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Regency Centers Expands San Diego Retail Footprint

Company Buys Scripps Ranch Property, Plans $230M UTC Redevelopment
January 11, 2018
Regency Centers is planning a $230 million redevelopment of its Costa Verde Center in San Diego's University Town Center neighborhood.
Regency Centers is planning a $230 million redevelopment of its Costa Verde Center in San Diego's University Town Center neighborhood.
Regency Centers is planning a $230 million redevelopment of its Costa Verde Center in San Diego's University Town Center neighborhood.
Credit: Regency Centers Corp.

Florida-based Regency Centers Corp. continues to grow its San Diego retail profile, witnessed by its recent acquisition of Scripps Ranch Marketplace -- bringing its local shopping center holdings to 11 -- and its planning for a $230 million redevelopment of its Costa Verde Center in University Town Center.

“San Diego is one of the top markets where we’re looking to grow and acquire and develop,” Omar Hussein, Regency’s vice president and San Diego regional market officer, told CoStar News.

Regency Centers (NYSE: REG) now owns 427 retail properties totaling more than 59 million square feet, including 2 million square feet in San Diego County. Its website indicates the Jacksonville-headquartered company has another 18 retail centers in development, the bulk of them in Florida, Texas and California.

Most recently, the company acquired the 132,000-square-foot Scripps Ranch property at 10555 Scripps Poway Pky in San Diego for an undisclosed price from a local entity listed as Scripps Ranch Marketplace LP. The center was originally built in the late 1990s and is anchored by a Vons supermarket, with other tenants including CVS Pharmacy and Starbucks.

Hussein called the purchase a fantastic long-term acquisition in a supply-constrained market where Regency continues to scout for well-located holdings that fit its density and demographic priorities.

Generally, the company aims to acquire and develop centers in neighborhoods where it can serve a population of at least 100,000 with an average household income of $100,000 within a three-mile radius. All of its current 11 San Diego County properties are grocery-anchored, as are about 85 percent of its nationwide holdings.

“It definitely checks all the boxes for us in terms of our investment strategy,” Hussein said of the Scripps Ranch property, located near Interstate 15 and not far from two of its other current neighborhood centers in Poway and 4S Ranch.

He added Regency will continue to scope out development and acquisition opportunities in local north-coastal and other neighborhoods within its investment parameters.

Regency’s priorities also guide an upcoming $230 million redevelopment of its nearly 30-year-old Costa Verde Center, located in the affluent and high-demand UTC market. Currently going through entitlement processes, the project calls for the addition of 125,000 square feet of retail -- bringing its total to more than 300,000 square feet -- along with a 200-room hotel. Nearly all of the current structures on the property will eventually be replaced.

Regency remains in talks with potential new hotel, retail and restaurant tenants at the UTC site, and is aiming to retain current anchors including grocer Bristol Farms. Hussein said Regency is also considering turning a portion of the planned new retail space into creative offices, though the proportion has not yet been determined.

Regency is anticipating San Diego city approvals for the UTC project by the end of 2018, which would allow construction to start in late 2019. Completion is expected by late 2021, coinciding with the completion of a new regional transit station next-door. That station will be the terminus for the city’s ongoing $2.1 billion trolley extension, giving thousands of potential new shoppers and other visitors direct access to both Costa Verde Center and the next-door Westfield UTC mall, which recently completed its own $600 million renovation and expansion.

UTC is among the San Diego region’s tightest and highly-desired retail submarkets for its upscale demographics. The most recently available CoStar data put the submarket’s average retail asking rent at $3.31 per square foot, making it the region’s sixth-most-expensive neighborhood.

San Diego’s overall retail vacancy remains among the tightest for U.S. metro retail markets, hovering around 3.5 percent. Hussein said the newly acquired Scripps Ranch property has just one small vacancy to fill in order to bring it to 100 percent occupied.

Generally, he said, Regency has had little trouble filling local vacancies that arose at its local centers, noting that a former Albertson’s space at its Poway center was recently filled by a newly-opened Atlas World Fresh international grocery market, and a Point Loma space vacated last year by Sport Chalet is now home to discount clothing chain Marshalls.

Hussein said Regency Centers is not being swayed from its grocery-anchor-focused strategy by the continued incursion of e-commerce players into the food space, led by last year’s $13.7 billion acquisition of Whole Foods by Amazon, Inc. Whole Foods, in fact, is an anchor in a large number of current Regency shopping centers, as well as others now in development nationwide.

“If anything, the Amazon purchase of Whole Foods validates for us the importance of having brick-and-mortar stores in these affluent neighborhoods,” Hussein said.

Please see CoStar COMPS #4099846 for more on the recent Scripps Ranch transaction.

Lou Hirsh, San Diego Market Reporter  CoStar Group   
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