GlobeSt.com – Why Kearny Mesa Stands Out for Apartment Investors
A lack of class-A apartments to support the 120,000-plus jobs in this popular office and industrial neighborhood of San Diego is keeping investors interested in this submarket, Moran & Co.’s Derrek Ostrzyzek tells GlobeSt.com.
SAN DIEGO—A lack of class-A apartments to support the 120,000-plus jobs in the popular office and industrial neighborhood of Kearny Mesa in San Diego is keeping investors interested in this submarket, Moran & Co. director Derrek Ostrzyzek tells GlobeSt.com. Ostrzyzek recently represented seller Alliance Residential in the sale of Broadstone Corsair, a 360-unit luxury multifamily complex in Kearny Mesa, to Olympus Property and Artemis Real Estate Partners, representing the buyers’ seventh multifamily investment, in the San Diego market.
The property is being renamed Olympus Corsair, effective immediately. Olympus Corsair is features high-end, class-AA, condo-quality finishes such as quartz and marble counters, stainless steel appliances, five-burner stoves and wood-plank flooring and a high-end, hospitality-designed amenity package aimed at creating a resort-inspired living experience. On-site amenities include a resort style pool with poolside cabanas inset with outdoor TVs; an indoor golf-simulator room; a two-story fitness center with reclaimed parquet wood flooring and a private yoga/dance studio; a clubhouse with demonstration kitchen, library and wet bar; a green living wall; and seven outdoor courtyard social spaces.
Rich Banjo, managing principal at Artemis, says, “Southern California is one of our top target markets for long-term core multifamily investing. Fundamentals are strong with steady job and population growth and unusually high barriers-to-entry, which, we believe, should drive above average operating performance and long-term value appreciation. Over time, we intend to aggregate a portfolio of high quality, core multifamily properties, similar to Corsair, in Southern California.”
The Kearny Mesa neighborhood is one of San Diego’s largest employment centers and strongest rental markets. We spoke with Ostrzyzek about the transaction, the Kearny Mesa submarket for multifamily investors and what these investors are most interested in buying.
Among the amenities at Olympus Corsair is a resort style pool with poolside cabanas inset with outdoor TVs.
GlobeSt.com: What stands out for you about this transaction and this property?
Ostrzyzek: Kearny Mesa is known as a commercial-investment submarket; it’s not really known for its residential. What really attracted investors to this deal is the lack of class-A apartment communities in Kearny Mesa to support the 120,000 jobs in the area. This is a job-rich submarket, but there are no more than five class-A apartment communities in the submarket. The process to get multifamily residential development approved in Kearny Mesa is arduous. With the current pipeline, only two or so projects adding about 550 units are being developed in Kearny Mesa.
Investors really liked the position that they have a captive audience with great demographics and a cap on future development in Kearny Mesa or any submarket in San Diego. Mission Valley, Orange County and L.A. seem to be on investors’ radar today. People feel pretty good about their rent growth here because nothing in the near term is coming down the line.
This is an employment story: there are 120,000 jobs across the street from us. It’s described as an emerging neighborhood; nine breweries just opened up over the last three years in this neighborhood, and it’s a great eating and drinking neighborhood. There’s good momentum in Kearny Mesa right now.
GlobeSt.com: What are multifamily investors in the San Diego market most interested in buying?
Ostrzyzek: Probably any type of multifamily, although value-add is the hottest segment right now. Multifamily is off the charts in Southern California right now. Every institutional advisor has raised value-add funds. Core has softened up a little bit, but in Kearny Mesa, with limited availability of multifamily product, the spectrum of assets from development to value-add to core is desirable for investors.
GlobeSt.com: What does this market need in terms of multifamily product type?
Ostrzyzek: Class-A, but really multifamily of all types.
GlobeSt.com: What else should our readers know about Olympus Corsair?
Ostrzyzek: This is the only LEED-certified deal in San Diego. The complex’s proximity, between two major freeways and only 12 minutes from Downtown makes it very accessible to all the job markets. This deal was eye opening for a lot of investors—they knew nothing about the apartment market in Kearny Mesa. There’s a new community plan for Kearny Mesa set to get approved in 2019 December that will promote more walkability and amenities for this neighborhood.
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