Brookwood Shops in Suburban San Diego’s Lucrative Market

Brookwood Financial hopes to contribute to San Diego's steady vacancy-rate decline with its latest portfolio purchase.
Thomas Brown Brookwood Financial Partners

Thomas Brown, Brookwood Financial Partners

By Barbra Murray, Contributing Editor

Brookwood Financial Partners has picked up an approximately 480,000-square-foot office portfolio in metropolitan San Diego from Newport National Corp. for $113 million. The transaction comes three years after Newport came into possession of the seven buildings as part of a larger portfolio purchase.

With a cost of approximately $235 per square-foot, the collection of Class A and Class B buildings in San Marcos and Carlsbad fits like a glove with Brookwood’s investment strategy. “Brookwood focuses on acquiring attractively priced, value-oriented properties, rather than aggressively-priced ‘trophy’ properties; skillfully managing and, where necessary, improving and re-tenanting such properties; and disposing of such properties at opportune times in the real estate cycle,” Thomas Brown, Brookwood’s president & director of Real Estate Acquisitions, told Commercial Property Executive.

The portfolio includes Civic View Corporate Center, a four-story Class A office building offering 95,500 square feet in San Marcos. The remaining assets, located in Carlsbad, are Ventana Real, a Class A complex consisting of three structures encompassing a total of 220,200 square feet; and The Campus, a Class B office destination offering three buildings accounting for an aggregate 163,000 square feet in the Carlsbad Research Center.

All told, the portfolio has an average occupancy level of 71.3 percent, which provide a certain upside potential. In the fourth quarter, the average asking rent in the San Diego market was $2.41 per square-foot and it was forecasted to continue on an upswing throughout 2015, according to a report by commercial real estate services firm DTZ. And the Carlsbad portion of the portfolio has something to offer that has grown increasingly rare in the city: large blocks of contiguous space.

Additionally, San Diego’s vacancy rate of 16 percent, though relatively high, is on a steady decline, spurred by a few very important drivers. There’s rapid population growth, and the population is young, diverse and well-educated, Brown said. “San Diego is one of the fastest metropolitan areas in the country, with unemployment dropping from 10.9 percent in 2010 to 5.9 percent in 2014,” he added.

Numbers are key in Brookwood’s approach to investment. “We conduct specific research for the purpose of knowing everything about a specific real estate market–occupancy; absorption trends; new construction; construction replacement costs; trends in landlord concessions; proposed ADA and fire safety regulations; political developments; etcetera.  We also research and act on very detailed macro-economic trends,” Brown added. “The combination of this top-down and bottom-up approach informs our investment strategy, market and submarket selection and most importantly, the timing of when we enter and exit a property, portfolio or market.”