San Diego County's residential and commercial markets have been improving, but uncertainty over raising the debt limit and ending the partial government shutdown continue to color the conversation.
"I was quite optimistic about the economy until I heard four congressmen say that it wouldn't be a big deal if we defaulted on our debt," said Richard Green, director of the USC Lusk Center for Real Estate during a panel discussion Wednesday at the W Hotel in downtown San Diego.
Green, who argued that default on the debt would be nothing short of "calamitous," said "everything else seems trivial."
Looking past the immediate events, Green said, mindsets are changing. For one, he asked whether people still hold homeownership as the American dream. With 18-to-24-year-olds postponing marriage and children, and middle-aged empty nesters downsizing, Green said the answer may be no.
Green said USC's research found that national homeownership spiked from a normal 64 or 65 percent to about 69 percent in the mid-2000s, adding that the figure is deceptive because it included a flood of subprime mortgages.
Given these new realities and that former subprime mortgage holders are returning to the rental market, Green said, "this should be the best decade for apartments in decades."
For those who wish to acquire large tracts of residential land for single-family homes, Tony Pauker, a principal with newly formed Draper Properties, said the pickings are slim.
"Finding residential land is incredibly difficult and the price of the land is often substantially higher than it was in 2006," Pauker said.
Tim Sullivan, Meyers Group LLC practice leader, agreed with the assessment.
"In the best markets, land prices almost doubled in 12 to 18 months," Sullivan said.
Michael McNerney, a Lowe Enterprises Real Estate Group senior vice president, said he has been surprised how quickly development has returned.
"We're as busy as we have ever been on the development side," McNerney said.
All seemed to agree that with dwindling land, mixed use is the key to downtown San Diego's development future. A 38-block area known as the IDEA District — short for Innovation, Design, Education, Arts — is being designed to transform a warehouse district into a haven for residents and businesses.
"I have always wondered why downtown isn't better than it is," said McNerney, who has been working on the initial project of the district.
A Lowe Enterprises piece on a full city block bounded by E and F streets, Park Boulevard and 13th Street, calls for 140 apartments, about 100,000 square feet of office space and 20,000 square feet of retail.
"Downtown has been good for residential, but it has been a very poor job creator," McNerney said.
Pauker said developers shouldn't look only at downtown San Diego for mixed-use developments, but also the downtowns of Oceanside, Escondido and El Cajon.
Robert Little, Kilroy Realty Corp. vice president of development, is overseeing the planned One Paseo development, a mixed-use plan at Del Mar Heights Road and El Camino Real.
If the developer is able to get the project past the objections of locals who are worried about traffic, it will have a leg up because the Real Estate Investment Trust will be able to self-finance its project.
Now being processed by the city, that plan calls for 500,000 square feet of office space, 270,000 square feet of retail, a 130- to-150-room hotel, 608 multifamily units and enough parking for 4,000 vehicles.
When Sullivan asked what developers are doing in the wake of a world without redevelopment agencies, McNerney said that his firm used federal New Market Tax Credits to develop a new 68,350-square-foot Sharp Rees-Stealy medical office building that opened earlier this year at the corner of Third Avenue and Fir Street in Bankers Hill. About 236 employees work at the facility.
The tax credits have been set aside to re-energize economically depressed areas.
Mark Cafferty, San Diego Regional Economic Development Corp. president and CEO, said jobs don't have to be generated in San Diego to help the San Diego region.
"The Imperial Valley could be the Silicon Valley of renewable energy," Cafferty said, adding that this could support many companies in San Diego County.
Cafferty added that Mexico may have a more talented labor pool for manufacturing than San Diego these days. This talent, he argues, could lead to more support services on this side of the border, as well.
For San Diego to succeed, Cafferty said this metropolitan area "needs to be thought of as a 6.5 million people mega-region" that has among the most diverse economies in North America.
Cafferty said another cornerstone of San Diego's future success will be to bring high-tech firms downtown.
"We'll only truly be diversified when we have a thriving tech center downtown, like San Francisco and New York does," Cafferty said.
Cafferty said he is less worried about job creators leaving the state, adding that it is not a simple thing to pick up stakes. He would like the state to be more business-friendly, however.
For instance, he said, Solar Turbines, which manufactures industrial gas turbines, isn't allowed to test its product in California, and must do so out of state.
While some laws may discourage, some trends have their benefits. Little said about 40 percent of the Kilroy's 13.5 million square feet of office and industrial space is now LEED (Leadership in Energy & Environmental Design) certified. Kilroy owns more than 5 million square feet of office space in San Diego County.
Little added that many of these changes are happening inside the buildings.
"We're developing healthy and collaborative office environments," he said.