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San Diego Council Approves $300M Project to Create a City in the Suburbs

Say Hello to Merge 56, a Self-Contained Residential, Retail, Office Community
May 22, 2018
Developers of the mixed-use Merge 56 in San Diego are in talks to bring in elements including a movie theater, an organic grocer and a 120-room hotel.
Rendering couresty of Sea Breeze Properties.

The San Diego City Council has unanimously approved plans for the $300 million, mixed-use Merge 56 development, among the latest examples of large suburban projects seeking to replicate an urban-style community vibe.

Local developer Sea Breeze Properties plans to begin grading in six months and construction could start next year on elements within the 45-acre site, located just south of state Route 56 in San Diego’s Rancho Penasquitos community.

Plans call for a total of 242 residential units, including 47 affordable units, in a mix of rental apartments, condos, townhomes and single-family houses, the first of which are scheduled to be delivered in 2020. Commercial elements, being delivered by 2021, are slated to include 160,000 square feet of retail, a movie theater, between 250,000 and 300,000 square feet of office space and a 120-room hotel with a fitness center and various outdoor public gathering spaces.

Developers said Brookfield Residential has already signed on to build the project’s single-family housing elements.

Prior to the May 22 city council meeting, Sea Breeze Properties principal and owner Gary Levitt said commercial tenants have not yet been signed, but he has recently been in serious discussions with a major movie theater chain to operate a 10- to 12-screen cineplex at the site. He said a well-known organic grocer has also expressed solid interest in locating there, along with an operator of a family entertainment center with bowling alleys.

The Merge 56 project was previously approved in 2004 under a prior developer when it was known as Rhodes Crossing. Since acquiring the site in 2014, Levitt said he began discussions with community members on a revamped configuration that would create more of a self-contained village feel.

Key issues for gaining community consent included making sure that the revised project would not add traffic, commercial square footage or other elements that would widen its overall footprint beyond what was allowed in the originally-approved development.

Levitt said the Merge 56 project’s design has been completely overhauled from its days as Rhodes Crossing, envisioned in the late 1990s as a big-box-anchored shopping plaza with smaller retailers aligned in a strip configuration and “pads” slated for banks and chain restaurants on the fringes of a large parking lot.

Elements have now been brought together to reflect a more modern “smart growth” approach aimed at creating a sense of neighborhood while encouraging walking and socializing. Parking has been moved to the back of the commercial properties and is much less visible than in the original plans from a decade ago.

“This is not what you would typically see as the standard big-box center,” Levitt said, adding the importance of big-box retail itself has been shrinking in recent years. “This is meant to create an actual community that people would want to go to and spend time in. It’s dining, it’s entertainment, it’s services, it’s things like medical offices close to where people live.”

Levitt said new roadways will be built to increase local neighborhood access to the project, and some of those roads will be more narrow than originally envisioned, with the use of traffic “roundabouts” aimed at slowing down the cars using them.

The Merge 56 project was approved by local community planning groups and the city’s Planning Commission earlier this year. It is the latest of several suburban projects in San Diego County that have sought to compete with denser, more urban areas – like downtown San Diego and University Town Center – that are increasingly drawing in millennials and other young professionals.

Levitt’s company, for instance, is a co-developer of North City, a large mixed-use community in San Marcos which has essentially created a new downtown-like village where none previously existed, near California State University San Marcos.

That 200-acre community has elements in place including new offices, student and market-rate apartments, and a restaurant-brewery with its own bowling lanes. Levitt said construction is now underway on a new student housing complex with retail elements, being built by developers in conjunction with the university.

At a recent downtown San Diego forum presented by the Urban Land Institute, experts said suburban developers are increasingly finding ways to urbanize their projects with denser, walk-friendly configurations with access to public transit. That’s in part to lure some of those urban-oriented millennials and other young consumers seeking more space and nearby amenities as they raise families.

Colin Parent, a La Mesa city councilman and executive director of the nonprofit Circulate San Diego, which advocates for affordable transit and walkable neighborhoods, said changes in California and local city laws are gradually having an impact on development offerings.

In places like the East County city of La Mesa, developers are permitted to build in denser configurations, or provide fewer parking spaces than usually required, if they set aside 11 percent or more of their housing units as affordable. Other incentives are available to developers who build near transit stops.

In the North County suburb of San Marcos, smart-growth elements instituted in the early 2000s helped create new life at places such as San Elijo Hills, which has since grown to more than 3,000 housing units interspersed with community-serving retail.

“It really changed the face of San Marcos from a cow town [...] to a place where there are things happening,” said Dahvia Lynch, the city’s director of development services, adding that continued progress at the mixed-use North City near the university is “proof of concept that things can happen in suburbs.”

In other parts of San Marcos, plans previously hinging on large swaths of retail will need to be adjusted to current realities, including the overall decline of big-box retail, to serve other neighborhood needs including housing.

Diego Velasco, principal in the San Diego architecture and design firm M.W. Steele Group, said suburban developers are recognizing that a turning point has been reached, with the push toward urban centers now creating some economic backlash in many cities.

“There’s been a flight of people back to city centers and they’ve now become very expensive,” Velasco said. “Gentrification has become a big issue. There’s this possibility to go back to the suburbs and re-invent the suburbs.”

Lou Hirsh, San Diego Market Reporter  CoStar Group   
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