Developer J Street is planning what it calls one of the largest office-to-hospitality conversions ever undertaken in Southern California as owners around the country try to shift workspaces into a wider variety of more lucrative uses in the wake of the pandemic.
J Street plans to convert the fully vacant 25-story Tower 180 office building, acquired by the San Diego developer in December 2023 for $61 million, into a 560-room hotel under the Hyatt Place and Hyatt House brands.
The $250 million downtown San Diego redevelopment is to be carried out in collaboration with the Chicago-based global hotel operator, with construction set to start in early 2026 and conclude in the first half of 2028. The project “exemplifies the transformation of office space in primary urban markets in the post-pandemic world,” Nirav Shah, regional vice president of development for Hyatt, said in a statement.
San Diego is among numerous U.S. cities posting higher vacancies in older office properties, especially in downtown hubs, as many of those buildings have been sold off during the past two years at prices well below their most recent purchase prices.
Real estate services firm CBRE this month reported that 23.3 million square feet of U.S. office space is on track for demolition or conversion to other uses this year, far outpacing the 12.7 million square feet of new office space being completed in 2025.
Based on a review of 58 regions, the largest concentrations of office space in transition are in New York’s Manhattan borough at 10.3 million square feet, and Washington, D.C., at 9.2 million square feet. San Diego is No. 13 on the list, tied with Minneapolis at 1.7 million square feet.
Most planned U.S. office conversions have targeted apartments or condos for the next use, with several projects in the works in Chicago among other cities. But older offices are also being eyed for hotels, beyond San Diego to places like San Antonio.
The trouble is, there can be economic and architectural obstacles to making a workplace a hotel or other kind of revenue-producing property, industry professionals say. As a result, some U.S. conversion projects have stalled.
"The pandemic created opportunities to reimagine office assets for hospitality, residential, and mixed-use purposes, but the reality is that conversion projects face prohibitive costs, design constraints, and structural limitations that render most projects unfeasible," J Street founder and CEO Saj Hansji said in a statement to CoStar News.
California conversions uncommon
J Street originally considered multifamily uses when it purchased the San Diego property but is now focused solely on a hotel conversion.
“Over the past two years, we’ve meticulously quantified and mitigated the risks, creating a friction-free path to deliver this transformative new hotel for Downtown San Diego,” Hansji said.
Hansji told CoStar News his company determined that hospitality represented the best use for Tower 180 given its location and architectural configuration and the strong overall hotel demand in San Diego among business and leisure travelers.
Those factors are important for any buyer considering a reconversion to a hotel, brokers say, and the lack of any of those qualities may mean a property just can't work for that use.
Hospitality broker and researcher Alan Reay said he’s so far not seeing a lot of office-to-hotel conversions in California, partly due to challenges now facing the state’s traditionally robust tourism economy along with business travel.
“I know of a lot of developers who have looked into office conversion but none that are moving forward,” said Reay, president of Atlas Hospitality Group in Newport Beach, California. “The feedback I have heard is it is just too expensive to convert.”
Reay, whose firm is focused primarily on California hotel properties, told CoStar News he does not see such conversions becoming common in the state unless developers “figure out how to convert at a cost below existing hotel product.”
He added that “the downturn we have seen in downtown office locations is also hitting hotels, and it is why we are seeing values being hit, especially in markets like San Francisco, San Jose, Oakland and downtown Los Angeles.”
Urban-focused J Street is counting on long-term hotel demand in downtown San Diego, where convention business and recreational tourism have long kept rooms filled nearly year-round. CoStar data showed downtown San Diego hotels consistently maintained occupancy levels around 80% overall from 2014 to 2019, though that moderated to just under 74% for the 12 months ending in May.
Downtown San Diego hotel development has been limited in recent years, with just one property opening since 2019, though three properties totaling 490 rooms are under construction.
Architectural compatibility cited
The Tower 180 office was originally built in 1963 as the U.S. National Bank Building and underwent extensive renovations in 2020.
“The building is also fully vacant, eliminating relocation challenges often associated with adaptive reuse projects, and has undergone substantial interior demolition and abatement,” the J Street statement said.
J Street and Hyatt said plans for the new dual-branded hotel include 371 guest rooms under the Hyatt Place brand, geared to business travelers and others seeking dedicated work spaces; and 189 rooms under the Hyatt House brand, providing “well-equipped living accommodations” for short- and long-term stays.
There are plans for reception areas, a lobby lounge, a ground-floor market and a breakfast bar with an additional “overflow lounge” on the second floor. It will also have more than 12,000 square feet of meeting space.
The 25th floor will feature a rooftop cocktail bar and lounge with floor-to-ceiling glass walls showcasing 360-degree views of the San Diego skyline and nearby ocean, the developer said.
J Street said the architectural configuration of the building's main tower and adjacent annex presented the developer with an efficient layout that was ideal for hotel guest room design. But Hansji said it remains to be seen whether other vintage office buildings in places like San Diego will be suitable for similar conversions.
"While we remain optimistic about office-to-alternative-use conversions as a significant trend, particularly in prime urban markets, there are substantial challenges involved," the CEO said.