The landmark office tower at 530 B Street, a long-standing fixture of the San Diego skyline, has been listed for sale. This could present a significant opportunity for investors in the downtown San Diego commercial real estate market.
Built in 1966, Five Thirty B features 250,181 square feet of office space across 24 floors. Currently, the building operates at 73 percent occupancy. The tower was acquired by its current owners in August 2017 for $57.7 million, or around $230 per square foot. While an asking price hasn’t been released, it is not certain if the pricing per square foot would be able to reach the number from the previous sale.
While the office market may be challenged at the moment, Five Thirty B may present some opportunities for potential buyers. Firstly, experts predict the sale could go through substantially below its replacement cost. That leaves incoming owners with a value-add opportunity, with the chance to reposition the property and attract new tenants looking for a prime location, according to the marketing documents distributed by CBRE.
The timing is also key. Recent owners have invested heavily in modernizing Five Thirty B, over $18 million since 2014. That means new lobbies, a stylish Sky Terrace, conference facilities, and upgraded building systems. The next owner could focus on filling space, not necessarily on costly upgrades.
Location is another key asset of this property. Nestled in the B Street Corridor, the building offers great connectivity across the downtown core. Major freeways, public transit, and ample downtown housing mean employees won’t face grueling commutes.
Downtown San Diego is also at the property’s doorstep. Steps away lie the restaurants of Little Italy, the attraction of Petco Park, the Gaslamp Quarter’s vibrancy, and the city’s waterfront. For some tenants, this could be a unique lifestyle they could offer to their employees.
CBRE’s team is led by Matt Pourcho, Anthony DeLorenzo, Matt Carlson, Hunter Rowe, Chuck Reiter, Tyler Jemmett, Scott Peterson, and Mark McGovern.
The San Diego office market continues to grapple with rising vacancy rates, reaching 12.1 percent this year – a significant jump from last year’s numbers, according to the first quarter of 2024 market analysis by brokers firm Kidder Mathews. Availability of space is also abundant, sitting at 19.1 percent, well above the region’s average. This translates to fewer tenants signing deals, with leasing activity down 42 percent compared to this time last year.
These trends are partly driven by a wave of new office developments opening their doors. While more space might be attractive in a growing market, the timing has coincided with an economic slowdown.
On the investment side, after a sluggish 2023, sales volume in the first quarter of 2024 remains below average. This suggests investors are taking a wait-and-see approach.
While the unemployment rate in San Diego County sits slightly higher than this time last year (4.7 percent), there were job gains across the board from January to February. Professional and business services bounced back, and the private education and health sectors saw strong growth compared to last year.
The second half of 2024 could bring a shift though. If the Federal Reserve cuts interest rates as hinted, investment activity may pick up. The problem remains: new office space is coming online, and much of it, especially downtown, is still waiting for its first tenants, Kidder Mathews concluded.
