CRE Q&A: DivcoWest’s Walker Breaks Down Little Italy Redevelopment

Publication: Connect Media
BY Dennis Kaiser

In September 2017, DivcoWest and its local operating partner Ocean West, acquired a 1980s-era office building at 1420 Kettner Blvd., in downtown San Diego’s Little Italy district. Upon move-out of the former tenant and owner, U.S. Bank, DivcoWest and Ocean West immediately began a major renovation of the 123,000-square-foot building with the goal of converting it to a highly-stylized, boutique, Class A, office project that would appeal to a broad base of modern tenants. Prior to completion, and just 12 months into the project, the building’s leasing agents, Derek Hulse and Phillip Roberts of Cushman & Wakefield, announced a lease for the first three floors of the building with Spaces, an international co-working operator. Rebranded “Kettner & Ash,” the building reopened last month.

We asked Gregg Walker, DivcoWest’s Head of Business Development, to take us behind the redevelopment, and explain what sets the building apart from its neighbors, as well as why DivcoWest sees tremendous potential and opportunity in downtown San Diego.

Q: Gregg, what about Kettner & Ash appeals to tenants like Spaces?
: Kettner & Ash has all the elements of a great building. It’s in a great location for tenants that want to be downtown, it’s walkable to more than 60 local restaurants as well as amenities throughout Little Italy, it’s close to major public transit, and it’s easily accessible from major freeways like I-5. Additionally, it is easy to get to and from the airport, and it’s surrounded by great housing options for employees who live, or want to live, in downtown San Diego.

We have also added amenities to the building that appeal to our target tenant base. For example, we have emphasized and invested in the building’s outdoor spaces, creating a common area balcony on the third floor that connects with an indoor tenant lounge. The tenant lounge provides a great venue for tenant to host events, meetings or just relax. The project offers resort-style locker rooms and showers for tenants who want to exercise at lunch or throughout the day, and the building also has its own café.

Q: What’s the timeline for Spaces to move in, and what does it mean to have a co-working tenant in the building?
 We expect Spaces will move in sometime around early summer. Having a co-working space in the building, and in the neighborhood, acts as an incubator for entrepreneurs and start-ups who will continue to grow the business ecosystem in the downtown market. Furthermore, it spurs innovation and company formation, and provides our existing tenants flexible workspace when there is a need for immediate expansion or special projects

Q: What attracted DivcoWest to downtown San Diego?
 We’ve had a lot of experience in innovation markets around the country, from Silicon Valley and the Bay Area to Seattle, Boston, Austin and New York. We see a lot of the same dynamics we’ve seen in those markets developing in San Diego. There is already a strong innovation economy here, great universities creating future tech entrepreneurs, and we see the beginnings of a migration toward downtown as a corporate location. San Diego has a high percentage of Millennial workers in its population, and that demographic wants to be downtown where there is vibrancy and more relevant lifestyle options for them than they might find in the outer suburbs. Downtown still has housing options that compare favorably to other higher-priced West Coast markets, and the development going on right now will continue to attract employees of the innovation economy. That means employers needing to recruit and retain talent are starting to follow. We’re also seeing a trend toward companies operating a ‘distributed real estate’ model. So, while they may keep a headquarters in the suburbs or a nearby market, they may want another location so that their employees living or moving downtown have a space to work and no commute, as well as tapping a larger labor pool for recruiting new employees.