Item 6.1 - Land Use Analysis for South Poway Bus. Park
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TO: Honorable Mayor and Members of the City Council
FROM: James L. Bowersox, City Man~
INITIATED BY: John D. Fitch, Assistant City Manager~1r
C# Warren H. Shafer, Director of Redevelo ent Servjces
DATE: November 14, 1995
SUBJECT: Consideration of Phase I Report from The London Group Realty Advisors,
Inc. on the Land Use Market and Feasibility Analysis for the South Poway
Business Park
ABSTRACT
This report follows the City Council meetin9 of August 1, 1995, at which time the
Council's direction was to retain a real estate marketing firm to better understand
what options may exist and their market possibilities for the South Poway Business
Park. This report presents the Phase I findings by The London Group Realty Advisors.
This information will enable the City to better evaluate any proposal received for
alternate land uses and determine whether the City wants to initiate any land use
modifications.
ENVIRONMENTAL REVIEW
This action is not subject to CEQA review.
FISCAL IMPACT
The cost of this contract has already been approved and will not exceed 530,000.
ADDITIONAL PUBLIC NOTIFICATION AND CORRESPONDENCE
A copy of this report will be sent to George Codling, Parkway Business Centre; Sam
Craig, CF Pomerado; Neville Bothwell, Poway Corporate Center.
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RECOMMENDATION
It is recommended that the City Council receive and file this report.
ACTION
c:/data/agenoa/lQnUont.COV
NOV 1 4 1995 ITEM 6.l
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AGENDA REPORT
CITY OF POWAY
TO: Honorable Mayor and Members of the City Council
FROM: James L. Bowersox, City Ma~ ,
INITIATED B~ John D. Fitch, Assistant City Manager~^\
~ Warren H. Shafer, Director of Redevelo ent Services
DATE: November 14, 1995
SUBJECT: Consideration of Phase I Report from The London Group Realty
Advisors, Inc. on the Land Use Market and Feasibility Analysis
for the South Poway Business Park
BACKGROUND
The City Council, at their March 21, 1995 meeting, considered the status of the
South Poway Planned Community, including financial status and outlook, current
allowed land uses and possible new uses. As a result of that meeting, the
Council's direction was to continue to pursue industrial uses and remain flexible
to consider different land uses, except residential. On August 1, 1995, the
Council approved retaining the London Group Realty Advisors, Inc. to conduct a
Land Use Feasibil ity and Market Study, in order to develop a better understanding
of what these options are, and to possibly identify one or more that may merit
further consideration. This report represents the findings for Phase I of this
Study.
FINDINGS
Currently, the South Poway Communi ty Pl an ant i ci pates 788 acres of industrial and
36 acres of commerc i a 1 use in the South Poway Business Park. Of this,
approximately 450 acres of the industrial property have been developed and are
available as finished lots. This leaves approximately 300 acres that are either
undeveloped or partially developed. Over the last several years, alternate land
uses have been suggested for some of this property. Some of these uses have
included a Water Park, a Western Theme Park, an Outlet Mall and others.
Additionally, the light-industrial, research and development, and warehouse and
distribution markets have changed considerably from what existed in the early
1980's when the original Plan was being developed.
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Attached is Mr. London's Phase I report which evaluates the feasibility of major
land uses in the South Poway Business Park. In summary, his findings indicate
the following land uses should be studied in greater detail to determine their
opportunity for success in the Park. They are Industrial, Research and
Development, Commercial Office, Transient Commercial, Auto Dealers, a Golf Course
and Water Park. Not recommended for further study are Repair, Maintenance and
Storage Yards, Theme Parks, and Retail uses. The report details Mr. London's
findings and reasoning. Mr. London will be in attendance to present his findings
and answer questions.
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Phase I Report-The London Group
November 14, 1995
Page 2
ENVIRONMENTAL REVIEW
This action is not subject to CEQA review.
FISCAL IMPACT
The cost of this contract has already been approved and will not exceed $30,000.
ADDITIONAL PUBLIC NOTIFICATION AND CORRESPONDENCE
A copy of this report will be sent to George Codling, Parkway Business Centre;
Sam Craig, CF Pomerado; Neville Bothwell, Poway Corporate Center,
RECOMMENDATION
It is recommended that the City Council receive and file this report.
Attachments: Phase I Feasibility Report of Major Land Uses in the South
Poway Business Park
c:\dat8\8gend8\londonl.rpt
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~ THE LONDON GROUP
REALTY ADVISORS, INC
Phase I
Preliminary Evaluation
of Candidate Land Uses
Prepared for
City of Poway
October, 1995
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ATTACHMENT
4275 Executive Squ3re. Suite 1020. La Jolla, CA 92037NOV 1 4 1995 ITEM 61
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Phase I: Pre1imi1W1'Y Evaluation o/Candidate Land Uses 1
I. Introduction 2
II. Conclusions 4
III. Demographic and Economic Overview 7
The Primary Market Area 7
The SccoDdary M&Ji(et Area 9
SID Diego Cowrty 10
IV. Market Analysis 12
IDdustriaJ U
Researcb ,. Developmeat (R&D) 15
Commen:iaJ Office 17
MoteIIIIotd 19
Table ofSu Die&o Bold IDveDtory 1980-1994 20
Table Compariloo: Su Die&o Couoty ud 1-15 Corridor BoteIIMotd 22
Golf Coone AoaI)'Jis 23
Competitive Supply 23
Table of Golf Coarx Supply for SoutberD CaJifonlia 2S
Daoud For Golf 26
RecoociIidoD 26
Water Park 27
Table of Comparable Wider Parks 28
AtIaIdaDce: 29
,,11m;...... Prices 29
Subject Site 30
RdaiI 30
Table Summary ofSu Die&o Fa:Iory Outlet MaD 33
Table Summary ofSu Die&o Nortb Couoty Fa:Iory Outlet MaD 34
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Phase I: Preliminary Evaluation of Candidate Land Uses
I. Introduction
This report addresses the findings of the Phase I analyses of The London
Group Realty Advisors, Inc. Market & Feasibility Study of the South
poway Business Park. This is part of a three phase assignment on behalf
of the City of Poway which will ultimately result in a comprehensive
market analysis as well as offer marketing recommendations and prepare
collateral material to market the industrial park.
The purpose of the Phase I assignment is to examine the general real
estate market and evaluate its opportunities in sufficient detail so as to
narrow the 'universe' of market opportunities: recommending those land
uses which should be studied in detail during Phase II of our analysis.
To accomplish this, we have divided our work into two tasks.
Task 1: identify and review the economic, demographic and general real
estate characteristics, trends and projections for the poway and North
County Inland competitive market area, including:
. Population, existing and projected
. Demographics of this population
. Employment characteristics
Task 2: Identify and evaluate possible land uses for the site. The
candidate land uses which we have reviewed and which are summarized
in this report, include:
. Industrial
. Commercial offICe
. Transient commercial: including hotel/motel
. Golf course
. Reaeation uses or theme oriented park.
. Retail
We have carefully evaluated each of these proposed land uses to .
detennine a) if there is a general 'fit' in the project for such a use and b) if
so, do preliminary supply and demand factors support a more detailed
analysis which would be carried out in Phase II?
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This report addresses the findings of each of these tasks. We have now
initiated Phase II of our analyses, which is the comprehensive supply and
demand analysis of those land uses which we believe should be
addressed in greater detail during in the Phase II report
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II. Conclusions
We have conducted a comprehensive study of proposed land uses which
might be accommodated at the South Poway Business Park. The
emphasis of this analysis is on those land uses which lend themselves to
market analysis. Special uses, such as recreational uses which have
regional appeal are subject to a compatibility test with the prevailing uses,
in this case industrial and commercial.
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Based on our Phase I analysis, we recommend that the following land
uses be studied in greater detail to determine their opportunity for success
at the Poway Industrial Park:
~ Industrial: The San Diego County' industrial market has shown
strong signs of recovery over the past 18 months and appears to
be enjoying the fastest rate of recovery. of any of the land uses
reviewed. Vacarq rates have been coming down over this period
to a point where investment and development opportunities now
exist, particularly in well located sub-markets and in good quality
business parks. The South Poway Business Park qualifies under
both of these aiteria. There will soon be a shortage of good
properties. This is a time of strong recovery in the industrial sector
and Poway should benefit from good timing and having the right
'product' available.
~ Research & Development (R&D): The R&D market has
traditionally been stronger in the coastal north corridors in locations
such as Torrey Pines Mesa, Campus Point, Sorrento Valley and
Sorrento Mesa. In fact, the growth. in the R&D sector has
principally been responsible for a recovery in these market areas.
V\lhile poway is not the prime location for this type of user, it can
become a candidate location for R&D firms if the setting is right
and if marketing efforts encourage them.
~ Oonvnercial Office: The office market is the weakest of the San
Diego County real estate sectors, yet we believe there is
opportunity for offICe product in Poway. The strength of this
conclusion lies in the opportunity for multiple purpose uses in the
South Poway Industrial park, such as with buildings that can
alternatively house administrative and even showcase retail
functions in the front, and warehousing or manufacturing functions
to the rear of the same structure. VVe believe that there will
eventually be opportunities to develop stand alone commercial
offICe buildings, although we do not expect this opportunity to
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--, present itself in the near term future until the office market
throughout the County rises out of a high vacancy, flat or even
weakening leasing situation. Vet, certain markets are stronger than
others and Poway presents itself as a good opportunity for firms
which desire a location convenient to employees residing along the
1-15 corridor.
~ Transient Commercial: Our study of the transient commercial
market, including hotels and motels, shows that this is a recovering
market. Frankly, the market is in better shape than we would have
anticipated just one year ago. While we do not believe that Poway
offers an opportunity for a large or top flight hotel, we do expect
that a transient facility serving principally the commercial market,
and to a lesser extent the visitor market, can eventually be
successful at this location. The opportunity for this use increases
significantly should visitor oriented facilities be developed here.
~ Golf Course: There is a San Diego County as well as a Southern
California shortage of golf courses, particularly those which service
a broader range of the market and are not high end membership
courses. poway would be an ideal location for another such facility.
Moreover, a golf course can fit quite nicely in a business park,
adding to the attraction of the park and ultimately contributing to
the value of the area.
~ Water Park: We believe that a water park facility, if located
correctly within the park (e.g. away from the main industrial and
commercial areas and in a location adjacent to other recreational
uses) can be successful in Poway. There are virtually no other
large facilities of this type presently located in San Diego County,
and the Poway location is most likely ideal from the standpoint of
centrality in the marketplace, climate, and strong demographics
(e.g. families and children). The key is that the project be large
enough and with strong operators so that it may operate solely as
a water park without the requirement for other supplemental
revenue sources.
~ Winery: If golf course and hotel elements are included at the
subject site, we recommend that the City encourage
complimentary uses. This would include recreational or leisure
uses_ One such use which has come to our attention is a winery
which would serve tourism, dining and leisure activities. The
concept would be to reserve an area for this type of use which
enhances the attraction of the business park to industrial and
commercial users.
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=:> Auto Dealers: Poway Road is the current location for the area's
auto dealers_ However, with the near-term construction of the
Parkway, we believe that it is now time to consider relocating these
users to a reserved section at the subject site at which a modem
auto pari< can be developed in what will become a substantially
higher visibility, high traffic location_ We believe that this is
ultimately a matter of survival to this important industry in Poway.
We do not believe that the following land uses should be pursued further
at this time:
=:> Theme Park: We are aware of and have examined a proposal for
a western oriented theme pari< at the South Poway Business Park.
We can find no compelling reason to aggressively pursue this idea
at this time and as currently proposed. We see the theme pari<
idea as being highly speculative and, in any event, as proposed is
essentially a large western themed specialty retail center, hotel
and rodeo, together making it some of the most difficult type of real
estate development to put together and make successful.
=:> Retail: We have evaluated the concept of an outlet mall at the
South Poway Business Park. The weakness of this use lies
principally in the fact that the ideal location for such a use is one
which has visibility from the 1-15 freeway corridor. Otherwise, this
becomes a 'destination' location and significantly detracts from its
opportunity for success.
=:> Repair, Maintenance & Storage Yards: \lVhile there is
undoubtedly a need in Poway for certain quasi-industrial functions
such as open-air repair, maintenance and storage facilities, we
believe that the subject site should allow for a limited number of
these uses. There is an incompatibility between this type of user
and other types of manufacturing, storage, distribution, R&D and
office facilities. If these latter uses are to be targeted, than open-air
facilities should be approved by the City on a very selective basis.
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The remainder of this report addresses our findings_
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III. Demographic and Economic Overview
We have composed three levels of market areas for the purpose of this
analysis, including:
Primary Market Area (PMA): this consists of the immediate Poway area,
identified as that geographic area which is within the 92064 Zip Code.
Secondary market area (SMA): this area includes what we teon the 1-15
Corridor, an important geographical corridor which includes seven
different zip codes running from north of Escondido to just south of Poway
(92131, 92064, 92128, 92127, 92029, 92025 and 92026). Among the
communities included in the SMA are Poway, Scripps, Penasquitos,
Carmel Mountain Ranch, Rancho Bernardo and Escondido.
Tertiary Market Area: consisting of the entire County of San Diego.
Demand for many of the prospective uses at the South Poway Business
Park are regional, particularly the industrial uses and recreational
proposals. Therefore, we view the demographics of the region important
in understanding overall demand propensities for the site.
These market areas are not necessarily synonymous with community
boundaries. Rather, they are designed to address a practical outline of
geographical area from which the different levels of market demand are
expected to be drawn. A discussion of each follows.
The Primary Market Area
The PMA shows modest growth in both population and number of
households over the ten year period between 1990 to 2000:
Primary Market (PMA)
1990 1995 2000
Total Population 43,4M 47,242 49,544
Total Households 14.010 15,057 15,841
Average Household Income $75,940
Median Household Inc:ome $59,377
Of the three market areas, the income levels are highest in the PMA in
both median/average household income as well as the percent of
households in the higher income ranges:
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Households By Income
% under $15.000 6.0%
% $15,000-24,999 7.3%
% $25.000-34,999 10.1%
% $35.000-49,999 16.3%
% $50,000-74,999 25.6%
% $75.000-99,999 16.6%
% $100,000-149.999 11.9%
% $150,000-249,999 3.9%
% $250,000-499,999 1.7%
% $500,000+ .6%
This is a relatively young population, with the median age younger than in
the SMA, as well as a larger percent of persons in the younger age
cohorts:
Population Bv Aae
% Under Age 6 9.5%
% Age 6-17 20.6%
% Age 18-24 8.0%
% Age 25-34 14.5%
% Age 35-44 20.3%
% Age 45-54 13.7%
% Age 55-64 6.3%
% Age 65+ 7.2%
Average Age of Total Population 32.1
Median Age 34
The median household size is 2.9 persons. It is a predominantly white
population (92%) which is highly educated (35% of persons 25 years or
older have graduated from college). A total of 65% of these same
persons are married.
Over 24,000 of persons 16 years or older are employed in the work force,
42% of whom are professionals or business persons. Another way to
express this is that almost 69% of the work force are in 'white collar'
professiOns.
There are an estimated 12,000 persons employed within the PMA Most
are employed in services (23.2%), manufacturinglinclustrial (22.5%), retail
trade (18.7%) and education/government (18.7%). There are an
estimated 1,332 total businesses in the PMA
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- The Secondary Marl<et Area
The SMA shows substantial growth in both population and number of
households over the ten year period between 1990 to 2000, as shown
below:
Secondary Market (SMA)
1990 1995 2000
Total Population ltsl.~29 218,480 250,002
Total Households 68,340 79,153 92,074
Average Household Income $65,140
Median Household Income $50,105
The income levels are high in the SMA, although not as high as in the
PMA This is due to the fad that the retirement population is higher in
Rancho Bernardo and surrounding communities. The median/average
household income and the percent of householdS in each income range is
as follows:
Households By Income
% under $15,000 10.2%
% $15,000-24,999 10.9%
% $25,000-34,999 11.9%
% $35,000-49,999 17.8%
% $50,000-74,999 22.2%
% $75,000-99,999 12.8%
% $100,000-149,999 9.7%
% $150,000-249,999 2.8%
% $250.000-499,999 1.2%
% $500,000+ .5%
The age of the SMA population tends to be higher than in the PMA:
Population Bv Aae
% Under Age 6 9.8%
% Age 6-17 15.8%
% Age 18-24 8.9%
- % Age 2>34 16.5%
% Age 35-44 17.2%
% Age 4>54 11.5%
% Age 5>64 6.9%
% Age 65+ 13.3%
Average Age of Total Population 34.8
Median Age 35
The median household size is 2.3 persons, another reflection of the high
number of older persons in the SMA It is also a predominantly white
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population (92%) which is highly educated (33% of persons 25 years or
older have graduated from college). A total of 62% of these same
persons are married.
Approximately 106,000 persons 16 years or older are employed in the
work force, 42% of whom are professionals or business persons.
Approximately 68% of the work force are in 'white collar' professions.
There are an estimated 93,000 persons employed within the SMA Most
are employed in manufacturing/industrial (31.1%), services (18.9%), and
retail trade (16.5%). There are an estimated 9,253 total businesses in the
SMA.
San Diego County
San Diego County as a whole is expected to continue to show a growth
pattern, primarily on the strength of natural increase (e.g. more births than
deaths). Inmigration has virtually disappeared throughout the past fIVe
years in which the economy has been in recession. The 1990 to 2000
projections are shown below:
Tertiary Market
1990 1995 2000
Total Population 2,498,016 2,119,'75 2,932,004-
Total Households 887,403 966,325 1,044,58
Average Household Income $50,647 1
Median Household Income $40,605
Income levels are lower in the County than in either the PMA or SMA The
median/average household income and the percent of households in
each income range is as follows:
Households By Income
% under $15,000 15.9%
% $15,000-24,999 14.9%
% $25,000-34,999 14.6%
- % $35,000-49,999 18.7%
% $50,000-74,999 19.4%
% $75,000-99,999 8.7%
% $100,000-149,999 5.5%
% $150,000-249,999 1.4%
% $250,000-499,999 .7%
% $500,000+ .3%
The age demographics in San Diego County are as follows:
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PODulation Bv Aae
% Under Age 6 9.7%
% Age 6-17 15.2%
% Age 18-24 12.9%
% Age 25-34 18.7%
% Age 35-44 15.8%
% Age 45-54 9.8%
% Age 55-64 6.8%
% Age 65+ 11.2%
Average Age ofTolal Population 33.2
Median Age 32
The median household size is 2.3. It is also a predominantly white
population (83%) whose education levels (25.5% of persons 25 years or
older have graduated from college) are the among the highest in the
nation for a metropolitan area. A total of 52% of these same persons are
married.
Approximately 1.2 million persons 16 years or older are employed in the
wori< force, 43% of whom are professionals or business persons.
Approximately 64% of the work force are in 'white collar' professions.
Most persons are employed in manufacturing(tndustrial (25.7%), services
(21,9%), personal services (16.1%) and retail trade (15.4%). There are an
estimated 88,111 total businesses in San Diego County.
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N. Market Analysis
We have completed an overview study of the key commercial markets in
San Diego County. A snapshot of the current inventory and vacancy for
each market is depicted in the graph which follows:
Conmercial Sunmory 01 San Diego County
110,000,000-
. Square Feet Vacant I
8Totallnvento
10,000,
Source; T\JRI Industrial 0_ R&D Retail
The following discussion focuses on the market for each of these land
uses.
Industrial
The industrial market is in remarkably good shape, although some
markets are doing better than others. With a current inventory of
103,58r-,666 square feet the industrial inventory has not appreciably
increased in the past several years. The vacancy rate is 7.66%. The
industrial market is divisible into eight major market as shown in the table
below:
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- 1_ Buildl ,-... QIW\w 1...
Iso. DIooo eo..ntv ._, Vacant Vacancy _..........;..~;.~.. UncIw I" .nned
s.... - CaMIructIon eon.tructIo"
Sauth Boy 16,521,284 ',714.209 '0-80% 2",155 214,380 417 .23$ 0 215,826
Contral Cly 14,498,220 8'3.284 5,5'% "4,772 184,007 242.292 0 5.600
east County '0,179,295 1S87,316 6.56% .109,0&1 -<<),315 62.231 37,~ 0
MiNion V.lIeylK...".,. Mesa 11,358,653 734.1504 6.46% ".063 225.279 176.844 26,000 0
La JoIIIIMontna 3.072,424 239.031 7.78% -4,306 "".406 -61,509 0 0
Nonh COy 1D.~,675 521,634 6.05% 256.210 153,9olIO 341,521 70,000 137,500
1.1 5 Corridor '6,714,50' ',332.284 7.97% '35,8'5 -113,547 66.934 ''',765 412,343
North CoIl.- 20850612 206l144ll '0.02% 43 4SO n21e 824_ 'I4n5 301770
... , , ~ "
The current inventory of industrial is well balanced throughout the County.
The largest concentration of inventory lies along the North Coast market
which includes the entire Sorrento area as well as Pomerado in Carlsbad.
The star perfonner is the North City market, including Sorrento Mesa.
Sorrento Valley, Torrey Pines and Miramar West. The reported vacancy is
about 6%. South Bay is the weakest at almost 11 % vacant, but even this
is down from the last couple of years when the vacancy was about 13%.
That market includes, of course, the Otay Mesa area, which has become
stagnant through its dependency on the weakened Mexican market over
the past several years.
The poway industrial inventory is approximately 1.9 million square feet,
1.90% of San Diego County's industrial inventory. As such, it captures a
very small market share:
Invemory po_yos
San Diego Co. Powey Market Share In SO Co.
1990 90,042.710 1,463.067 1.62%
1991 94,925,154 1,804,823 1.90%
1992 99,128.741 1,835,799 1.85%
1993 100,884,892 1,915.610 1.90%
1994 101,981,125 1,932,965 1.90%
The vasancy rate in Poway's industrial inventory has remained high
during most of the past five years':
, This is protim...ry data ftom regiorlalagencies and does not rellocl TI'e london Gtoup Realy Advioors, Inc.
survey oflhe poway mar1<et whicI1lS CUITl!ntIy taking place.
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Inventory Vacancy VacancY Rate
Year Poway Poway poway
1990 1,463,067 451,436 30.86%
1991 1,804.823 405,860 22.49%
1992 1,835.799 315,059 17.16%
1993 1,915,610 288.754 15.07%
1994 1,932.965 89,135 4.61%
The overall inventory and vacancy in the County from 1990 to 1995
(Second Quarter) is summarized below:
o.
. ,
1991 94,925,154 10,481.344 . 11.04%
1992 99,128,741 11,540,805 11.64%
1993 100.884,892 10,445,584 10.35%
1994 101,981.125 8.429,810 8.27%
1995 103.587,666 8.288,365 7.66%
VIA'lile the industrial inventory has increased during this time period, it has
also been a period of 'retooling' of industrial space. There has been
movement and expansion by firms as well as new firms coming into the
current space.
At 7.6% the vacancy now mostly reflects obsolescence of existing
structures. An emerging industrial sector with strengths in modem
distribution, manufacturing and technology will require an updated
infrastructure.
Moreover, there is less land available in the major industrial areas. During
the last two years there have been more total industrial acres transferred
(378 acres) than in the previous three years combined. This activity
appears"1o be continuing and we expect will increase with economic
recovery.
This health is translated in the transactional analysis. CAP rates are
continually decreasing, currently at 1 0.44%, while the Average Price Per
Square Foot is gradually decreasing and has probably hit bottom:
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Industrial T",n..ctions I
I
$60.00 _________________ 11.20 I
$55.00
I
11.00 ,
$50.00 I
$45.00 i
10.80 I
I $40.00 ..
1&
$35.00 10.60 Ill: I
...
I $30.00 I ___ Average $IS.F. C
I u
I I 10.40
I $25.00 I-+-Avg. CAPRate i I
I $20.00 10.20 I
$15.00 I
,
i $10.00 I I 10.00 I
, 1992 1993 1994 1995
I
I SO....ee: CO/ooP.>
I The number of transactions, which currently stand at 113. will be the
lowest in three years, probably reflecting the fact that the best values are
behind us and that current owners are holding, anticipating increasing
values.
Areas of projected scarcity include Sorrento Mesa, in which the remaining
industrial land lies in a single business park; and Keamy Mesa, which is
the historical industrial leader in the County, but its future growth is largely
dependent on the availability of the General Dynamics site for industrial
development VVhile there are significant industrial development
opportunities in locations to the north inland, north coastal and south
county, the more centralized Poway location should prove to be a
marketing advantage.
Research & Development (R&O)
The R~D sector is linked to the industrial market throughout San Diego
County and in many cases is indistinguishable. We point it out as distinct
from the overall industrial market (and its manufacturing and distribution
functions) because R&D is such an important element to the functioning
of our economy. It has contributed significantly to the resurgence and
health of our best current market, Torrey Pines and Sorrento Valleyl
Mesa. R&D growth evolves into manufacturing and distribution growth.
Therefore, it is worth pursuing as distinct from the other sectors.
NDV 14 1995 ITEM .61
19 of 39
16
R&D is defined in real estate terms both by the type of space it requires
as well as in the ambiance of that space. It is a hybrid between an
industrial building and a commercial office building. Many of the R&D
facilities are equipped with lab space and other specialized infrastructure
to accommodate scientific research. The density of employees in this
space is higher than industrial. Therefore, the amount of parking required
as well as services in the building and vicinity are greater.
Currently. there are approximately 24 million square feet of R&D inventory
in San Diego County. The following chart shows the growth of this
inventory over the past seven years as well as vacancies during that
period:
I
San Diego Co. R & D Martl:et .VllClIntSq. Feetl I
1988-1881 .._Space I
25.000.000 T
I
20,000,000 +
15.000.000 J.
i
1'0,000,000 T
I I
I 5,000,000 J. I
' '
I 1988 1989 1990 1991 1992 1993 1_ 1995
This is a very stable market. Most of the additions are build-to-suits and/or
are owned by the occupying firms. A detailed analysis of this inventory is
shown in the following table:
Sin III Co,R&DS . - First QUlrtor Data
my nue WI ory aca oconcy w u WI .r Wl /On
q. Feet Growth R8t. Sq. Feet Po....., S..... Inventory Abeorption s.f. AloeoJption Ret.
1_ " .
,_ 22.574$,158 -3.03% 3.152.989 13.97% 19,421.170 -7o.,ll67 _,59S 757,433 .107..46%
1990 23,107,_ 2.36% 2,&48,1015 11...e% 20,459,260 533,2..e 161,532 50.,_ 94.57%
1991 22.242,084 -3.74% 3,816,379 17 .16% 18.425,705 _,321 -58,380 -1.168.234 135.01%
1992 24,117,348 8.43% 3,915,710 1824% 20,201,&38 1,875.264 103,638 -911,331 -0.30%
111113 24.143,310 0_11% 3,7158,487 15.60% 20,376,823 25.9&2 1,251 149,223 574_n%
,_ 24.538,719 1.&4% 2,485,697 10.13% 22,053,022 395._ 748.317 1.280,790 323.92%
1995 24,6&9,876 0.53% 2,305,Q.4Q 9.34% 22,3&4,838 131.157 ~1,291 180,657 137.74%
I AV....,. - u"w.,. . 1......,. . 11'.,... . U_,.I4U 1M.' I.,.
NOV 14 1995 ITEM 6.1 .
20 of 39
17
Vacancies are the lowest this year from any time during the past seven
years, yet absorption of space is very low at the present time. There will
be significant R&D development in the coming years and market share
should broaden beyond just the North Coastal markets. The key is to
develop a directed mar1<.eting effort to attract this type of user.
Commercial Office
The San Diego County office market consists of a current inventory of
58.3 million square feet divisible into eight major markets, of which Central
City is the largest sub-market at 13.1 million square feet (7.S percent of
overall office space in the market). The office market has not added
significant space during the past four years. Yet, its vacancy rate has
gradually receded from a current cycle high of 19.5 percent in 1992, to
1S.S in mid-199S, as shown in the following chart:
San Diego County Inventory md I c:::::::J1~S,F,) I
Vacancy Rata.1.BI.1_ -+- V8CMCy RUI("') I
-
~~~t .. ~...... ..... -
"".
-
46,000,000 r- ""'
- '\ I' ...... ...
- 1/ r---
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,...
1~,OOO,OOO
'"
0 ...
'012 ,- ,... 'OM ,... '98' ,... ,... ,... ,.., 'llI2 ,... ,... ,...
The following table shows the growth of the office market from 1982 to the
present. It demonstrates that 30 million square feet of inventory have
been aq,ded over that period of time:
Nav 14 1995 ITEM 6.1
21 of 39
18
an legO oun
nveno ~ acan pace acancy ea y on
1982 28,739.342 21,324,592 7,414,750 25.80% -
1983 32,539.342 24,404,507 8,134,836 25.00% 3,800,000
1984 33.939,342 25,420,567 8.518.715 25.10% 1,400,000
1985 37.439,342 27,255,841 10,183,501 27.20% 3,500,000
1988 40.139,342 30.513,767 10.225,575 25.10% 3,300,000
1987 44,639.342 34,863.326 9,716,016 21.90% 3,900.000
1988 46,539,342 39,196,240 7,343,102 15.78% 1,900.000
1989 49,809.649 42.310.522 7,499,127 15.06% 3,270,307
1990 53,355,287 45,276,366 8.078.921 15.14% 3,545,638
1991 56.026,209 45,512,044 10,514,165 18.77% 2,670,922
1992 57,278,579 46,108,584 11.169,995 19.50% 1.252.370
1993 57.989,834 47,787,047 10,202.787 17.59% 711,255
1994 58,122,755 49.262,130 8,860,625 15.24% 132,921
1995 58,474,091 49,407,954 9,066137 15.50% 398.746
The vacancy rate has come down due to the excellent pelfoonances of
two office nodes, Mission Valley and the La Jolla Village Drive corridor,
known as University Towne Centre (UTC). Yet, there has been only minor
addition to inventory,
We estimate that there is still at least a three year supply of space in the
overall market There is 900,000 square feet either under constnJclion or
'planned'. Of that space which is under construction, most of it is 'bui~o-
suit'/non-speculative space. Another way to relate the story of the market
is through absorption:
Ion -
Absorption 1982-1990 3,076,993
Absorption 1991-1995" 994,780
This absorption data reflects the net movement in the market, including
companies which have down sized and gone away as well as other
companies which have expanded or have been aeated. Clearly, demand
for office space has dropped considerably from previous years.
By sub-market, the breakdown of San Diego County Office Space is as
follows~
22 of 39 NaV 14 1995 ITEM 6.1
19
omce Building Summary
San Diego County
Second Quarter 1995
unen
Total Qlr. Net Yr~To-Oa" Last" Qt,s Square feet Vacancy Under Planned
Inventory Absorption Absorption Absorption Vacant Rat. Construction Construction
South Bay
Central City 1&,111,311 131,678 109,336 178,728 2,867 ,856 17.8% 0 0
East County 2,138,G49 S,499 11,011 42,109 287,912 13.5% 0 0
Mission ValleylK..my Mesa 12.544.087 63,255 -61.697 25,225 2,'42.894 17.1% 0 0
La Job/Morena 2.414.137 49,959 77.837 126.337 33' .245 13.7% 0 0
North City 12.872,m -26.935 -233,537 48..... 1.933.965 15.0% 10,000 880.000
..,5 Corridor 4,763,279 31,803 -3.530 18,952 670,009 14.1% 9,000 11,000
North Cool.. 5.392."78 17.045 19.011 11.760 668.476 12.4% 0 41,000
Total 58.474.091 259.813 -112.035 398.746 9.066,137 15.5'11 19,000 932.000
Poway is located in the 1-15 Corridor market, which contains 4.76 million
square feet of inventory, of which 670,000 square feet or 14.1% is vacant.
There has been very little absorption activity in this marKet.
The implications of this data are that the San Diego County office market
is gradually recovering. However, there has not been substantial activity in
the suburban office nodes, induding the 1-15 corridor.
MoteUHotel
We have conducted a competitive audit of motel and hotel facilities along
the 1-15 corridor. There are a total of 63 hotels in this marKet area,
accommodating 5,608 rooms. This is a 12.55% marKet share of the total
44,673 rooms which currently exist in San Diego County.
The preponderance of these facilities are moderately sized and priced
motels. Most range in size from 50 to 150 rooms. The largest facility in the
marKet is the Rancho Bernardo Inn at 287 rooms, also one of the most
expensive at room rates ranging up to $210 per day. Most of the other
larger and higher priced facilities are also located in Rancho Bernardo.
The San Diego County hoteVmotel industry occupancy rates have been
less thlYl stellar thus far during the 1990's. After coming off of a strong
perfonnance in the later eighties, culminating in 1989 when occupancies
for much of the year ranged near or well above 70%, the 1990's saw
these occupancies most of the year fall into the low to mid 60% range.
However, in 1994 the industry has rebounded and occupancies are once
again 70% or greater most of the year as shown in the table on the
following page.
NOV 1 4 1995 ITEM &l
23 of 39
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24 of 39 NOV 14 1995 ITEM b.1
21
The 1-15 corridor has consistently under-perfonned relative to the overall
County. It's occupancy averages in 1994 ranged approximately 12%
lower than the remainder of the County. The 1994 1-15 corridor averages
ranged from a low in December of 42% to a high in August of 68%. There
has been little movement in these figures over the past several years.
Room Rates along the 1-15 corridor, however, are more consistent than
that of the rest of the County. In 1994 San Diego County's monthly
averages ranged from a low of $72 in December to a high of $87 in
August. The 1-15 corridor averages ranged from a low of $62 in August to
a high of $81 in December, but most of the time the averages were in the
$61 to $69 range. This infonnation is depicted in the graph on the
following page.
-
-
NOV 14 1995 ITEM .6J.
25 of 39
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26 of 39 NOV 14 1995 ITEM .oJ.
23
The early 1990's saw the addition of many hotel rooms in San Diego
County, a response to a strong market during the 1980's. Much of this
growth took place in the form of smaller motel facilities in central and north
inland San Diego County, near or within the primary market area. The
economic recession, coupled with this new influx of rooms, has kept the
overall occupancy and room rates low, but there is an order-of-magnitude
increase in visitors to the area.
We believe that when taken as a whole the market offers few
opportunities for transient commercial development in Poway. However,
general market statistics are less important if visitors need such a facility
in a particular location. Our conclusion is that eventually such a facility will
be required in Poway at the South Poway Business Park due to the
combined demand from business travelers and visitors to the area. Our
recommendation is to reserve a site or area for such a facility.
Golf Course Analysis
We also evaluated the market for Golf Courses. The market is divided into
a Primary and Secondary Market Area. The Primary Market, consisting of
Riverside, San Diego and Orange County, represents that geographical
area from which we think most golfers who play in Poway will originate.
The Secondary Market is Los Angeles, which by itself is a giant golf
course market, and from which a significant number of golfers will
originate.
Competitive Supply
There is a substantial supply of Golf Facilities in Southern Califomia. A
summary of the market supply is as follows:
. In San Diego County there are 33 full sized (18 hole) public courses
and 27 private courses2.
. In Riverside County, excluding the Palm SpringslCoachella Valley
area, there are 19 public golf courses and 12 private courses.
. In Palm Springs there are 27 public golf courses and 32 private
courses.
. In Orange County there are 29 public courses and 22 private courses.
. In Los Angeles County there are 72 public courses and 34 private
courses.
.'-"
'Thio__ of the Iorgor. mont p.~,,j,_. ---. Sn.- ccu.s, irUdng__ or,*" ond platypos.
are ~ not n:Iuded in Il1e SUV"'l.
NaV 14 1995 ITEM bJ.
27 of 39
.--- -
24
A detailed summary of the market is included in the table on the following
page. There are a total of 108 public golf courses and 102 private courses
in the three county Southern California Region, excluding Los Angeles.
This translates to a total of 3,407 holes and approximately 9.4 million of
rounds of golf which are played annually. Adding Los Angeles, which we
have designated as the secondary market, increases the number of holes
by over 1,900,000 and the number of annual rounds by 4.7 million.
-
NaV 1 4 1995 ITEM bJ.
28 of 39
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29 of 39 NaV 14 1995 ITEM il.1
26
Demand For Golf
In our Primary Market, consisting of Riverside, San Diego and Orange
Counties, there are estimated to be almost 509,000 golfers, representing
a 'golf participation rate' of 8.17% of the total population. This is divisible
into a public course market share of 422,000 golfers and a private course
market share of over 86,000 golfers, 77% of which are males.
There are an additional 870,000 golfers in Los Angeles County, which we
have designated as our secondary market area for purposes of this
analysis.
Our analysis suggests that 75% of golfers play "frequently" which means
25 or more rounds per year. A total of 87% of golfers play at least eight
rounds per year. This means that in our primary market, over 381,000
golfers play frequently (of the total of 509,000) and in the secondary
market over 653,000 golfers play frequently (of the total 870,000 golfers).
These play frequency estimates translate into almost 11 million rounds of
golf played amually in the primary market area and an additional 18
million rounds of golf played in the secondary market area.
Reconciliation
We have combined these supply and demand figures for each of the
markets as well as the individual counties.
In the primary market there is a demand for an estimated 10.8 million
rounds of golf annually, yet the current supply is approximately 9.4 million,
suggesting a shortage, or excess demand, of almost 1.4 million rounds
per year.
This means, assuming that this demand would be filled by 18 hole
courses, that there is a demand for an additional 32 golf courses in the
Primary Market Nea, fIVe of which would be private courses if the current
mix of private to public were applied. This assumes that the current golfer
penetration rate is sustained.
In the Secondary Market Area there is an estimated excess demand of
306 18 hole golf courses based on an estimated excess demand of 13.7
million rounds per year.
The opportunity for Poway is apparent in this analysis. The golfing
business is solid and has been growing in tenns of demand and fees per
NOV 1 4 1995 ITEM &1
30 of 39
,
27
round for many years. The demand, particularly for public or public
access courses, appears to be strong. Moreover, because golf is often
regarded as a recreational activity for business persons, the location of
South Poway Industrial Park is compatible to capture a small share of this
market
Water Pari(
We have completed a survey of water parks located throughout the
nation, and identified seven potentially competitive water park properties
in Southern California. We have divided the markets as follows:
Primary Market (PMA): this recognizes that a proposed water park project
in San Diego County will be fundamentally competitive with three other
water parks within San Diego County.
Secondary Market (SMA): The SMA includes all of Southern California.
We have focused on two well known water parks, each of which represent
destination locations for San Diego residents who are water park users.
Moreover, they are the nearest and therefore the most relevant examples
of major water parks from which to draw comparisons.
. Total parks: 4
. Comparable parks:
=> Oasis in Palm Springs, California
=> Wild Rivers in Irvine, California
National Market: We have chosen several water parks located elsewhere
in the nation to compare their experiences with the potential experiences
of a proposal in Poway.
. Total parks reviewed: 4
. Comparable parks:
_ => Water World USA in Sacramento, California
=> Water Town, Inc. in Shreveport, Louisiana
Our market analysis addresses such factors as park size, number and
type of attractions, attendance estimates and other operating revenue. A
summary table of Comparable Water Parks is included in the following
page.
-
NOV 1 4 1995 lTEy&1
31 of 39
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Nav 14 1995 ITEII 6J.
32 of 39
-
29
Attendance:
Examples of annual attendance at water parks throughout the PMA, SMA
and the nation include:
. Sengme Oak Indian Reservation in the PMA provides 8
attractions, hosting 1,250 persons daily.
. Oasis in the SMA provides 15 attractions, hosting 1 ,500 persons
daily.
. Waterworld USA in the National Water Park Survey provides 21
attractions, hosting 2,500 persons daily.
This is data which can serve as a benchmark to the proposed Poway
facility.
Wild Rivers in Irvine, offers 42 attractions within a 14 aae setting; and
Oasis water park in Palm Springs offers 15 facilities on a 10 acre setting.
Any water park in Poway must be competitive to these neighboring full
service parks which are currently taking the preponderance of the
demand in Southern California for water parks, including "The Wave" in
nearby Vista.
Admission Prices
Admission prices can be projected relative to competitive parks as well as
industry averages. The average admission price in the PMA is $7.17, in
the SMA the average is $14.36 and in our National Survey it was $13.89.
The overall average admission price in our survey is $12.41, which
provides an average of 15 attractions.
These admission prices, however, do not necessarily reflect a propensity
in the industry to heavily discount those prices. For instance, Oasis water
park in Palm Springs offer a summertime promotion to increase local
attend8QC8. A total of 10% of it's annual attendance is generated from the
local market. In an attempt to increase that number, an admission price of
$8.50 was offered to those that live in the comml.lnity who provide proof of
local residence compared to $11.97 average price. This is expected to
become a continuing promotion.
Average prices on the national level are considerably lower in mid sized
parks. In particular, Water Town, Inc. charges $11.80 on average, with 7
attractiOns provided; Astrowortd-Waterwor1cl, which provides 14
attractions at $13.46; and Waterwor1d USA, which offers 21 atb....tions,
33 of 39 NOV 14 1995 ITEM 6.1
-
30
charges $14.49 on average. Overall. the National survey demonstrated
that an average of 14 attractions were provided at an average admission
price of $13.89.
Subject Site
A hypothetical water park is also summarized in the table. We wish to
emphasize that these are our projections of expenditures and revenues
and do not necessarily reflect any proposal. These estimates are based
on industry standards. However, our analysis based on industry
standards suggests that the opportunity for success of a water park in
Poway is quite high if it includes approximately 22 attractions.
Retail
There is a tremendous variety of retail shopping choices available in San
Diego. In fact, there are virtually no easily identifiable 'gaps' at the present
time for additional development of large, principally regional and super-
regional shopping centers within the entire County.
There is a less than eight percent retail vacancy rate within the County of
San Diego. The opportunity for additional retail does not lie in new centers
where there are few opportunities for new construction, but rather in
rehabilitating and revitalizing existing centers.
Over the past several years, the concentration in the retailing sector has
been to rehabilitate, modernize and otherwise take steps to maximize the
potential market share of their centers. The challenge to existing centers
has come from increasing competition brought on by newer forms of
retailing including off-price centers, outlet centers, discount or warehouse
stores and specialty centers. Together, they have had a significant impact
on moving retailing expenditures to some extent away from the more
traditional regional, community. neighborhood and strip centers.
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'lv'hile the competition has changed, the gross square footage in the
county has only gradually increased, now standing at 57.4 million square
feet:
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Tot.. Us! . Qlrs Square Feel Vacanc:y Under Planned
Inventory Absorption Vac:anI Rate Construc:tlon Construction
57,405,909 196,506 .,561,_ 7.90% 1 ,386,861 1 ,380,042
Retail space now under construction or planned consists primarily of
smaller centers which are filling specific retail needs in newer, growing
communities, WalMart has been developing larger facilities during the
past several years and is expected to build more, CostCo has a new
facility within the SMA But that represents most of the larger facilities
which are now being built in the County,
V\lhat characterizes the retail market is that it has consistently retained a
relatively low vacancy rate of 7.9%. VVhile this is a number reflecting all
centers, we are aware that the larger centers have fared better in keeping
vacancies low. From a real estate perspective, the retail industry has out-
performed the other sectors throughout the recession.
Retail expenditures in the region have remained stable in both the City
and County of San Diego between the 1992 and 1993 period:
Taxable Sales
(Dollars of Sales in Thousands, $ , 000)
City of Percent County of Percent
San Diego Change San Diego Change
1992 9,654,105 21,357,857
1993 9,6n,562 1.00% 21,576,327 0,99%
From a retailing perspective, the market has been relatively flat While
1994 data was not available, we expect the inaease for that year was,
again, marginal. This is partly a function of a slowdown in growth: the
region's growth has slowed dramatically during the past three years to
approximately a net inaease of 35,000 persons per year as compared to
a fifteen_year average of 50,000 persons per year.
It is also clearly a result of the deep recession (and concomitant spending
cuts) this region experienced from 1990 to 1994. The region is growing
out of the recessioli and is expected to see a gradual recovery continue
this year.
We evaluated the concept of a factory outlet mall for the South poway
Business Park. Such a retail project would be sized over 150,000 square
feet and is likely to accommodate forty or more retailers. This type of
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center has become very popular over the past decade and, along with big
box retailing (e.g. Walmart, Incredible Universe, etc.) has not only become
the rage in shopping center development but also represents much of the
retail which has been built over the past several years.
We could find only two shopping centers which were identified as factory
outlet malls, one located in San Ysidro and the other in San Marcos:
San Diego Factory Outlet Malt. Located in San Ysidro, this mall consists
of 150,000 square feet, of which 15,000 square feet is currently vacant.
The center includes an Eddie Bauer Outlet, Nike, Guess, Jockey Oshcosh
B'Gosh and many others totaling approximately 35 retailers. These
tenants pay between $1.43 to $1.83 per square feet for their space. Given
its location near the Mexican border, the centers caters to an international
clientele.
San Diego North County Factory Outlet Malt. Located in San Marcos, this
is a 108,000 square foot mall which includes Adolfo, Capezio, Bugle Boy,
Famous Footware and others, totaling 26 retailers. The center is located
on the 1-78 corridor, just west of 1-15, so it is within the trade area of
Poway.
VVhat these centers have in common and, frankly, what is characteristic of
this fonn of retail center, is excellent visibility. At the border this is
accomplished by proximity to the International Border Crossing. In San
Marcos the center is visible from the freeway. Some of Southern
California's most popular outlet malls are not actually located near a large
local population. Rather, they have tremendous visibility near a well
traveled freeway corridor. Two excellent examples of this are a center
located in Barstow on the 1-15 to Las Vegas, and another one located on
the 1-10 near Beaumont in the Coachella Valley.
Summary tables of each of these centers are included in the following
pages.
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San Diego County
Factory Outlet Mall
Name San Diego Factory Outlet Mall
Location San Yosidro
Phone 714.955-0115
Contact Wool Investment Company, Peter Desforges
Total Sq. Feet 150.000
Vacant 15,000
Vacancy Rate 10.00%
Lease Rates $1.43-$1.83(17-22Annual)
Ancor Tenants
Eddie Bauer Outlet
Mikasa Factory Store
Nike
In-Line Tenants
Ashworth Factory Store
Banister Shoes
Bass Outlet
Boutique & Fabrics
Carters
Christene Outlet
Coin Laundry
.- Designer Brand Accessories
Designer Labes for Less
Dockers
EI Portal Luggage
Famous Brands Houseware Outlet
G & G Nintendo/Sega
Georgiou Outlet
Guess
Guess Footware
Jockey
Levrs Outlet
Maidenfonn
Nine-West
Oshkosk B'gosh
Pottery Outlet
Rocky Mountain Chocolate Factory
S.D. Police Dept Communitv Relations
San Yasidro Plasma Center
San Yosidro Postal Center
Socks Galore
Spectacular Eyeware
Toy Uquidators
Van Heusen
Van Shoes
Welcome Home
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Source: The London Group Realty Advisors, Inc. NOV 1 4 1995 ITEM &1
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San Diego County
Factory Outlet Mall
Name San Diego North County Factory Outlet Mall
Location San Marcos
Phone 471-1500 595-5222
Contact Developer. Dave DuFour@ 792-88001 will be gone untill Wen 9-6-95
Total Sq. Feet 108,000 100,000 additional s.c. are planned to be added sometime next yea
Vacant 12,000
Vacancy Rate 11.11%
Lease Rates N/A
Ancor Tenants Phone
In-Line Tenants
Adolfo II 591-4128
Arrow 744-2884
Barron's Burgers & BrewlDeli 752-7800
Black & Decker 471-5285
Bonworth 591-3459
Book Warehouse 471-8828
Bugle Boy Outlet 471-9347
CA Luggage Outlet 578-4337
Capezio Shoes 744-3599
Coming Revere 471-6240
Designer Lables for Less 471-9950
Discount Watch Outlet 744-5983 471-9841
Famous Brands Houseware 0 744-8844
Famous Footware Outlet 591-9240
Jewelry Outlet 736-0230
Leather Loft 752-1925
Legs-Hains-Bali 736-9212
Paper Outlet 471-4811
p'erfumania 591-0320
Socks Galore 471-1043
Sunglass Outlet 736-9942
Toy Uquidations 752-1418
Trend Club 471-7804
Welcome Home 591-4258
Westport Ltd. . 471-2750
Westport Women 471-2750
Source: The London Group Realty Advisors, Inc. ITEII 6.1 .
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The South Poway Business Park does not yet fit in this category of high
visibility, although eventually the completion of Highway 67 might achieve
this. There are also other forms of retailing that are similarly strong which
are hybrids of the 'big box' concept which might ultimately judge a Poway
location as ideal. It is possible that one might find the South Poway
Business Park's location as strong.
However, at the present time we do not believe that a significant retail
mall can be achievable on the South Poway Business Park. Moreover,
there is a large amount of retailing just minutes away in Poway which can
serve the retailing, restaurant and servicing needs of commercial tenants
for the foreseeable future.
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