Our San Diego Econometer panel considers a failed project in the East Village that dragged on for seven years.
The city says the developers took too long to arrange final financing and break ground. COVID and rising interest rates contributed to those delays. But so did lawsuits by union activists and changes in the city’s terms that make it harder to earn a profit. The city and state need to streamline the regulatory process to enable businesses to follow through on plans in a timely fashion. Seven-year delays don’t help anyone.
One reason our real estate costs are so high is because it takes forever to get entitlement and the city imposes double jeopardy risks. If a developer spends several hundred thousand on feasibility and design studies, they may find out that the city has screwed up in terms of state requirements or due diligence, i.e. Midway sports arena district. These delays and hurdles make it impossible to predict what market conditions will be at the time of delivery.This isn’t cut and dry.
This was a bad call because 7th & Market is in dire need of an anchor project that can stimulate the completion of this neighborhood. Building a hotel requires a clear return on equity and repayment of debt. The cost to build a Ritz is too high for the market — a Ritz was tried on UCSD land and it ended up being the Estancia Hotel, a nice 4-star resort. That would jump-start the neighborhood.
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