDUSTRIAL SPACE
Number of Buildings
-0-Rentable Building Area
1 I•I•I•I•I•I•I•
001' 000 0ck oO<0 oO0 o0A 000 O°� ,O°, ,D°, ,O,�O .�O ,�O
L 0 `L `L `L y `L �} •�� o-3 o-
R o-� o-ti
195, 000, 000
190, 000, 000
185, 000, 000
180, 000, 000
175, 000, 000
170, 000, 000
Total Rentable Square Feet
1,800
1,600
c 1,400
'0 1,200
m 1,000
c 800
iu 600
n
E 400
3
Z 200
0
TOTAL INDUSTRIAL SPACE BY SUBMARKET
Numberof Buildings
-*-Rentable Building Area
1 1 1 1
- 40, 000, 000
- 35, 000, 000
- 30, 000, 000
- 25, 000, 000
- 20,000,000
- 15, 000, 000
- 10,000,000
- 5,000,000
I 0
131
ol
N°�rsa N 1$ G°ma s°J�r�Ns Ge s' �a ow vl GoJ *y ��a`�a\ So
Total Rentable Square Feet
Source: CoStar
Number of Buildings
1,130
1,120
1,110
1,100
1,090
1,080
1,070
1,060
1,050
1,040
1,030
SOUTH BAY SUBMARKET: INDUSTRIAL SPACE
- 32, 000, 000
- 31,500,000
- 31,000,000
- 3IIIIIII°'°°'°°°
5
- 30, 000, 000
I Numberof Buildings
- 29, 500, 000
-4-Rentable Building Area
1 I I I I I I I I I I I I I I 29, 000, 000
OboNcibo-t`O\01'cis0°'o-.`(� O�'O� o-N
Total Rentable Square Feet
20, 000, 000
18, 000, 000
NumberofBuildings 16,000,000
-i-Rentable Building Area 14,000,000
12, 000, 000
10, 000, 000
8,000,000
6,000,000
4,000,000
2,000,000
0
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INDUSTRIAL RENT AND VACANCY TRENDS
JOHN IBURJS
REAL ESTATE CONSULTING
San Diego County industrial rents continued to decline into the first quarter of 2011, while vacancy hovered near 11 % (well
above the 7% to 8% maintained from 2002 to 2007). Rents and vacancy in the South Bay, however, suggest that a bottom may
have been reached last year and the market could be turning around. Of course this is helped by the fact that South Bay rents
are the lowest in the county. In National City specifically, both rents and vacancy are quite low, suggesting continued demand
for this type of space at the Subject Property.
$12.50
• $12.00
$11.50
cc
• $11.00
d $10.50
$10.00
c $9.50
a $9.00
$8.50
$8.00
AVERAGE RENT VS. AVERAGE VACANCY
12.0%
11.0%
10.0%
9.0% c
8.0% >
7.0%
11Quoted Rates
-0-Vacancy - 6.0%
11111 5.0%
00 00 O� OcO O� O� O°j O°� O°' O°' �O ,�O ,\O ,\O P\N
`L° ry0 0° L° ,l• o ,l L° O^ 01/ p`5 OD 4° p`I p0 ptx p^
$12.00
If, $11.00
• $10.00
d
N
J $9.00 -
• $8.00
0
Ci $7.00
$6.00
AVERAGE RENT VS. AVERAGE VACANCY
BY SUBMARKET
Quoted Rates
-0-Vacancy
18.0%
16.0%
14.0%
12.0% c
10.0%
- 8.0%
6.0%
■ 4.0%
d°� ve0° coat aos g0 rt� �aot <ro a4
V5 No rSaG�tiia� SJ�a V"5 �� Gea«a\ V.9 1a s°u
e
Source: CoStar
Quoted Lease Rates
$8.00
$7.80
$7.60
$7.40
$7.20
$7.00
$6.80
$6.60
$6.40
$6.20
$6.00
SOUTH BAY SUBMARKET: AVERAGE RENT VS. AVERAGE VACANCY
Quoted Rates
-4-Vacancy
1 1 1 I 1
00 00 01' 0'3 65 65 •O°.,.O C) \
17.5%
15.0%
12.5%
10.0% >
- 7.5%
5.0%
$18.00
$16.00
$14.00
$12.00
$10.00
$8.00
$6.00
$4.00
$2.00
$0.00
AVERAGE RENT VS. AVERAGE VACANCY BY AREA (Q1'11)
Quoted Rates
-0-Vacancy
I I I 11 I 1 11 11 I 1 11 11 I I I I I I I I I
4 G`�a,° �iee
0\e,+p0`cGarya" e", 4e.,c°Q°�`00:4°yu°°oap4s#,,;(' o 0 oc ° 00.tea \e.6\ '�ec0y
eea c oh° " <0 o a° cQQ y5 °ak e fit. ��a'�
°fir g° 5 - ao e� `o° �` e� g�° _o a
Q- SQ0 .;`a o .;;; �,my Sao
35.0%
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
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INDUSTRIAL ABSORPTION
JOHN BUK\JS
(PEAL ESTATE CONSULTING
While in small increments, there was positive absorption of industrial space in San Diego County and in the South Bay in the
past five quarters. The chart below shows quarterly net square footage of industrial space absorbed in San Diego County overall
and in the South Bay submarket.
1,750,000
1,500,000
1,250,000
1,000,000
750,000
500,000
250,000
0
(250,000)
(500,000)
(750,000)
(1,000,000)
(1,250,000)
(1,500,000)
(1,750,000)
QUARTERLY NET SQUARE FOOTAGE ABSORPTION (RBA)
❑San Diego Overall
•South Bay
rn rn rn rn o 0 0
0 0 0 0
EN M d (N c )
C'1 0 C3 0 0 0 U'
Source: CoStar
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JOHN IJBUS
kEAL ESTATE CONSULTING
COMMERCIAL DEMAND UPDATE
53
JOHN k5 BURNS
COMMERCIAL DEMAND (RETAIL, OFFICE, INDUSTRIAL)
DEAL ESTATE CONSULTING
In addition to analyzing trends relative to the various commercial markets here in San Diego, we also conducted a number of statistical
demand analyses based on factors such as household expenditures and job growth. The following sections summarize our findings from
these models for each potential commercial land use at the Subject Property. The demand for additional hotel rooms was discussed in that
section of the report. The demand exhibits are in Slides 57 to 64.
A. Retail
To estimate potential excess demand for new retail space by category in a particular area, we began by understanding what retail
expenditures are by households within that area. This represents local "demand". We then analyze what actual retail sales are by category
within that same area, which represents "supply". The difference between these two numbers is often referred to as "leakage", or
over/under supply. In other words, do residents spend more in total for goods and services than local retail sales reflect? This indicates
that the area is under -served by a particular retail use (i.e. people are spending more money for services than what is reflected in actual
sales, and excess demand or "leakage" exists). Alternatively, do retail sales exceed what local households actually spend? This indicates
that more retail space exists than what is needed, and sales are being generated from outside of the local area.
In fact — National City attracts significant retail sales from outside the City boundaries because of the types of retail located there (people
come to National City from regional area to shop) — including a regional mall (Westfield Plaza Bonita), car dealerships and some "big -box"
retailers like Wal-Mart, Nordstrom Rack and Mor Furniture. Despite a challenging regional economy in recent years, some major retailers
have established new locations in National City in recent years, including Target, Nordstom Rack and Mor Furniture — and Westfield Plaza
Bonita has also been upgraded and expanded with various national and local retailers.
Given this draw to a wider region, we conducted a retail demand analysis for a 5-mile, 10-mile and 20-mile drive around the Subject
Property This analysis (Slides 58 to 60) also indicates demand in some few sectors, including Electronics and Appliance Stores, Building
Material and Garden Equipment Stores, Drugs, Health & Personal Care, Gasoline Stations, General Merchandise, etc, which would help
justify the development of the new retail of various types. There is limited demand in the 5 to 20-mile radius for additional eating & drinking
places (and Buster's is reportedly doing "OK" at best). This spending type can be highly discretionary and depends on mix of uses offered
and ability to draw from a wider region based on the appeal of what is actually developed.
Based on an estimate of typical revenue per square foot by category, this implies that unmet demand for additional square
footage currently exists in some retail sector categories in the 5, 10 and 20-mile radius from the Vision Plan area, although the
ability to attract this space to this location will be dependent on things other than pure demand potential — including concept, mix of stores,
parcel sizes and proximity to target populations (a lack of surrounding residential homes, lower income levels and a trade area that is
constrained by the bay, military base, roadways, etc. will impact developing the site with commercial uses). Success will depend on
attracting concepts that have critical mass and draw and can co -exist and benefit from existing businesses and the growing marina/park
uses in the Marina District area.
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JOHN k5 BURNS
COMMERCIAL DEMAND (RETAIL, OFFICE, INDUSTRIAL)
DEAL ESTATE CONSULTING
Overall, this relative lack of demand and near -term potential is consistent with our 2009 discussions with local brokers as well as the
general trend of rising vacancy and falling rents. As consumer spending improves, this potential improves. The Preferred Alternative has
improved the potential to attract a major commercial component at the site. Prior planning exercises only included small, non-contiguous
areas that did not offer the development footprint singly or in combination that many big -box retailers would be seeking (10 to 20 acres),
and access and visibility are also improved by proposed circulation changes. Retailers today are very picky about new locations given the
reduction in consumer and business spending and prefer locations where there is a critical mass of other retail uses (and this preferred
alternative Vision Plan area could accommodate this).
B. Office
To estimate demand for office space in San Diego County and in National City, we began by understanding what current (2010)
employment is in each of the various industries. From there we estimated what percentage of those jobs required office space, to arrive at
the number of people employed in office buildings. (See Slide 62) It should be noted that the individual industry percentages were
estimated by JBREC with the intention of creating an overall average that matched the amount of office space in San Diego County. For
example, the average number of jobs employed in office buildings in our model in 2010 was 33%, or 442,285 people. Based on an
average square feet of office space per job of 250 square feet (per CoStar), this implies that just over 110 million square feet of office space
should exist in the county — the actual number is 110.3 million square feet, with 94 million SF occupied (some of this space may never be
re -occupied, is suited for special uses or will be re -developed, etc.).
Based on Economy.com's estimated annual growth rate of 1.6% for employment in the County through 2014, this implies that 462,000
people will be employed in office buildings by that time. Assuming the same ratio of 250 square feet per office job, this indicates demand
for approximately 1.2 million new square feet of office space per year county -wide.
CoStar also indicates that in 2008 to 2010, a capture rate of 5% to 10% of county absorption activity was achieved by the South Bay
Submarket. Assuming that rate is accurate through 2014, this indicates demand in this area of anywhere from 61,811 to 123,622 square
feet of office per year. If National City captures 15% to 20% of this potential demand moving forward, this suggests an average annual
demand of 15,000 to 20,000 square feet of new office space per year.
While this level of potential demand is a favorable indicator, the reality is that there is very little active demand for office space of any kind in
the South Bay today. This is illustrated not only by the high vacancy and falling rent trends, but also by our 2009 discussions with local
brokers that indicate significant supply in the area with little to no demand. As such, office space does not appear to present an ideal use at
the Subject Property in the near term, though this opportunity may be enhanced as the local economy improves and existing space is
absorbed. Demand in the area will also result from the expansion of existing and new port tenants (often built to -suit for a specific user).
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JOHN BU�NS
COMMERCIAL DEMAND (RETAIL, OFFICE, INDUSTRIAL)
C. Industrial
REAL ESTATE CONSULTING
As presented in Slide 63, a similar process of estimating demand was conducted to that of the office sector above. In this case,
we began with the same current employment figures by industry, estimated the percentage of total jobs that occur in industrial
buildings, and compared that to the number expected for 2014. The result is a total demand estimate of approximately 1.576
million new square feet per year county -wide. Since the South Bay Submarket typically captures 10% to 20% of total
absorption activity, this indicates demand in the Submarket of 157,000 to 315,000 square feet per year. National City's current
supply of this type of space represents approximately 14% of the Submarket's supply, which can be translated into annual
demand of just under 34,000 new industrial square feet per year.
Our 2009 discussions with local brokers indicate that while short-term market conditions may be somewhat competitive,
National City is a desirable industrial market (particularly near the port/Navy west of Interstate 5), and any amount of space that
is offered at the Subject Property is likely to be absorbed fairly quickly.
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PARKS
JOHN BU�NS
D. Parks
REAL ESTATE CONSULTING
To estimate "demand" for new parks in National City, we analyzed San Diego County as a whole to determine which cities
and/or zip codes have the most amount of park space and which have the least. This was determined by both the ratio of park
acres as a percent of total developable acres as well as the ratio of population per park acre.
Of the 19 jurisdictions in San Diego County, the City of National City ranks 17th in terms of park acres as a percentage of total
developable acres (2010 estimate).
Not surprisingly, the areas with the highest percentage of parks per acre are in outlying parts of the county — central/infill
portions of the county are typically much lower. As of 2010 National City is also expected to rank 16th among 19 jurisdictions in
terms of population per park acre, and could fall to 17th place by 2030.
Central parts of San Diego County — i.e. those with the highest population density — tend to have the highest population per park
acre. In addition, the City of National City is expected to grow by 700 people per year through 2015. Since its current ratio of
population per park acre is 213, this implies demand for 3.28 new park acres per year over the next five years.
Overall, this indicates that National City and the greater central San Diego region appears to be "under -parked", and would
benefit from the construction of additional park space in the Marina District area. In any case it is envisioned as an active park
with an aquatics focus that has a regional (not purely local) draw and can be tied into the new "South Bay waterfront"
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RADIUS MAP
JOHN [BUR S
DEAL ESTATE CONSULTING
The 5-mile, 10-mile and 20-mile radius around the study area are shown in the following map. The greatest capture would be
likely at the 5-mile radius, less so as the radius expands and includes other competitive retail areas (for example, the 10-mile
radius area includes Mission Valley and the eastern Chula Vista areas that have significant retail concentrations).
c e a rr
r ivn Od'1C ,'?;. ,: 2UTJ V IMS5.'.:4M3r.r.m dYSVr Ce W»I V_r6. All rlGi?`b
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pigge. akeside°
rij
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Reservoir
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Grande
, Indian
Reseruation
Alpine
Big
L I F 0 R N I F
Loveland
Reservoir
DIEGO
CALII
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RETAIL SUPPLY/DEMAND RECONCILIATION - 5-MILE RADIUS
JOHN BUK\JS
II`EAL ESTATE CONSULTING
This indicates that there is more supply of retail space in the 5-mile radius than there is demand. Some sectors are showing
some current demand potential — including Building Materials, Gasoline Stations, etc. Since it is not logical to assume that all
demand for retail space at the Subject will originate from within a 5-mile radius (and certain concepts may have a wider draw),
we conducted the same analysis for a 10-mile radius from the study area (next page).
RETAIL SUPPLY AND DEMAND RECONCILIATION BY CATEGORY
5-Mile Ring Around the Subject Property
2010
Retail Categories
Motor Vehicle and Parts Dealers
DEMAND
SUPPLY
LEAKAGE
%
-91.6%
Retail Expenditures
by City Residents
$536,382,517
Retail Spending
Within the City
$1,027,523,615
Difference $ Difference
($491,141,098)
Furniture and Home Furnishings Stores
$80,673,816
$122,837,967
($42,164,151)
-52.3%
Electronics and Appliance Stores
$70,068,694
$41,317,486
$28,751,208
41.0%
Buildin• Material, Garden Equip Stores
$90,381,556
$49,536,808
$40,844,748
45.2%
Food and Beverage Stores
$450,596,915
$644,747,190
($194,150,275)
-43.1%
Drug, Health and Personal Care Stores
$107,693,446
$94,858,967
$12,834,479
11.9%
Gasoline Stations
$320,984,164
$260,766,026
$60,218,138
18.8%
Clothing and Clothing Accessories Stores
$118,767,452
$224,821,926
($106,054,474)
-89.3%
Sporting Goods, Hobby, Book, Music Stores
$32,632,951
$30,701,902
$1,931,049
5.9%
General Merchandise Stores
$315,192,379
$495,123,784
$179,931,405
-57.1 %
Miscellaneous Store Retailers
$46,154,525
$41,041,745
$5,112,780
11.1%
Food Service and Drinking Places
$402,591,590
$762,243,443
($359,651,853)
-89.3%
Total
$2,572,120,005
$3,795,520,859
($1,223,400,854)
-47.6%
Source: ESRI, JBREC
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59
RETAIL SUPPLY/DEMAND RECONCILIATION - 1 O-MILE RADIUS
JOHN U5BUI\NS
(PEAL ESTATE CONSULTING
This indicates that there is more supply of retail space in the 10-mile radius area than there is demand. This area includes Mission
Valley, Downtown San Diego and parts of South County with significant retail concentrations — including areas that attract demand
from a wider regional area.
RETAIL SUPPLY AND DEMAND RECONCILIATION BY CATEGORY
10-Mile Ring Around the Subject Property
2010
Retail Categories
Motor Vehicle and Parts Dealers
DEMAND
SUPPLY
LEAKAGE
%
-12.1%
Retail Expenditures
by Area Residents
$2,039,310,338
Retail Spending
Within the Area
$2,285,246,065
Difference $ Difference
($245,935,727)
Furniture and Home Furnishings Stores
$308,491,846
$349,508,612
($41,016,766)
-13.3%
Electronics and Appliance Stores
$266,912,120
$189,156,049
$77,756,071
29.1 %
Building Material, Garden Equip Stores
$341,880,359
$229,572,297
$112,308,062
32.9%
Food and Beverage Stores
$1,686,223,912
$1,886,924,232
($200,700,320)
-11.9%
Drug, Health and Personal Care Stores
$406,818,910
$286,558,958
$120,259,952
29.6%
Gasoline Stations
$1,214,590,544
$1,034,307,068
$180,283,476
14.8%
Clothing and Clothing Accessories Stores
$451,100,809
$600,453,998
($149,353,189)
-33.1%
Sporting Goods, Hobby, Book, Music Stores
$124,826,558
$105,796,041
$19,030,517
15.2%
General Merchandise Stores
$1,188,463,524
$1,265,148,488
($76,684,964)
-6.5%
Miscellaneous Store Retailers
$175,332,252
$163,384,797
$11,947,455
6.8%
Food Service and Drinking Places _ —
$1,526,489,809
$2,280,970,146
($754,480,337)
-49.4%
Total
$9,730,440,981
$10,677,026,751
($946,585,770)
-9.7a/a
Source: ESRI, JBREC
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6U
RETAIL SUPPLY/DEMAND RECONCILIATION - 20-MILE RADIUS
JOHN U5BUK\IS
EZ`EAL ESTATE CONSULTING
In the broader 20-mile area, demand from specific categories tend to emerge — many of which could be logical uses at the
Subject site. At the same time, it becomes harder to capture residents for more general retailers (a resident of El Cajon is likely to
shop at a Lowe's there, rather than drive to National City) — there may be specialty uses (i.e. IKEA, Cabela's) that have regional
draw with a more unique offering. Routes of access to/from an area will also influence where households go to shop.
RETAIL SUPPLY AND DEMAND RECONCILIATION BY CATEGORY
20-Mile Ring Around the Subject Property
2010
Retail Categories
DEMAND
SUPPLY
LEAKAGE
Retail Expenditures
by City Residents
Retail Spending
Within the City
Difference $
Difference %
Motor Vehicle and Parts Dealers
$3,728,906,382
$4,380,670,807
($651,764,425)
-17.5%
Furniture and Home Furnishings Stores
$572,464,040
$654,028,715
($81,564,675)
-14.2%
Electronics and Appliance Stores
$489,320,054
$527,359,354
($38,039,300)
-7.8%
Building Material, Garden Equip Stores
$638,477,265
$415,016,489
$223,460,776
35.0%
Food and Beverage Stores
$3,054,690,422
$3,234,674,388
($179,983,966)
-5.9%
Drug, Health and Persona_ l Care Stores
$747,672,335
$644,433,786
$103,238,549
13.8%
Gasoline Stations
Clothing and Clothing Accessories Stores
Sporting Goods, Hobby, Book, Music Stores
$2,213,740,692
$825,590,822
$228,193,701
$1,747,954,527
$893,377,424
$242,870,506
$465,786,165
($67,786,602)
($14,676,805)
21.0%
-8.2%
-6.4%
General Merchandise Stores
$2,164,731,947
$2,056,715,266
$108,016,681
5.0%
Miscellaneous Store Retailers
$322,559,871
$306,558,905
$16,000,966
5.0%
Food Service and Drinking Places
$2,784,964,174
$3,701,749,335
($916,785,161)
-32.9%
Total
$17,771,311,705
$18,805,409,502
($1,034,097,797)
-5.8%
Source: ESRI, JBREC
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61
RETAIL EXPENDITURES - 5 AND 1 O-MILE RADIUS
JOHN I5BUPJS
REAL ESTATE CONSULTING
The fact that demand is originating from the broader 10-mile radius is favorable since households in the wider area tend to
spend more per capita than those within the 5-mile radius.
RETAIL EXPENDITURES BY RETAIL CATEGORY
5-Mile Ring Around the Study Area
2010
Expenditure Category
Motor Vehicle and Parts Dealers-441
Automotive Parts/Accsrs, Tire Stores-4413
Furniture and Home FurnishingsStores-442
Furniture Stores-4421
Home Fumishing Stores-4422
Electronics and Appliance Stores-443
Building Material, Garden Equip Stores-444
Building Material and Supply Dealers-4441
Lawn, Garden Equipment, Supplies Stores-4442
Food and Beverage Stores-445
Grocery Stores-4451
Specialty Food Stores-4452
Beer, Wine and Liquor Stores-4453
Health and Personal Care Stores-446
Clothing and Clothing Accessories Stores-448
Clothing Stores-4481
Shoe Stores-4482
Jewelry, Luggage, Leather Goods Stores-4483
Sporting Goods, Hobby, Book, Music Stores-451
Sporting Goods, Hobby, Musical Inst Stores-4511
Book, Periodical, Music Stores-4512
General Merchandise Stores-452
Department Stores Excl Leased Depts-4521
Other Gnenearl Merch Stores-4529
Miscellaneous Store Retailers-453
Florists-4531
Office Supplies and Stationery Stores-4532
Used Merchandise Stores-4533
Other Miscellaneous Store Retailers-4539
Foodservice and Drinking Places-722
Full -Service Restaurants-7221
Limited -Service Eating Places-7222
Special Foodseruices-7223
Drinking Places -Alcoholic Beverages-7224
% of
Expenditure Household
Expenditures ($) Per Capita Income
$536,382,517 $1,346 7.07%
$38,045,968 $95 0.50%
$80,673,816 $202 1.06%
$54,790,140 $137 0.72%
$25,883,676 $65 0.34%
$70,068,694 $176 0.92%
$90,381,556 $227 1.19%
$86,493,679 $217 1.14%
$3,887,877 $10 0.05%
$450,596,915 $1,130 5.94%
$424,091,582 $1,064 5.59%
$12,117,957 $30 0.16%
$14,387,376 $36 0.19%
$107,693,446 $270 1.42%
$118,767,452 $298 1.57%
$97,347,656 $244 1.28%
$9.096,462 $23 0.12%
$12,323,334 $31 0.16%
$32,632,951 $82 0.43%
$20,547,465 $52 0.27%
$12,085,486 $30 0.16%
$315,192,379 $791 4.15%
$105,790,453 $265 1.39%
$209,401,926 $525 2.76%
$46,154,525 $116 0.61%
$2,026,197 $5 0.03%
$15,524,916 $39 0.200/0
$2,082,309 $5 0.03%
$26,521,103 $67 0.350/
$402,591,590 $1,010 5.31%
$185,283,219 $465 2.44%
$179,909,999 $451 2.37%
$29,350,604 $74 0.39%
$8,047,768 $20 0.11 %
Total Retail Trade
$2,251,135,841 29.67%
RETAIL EXPENDITURES BY RETAIL CATEGORY
10-Mile Ring Around the Study Area
2010
Expenditure Category
Motor Vehicle and Parts Dealers-441
Automotive Parts/Accsrs, Tire Stores-4413
Furniture and Home Furnishings Stores-442
Fumiture Stores-4421
Home Fumishing Stores-4422
Electronics and Appliance Stores-443
Building Material, Garden Equip Stores-444
Building Material and Supply Dealers-4441
Lawn, Garden Equipment, Supplies Stores-4442
Food and Beverage Stores-445
Grocery Stores-4451
Specialty Food Stores-4452
Beer, Wine and Liquor Stores-4453
Health and Personal Care Stores-446
Clothing and Clothing AccessoriesStores-448
Clothing Stores-4481
Shoe Stores-4482
Jewelry, Luggage, Leather Goods Stores-4483
Sporting Goods, Hobby, Book, Music Stores-451
Sporting Goods, Hobby, Musical Inst Stores-4511
Book, Periodical, Music Stores-4512
General Merchandise Stores-452
Department Stores Excl Leased Depts-4521
Other Gnenearl Merch Stores-4529
Miscellaneous Store Retailers-453
Florists-4531
Office Supplies and Stationery Stores-4532
Used Merchandise Stores-4533
Other Miscellaneous Store Retailers-4539
Foodservice and Drinking Places-722
Full -Seance Restaurants-7221
Limited -Seance Eating Places-7222
Special Foodservices-7223
Drinking Places -Alcoholic Beverages-7224
of
Expenditure Household
Expenditures ($) Per Capita Income
$2,039,310,338 $1,638 7.21%
$143,674,757 $115 0.51 %
$308,491,846 $248 1.09%
$209,641,057 $168 0.74%
$98,850,789 $79 0.35%
$266,912,120 $214 0.94%
$341,880,359 $275 1.21%
5327,069,602 $263 1.16%
$14,810,757 $12 0.05%
$1,686,223,912 $1,355 5.96%
$1,586,518,548 $1,274 5.61%
$45,171,068 $36 0.160/0
$54,534,296 $44 0.190/0
$406,818,910 $327 1.44%
$451,100,809 $362 1.60%
$369,406,220 $297 1.31%
$34,219,003 $27 0.12%
$47,475,586 $38 0.17%
$124,826,558 $100 0.44%
$78,434,900 $63 0.28%
$46,391,658 $37 0.16%
$1,188,463,524 $955 4.20%
$400,766,949 $322 1.42%
$787,696,575 $633 2.79%
$175,332,252 $141 0.62%
$7,716,084 $6 0.03%
$58,695,861 $47 0.21%
$7,951,125 $6 0.03%
$100,969,182 $81 0.36%
$1,526,489,809 $1,226 5.40%
$703,920,981 $565 2.49%
$680,434,372 $547 2.41%
$111,067,945 $89 0.39%
$31,066,511 $25 0.11%
Total Retail Trade
$8,515,850,437
30.11%
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IMPLICATIONS FOR NEW RETAIL SPACE — 10 MILE RADIUS (SQUARE FEET)
JOHN I5BUPJS
REAL ESTATE CONSULTING
This indicates that there is some demand for retail in the 10-mile radius — particularly in the Building Materials, Electronics and
Drug Store categories.
SUPPLY AND DEMAND RECONCILIATION BY CATEGORY
10-Mile Ring Around the Study Area
2010
OPPORTUNITY FOR ADDITIONAL RETAIL SPACE WITHIN A 10-MINUTE DRIVE OF THE SUBJECT
Expenditure Categories
Reconciliation Reconciliation
(Demand - Supply) Median Revenue/SF Opportunity (SF)
Motor Vehicle and Parts Dealers
Fumiture and Home Furnishings Stores
Electronics and Appliance Stores
Building Material, Garden Equip Stores
Food and Beeerage Stores
Drug, Health and Personal Care Stores
Clothing and Clothing Accessories Stores
Sporting Goods, Hobby, Book, Music Stores
General Merchandise Stores
Miscellaneous Store Retailers
Food Service and Drinking Places
($245,935,727)
($41,016,766)
$77,756,071
$112,308,062
($200, 700, 320)
$120,259,952
($149,353,189)
$19,030,517
($76,684,964)
$11,947,455
($754,480,337)
$314
$412
$233
$225
$429
$250
$302
$220
$300
$295
$267
-783,235
-99,555
333,717
499,147
-467,833
481,040
-494,547
86,502
-255,617
40,500
-2,825,769
Total
($1,126,869,246)
$295 -3,485,650
Source: ESRI, JBREC
Food Service and Drinking Places
Miscellaneous Store Retailers
General Merchandise Stores
Sporting Goods, Hobby, Book, Music Stores
Clothing and Clothing Accessories Stores
Drug, Health and Personal Care Stores
Food and Beverage Stores
Building Material, Garden Equip Stores
Electronics and Appliance Stores
Furniture and Home Furnishings Stores
MotorVehicle and Parts Dealers
DEMAND FOR RETAIL SPACE (SF) BY SECTOR
10-Mile Ring Around the Study Area
2010
-2,825,769
2 2
,0O000o�S00OS00000
-255,617
-494,547
-467,833
-99,555
' - S ,72 O �`SO S0O 20
S0
O00 S00 O00 S00 000 0O0 000 000
�0 00 00 00 00 00
40,500
86,502
—1111 481,040
499,147
V333,717
25.000�50.000
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OFFICE DEMAND
JOHN I5BUPJS
REAL ESTATE CONSULTING
Based on expected job growth in San Diego County between 2010 and 2014, typical capture of office space by industry,
historical office demand in the South Bay and existing office supply National City, there does appear to be some demand for
new office space in the study area going forward. It should be noted, however, that this demand will likely be more prevalent
over the long term (local brokers indicate that the near -term opportunity is limited and the commercial space at Marina Gateway
remains vacant several years after completion).
ESTIMATED DEMAND FOR OFFICE SPACE (BASED ON EMPLOYMENT GROWTH)
San Diego County, California
2010 to 2014
Industry
2010
2014
2010 to 2014
Total
Employment 1/
Occupied in Office
Buildings 2/
No. Employed in
Office Buildings
Total
Employment 3/
Occupied in Office No. Employed in
Buildings Office Buildings
Total Emp. Growth
in Office Buildings
New Office SF
Needed 4/
Mining
400
10%
40
418
10% 42
2
447
Construction
55,500
20%
11,100
57,982
20% 11,596
496
124,101
Manufacturing
92,400
10%
9,240
96,532
10% 9,653
413
103,306
Wholesale Trade
39,200
20%
7,840
40,953
20% 8,191
351
87,653
Retail Trade
130,000
10%
13,000
135,814
10% 13,581
581
145,344
Transportation/Utilities
27,500
20%
5,500
28,730
20% 5,746
246
61,492
Finance Activities
67,100
80%
53,680
70,101
80% 56,081
2,401
600,157
Information
25,200
80%
20,160
26,327
80% 21,062
902
225,394
Professional/Business Services
208,000
80%
166,400
217,302
80% 173,842
7,442
1,860,398
Education/Health Services
147,100
45%
66,195
153,678
45% 69,155
2,960
740,079
Leisure/Hospitality
154,600
15%
23,190
161,514
15% 24,227
1,037
259,271
Other Services
47,200
20%
9,440
49,311
20% 9,862
422
105,542
Government
226,000
25%
56,500
236,107
25% 59,027
2,527
631,686
Total
1,220,200
33%
442,285
1,274,769
33% 462,064
19,779
4,944,870
Annual Average
1,236,217
Estimated Annual Capture: South Bay (%) 5/
5% - 10%
Estimated Annual Office Space Absorption: South Bay (SF)
61,811 -123,622
Potential Annual Capture: National City (%) 6/
15% - 20%
Potential Annual Office Space Absorption: National City (SF)
9,272 -24,724
Average (SF):
16,998
Notes:
1/ Per the CA EDD.
2/ JBREC estimate per industry based on overall average.
3/ Based on JBREC expected overall employment growth rate of 0.8% in 2011, 1.0% in 2011, 1.2% in 2013 and 1.4% in 2014.
4/ Assumes 250 square feet per employee, which is generally consistent with CoStar.
5/ Estimated based on capture of the South Bay from 2008 to 2010.
6/ JBREC estimated capture of National City based on NC's capture of the South Bay in Q1'11.
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INDUSTRIAL DEMAND
JOHN I5BUPJS
REAL ESTATE CONSULTING
Using similar methodology to the Office Demand table shown on the previous page, this indicates demand for roughly 34,000
new square feet of industrial space per year in the 2010-2014 period in National City.
ESTIMATED DEMAND FOR INDUSTRIAL SPACE (BASED ON EMPLOYMENT GROWTH)
San Diego County, California
2010 to 2014
Industry
2010
2014
2010 to 2014
Total
Employment 1/
Occupied in
Industrial Buildings
2/
No. Employed in
Industrial
Buildings
Occupied in No. Employed in
Total Industrial Industrial
Employment 31 Buildings Buildings
Total Emp. Growth
in Industrial New Industrial SF
Buildings Needed 4/
Mining
400
10%
40
418 10% 42
2
1,789
Construction
55,500
10%
5,550
57,982 10% 5,798
248
248,202
Manufacturing
92,400
70%
64,680
96,532 70% 67,573
2,893
2,892,562
Wholesale Trade
39,200
35%
13,720
40,953 35% 14,334
614
613,574
Retail Trade
130,000
5%
6,500
135,814 5% 6,791
291
290,687
Transportation/Utilities
27,500
20%
5,500
28,730 20% 5,746
246
245,966
Finance Activities
67,100
5%
3,355
70,101 5% 3,505
150
150,039
Information
25,200
10%
2,520
26,327 10% 2,633
113
112,697
Professional/Business Services
208,000
5%
10,400
217,302 5% 10,865
465
465,100
Education/Health Services
147,100
5%
7,355
153,678 5% 7,684
329
328,924
Leisure/Hospitality
154,600
5%
7,730
161,514 5% 8,076
346
345,694
Other Services
47,200
5%
2,360
49,311 5% 2,466
106
105,542
Government
226,000
5%
11,300
236,107 5% 11,805
505
505,349
Total
1,220,200
15%
141,010
1,274,769 15% 147,316
6,306
6,306,125
Annual Average
1,576,531
Estimated Annual Capture: South Bay (%) 5/
10%- 20%
Estimated Annual Industrial Space Absorption: South Bay (SF)
157,653 - 315,306
Potential Annual Capture: National City (%) 6/
13% - 15%
Potential Annual Industrial Space Absorption: National City (SF)
20,495 - 47,296
Average (SF):
33,895
Notes:
1/ Per the CA EDD.
2/ JBREC estimate per industry based on overall average.
3/ Based on JBREC expected overall employment growth rate of 0.8% in 2011, 1.0% in 2011, 1.2% in 2013 and 1.4% in 2014.
4/ Assumes 1,000 square feet per employee.
5/ Estimated based on capture of the South Bay from 2008 to 2010 (for perspective, 16% of all industrial space in the county is located in the South Bay).
6/ JBREC estimated capture of National City based on current industrial SF in the City versus the South Bay Submarket.
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JOHN BUR S
kEAL ESTATE CONSULTING
LIMITING CONDITIONS
66
LIMITING CONDITIONS
JOHN k5 BURNS
fkEAL ESTATE CONSULTING
The conclusions and recommendations presented in this report are based on our analysis of the information available to us from
our own research and from the client as of the date of this report. We assume that the information is correct and reliable and
that we have been informed about any issues that would affect project marketability or success potential.
Our conclusions and recommendations are based on current and expected performance of the national, and/or local economy
and real estate market. Given that economic conditions can change and real estate markets are cyclical, it is critical to monitor
the economy and real estate market continuously, and to revisit key project assumptions periodically to ensure that they are still
justified.
The future is difficult to predict, particularly given that the economy and housing markets can be cyclical, as well as subject to
changing consumer and market psychology. There will usually be differences between projected and actual results because
events and circumstances frequently do not occur as expected, and the differences may be material. We do not express any
form of assurance on the achievability of any pricing or absorption estimates or reasonableness of the underlying assumptions.
In general, for projects out in the future, we are assuming "normal" real estate market conditions, and not a condition of either
prolonged "boom" or "bust" market conditions. We do assume that economic, employment, and household growth will occur
more or less in accordance with current expectations. We are not taking into account major shifts in the level of consumer
confidence; in the ability of developers to secure needed project entitlements; in the cost of development or construction; in tax
laws that favor or disfavor real estate markets; or in the availability and/or cost of capital and mortgage financing for real estate
developers, owners and buyers. Should there be such major shifts affecting real estate markets, this analysis should be
updated, with the conclusions and recommendations summarized herein reviewed and reevaluated under a potential range of
build -out scenarios reflecting changed market conditions.
We have no responsibility to update our product analysis for events and circumstances occurring after the date of our report.
This analysis represents just one resource that the City of National City, the Port District and PDC should consider when
assessing this Vision Plan.
We relied on the documents, maps and documents provided by the project team, City and Port of San Diego.
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MARKET ANALYSIS
UNIFIED PORT/NATIONAL CITY MARINA DISTRICT VISION PLAN
PREPARED FOR PROJECT DESIGN CONSULTANTS
JOHN It BUINS
I�EAI. ESTATE CONSULTING
4250 Executive Square, Suite 540 San Diego, CA 92037 I 858-558-8384 I www.realestateconsulting.com