The document discusses the benefits of creative office space in San Diego and how developers are adapting creative office models to the local market. Due to smaller average tenant sizes in San Diego compared to cities like San Francisco, developers must design buildings with smaller floor plans that can accommodate multiple tenants. Amenities and designs that allow for open layouts and collaboration are important. Some developers are seeing success attracting professional services firms to creative spaces, indicating a potential shift in the types of companies seeking these work environments in San Diego. As more creative office spaces prove successful, developers expect the market to shift significantly towards these styles of spaces.

1. Understanding the Benefits of
Creative Office Space in San
Diego
By David Farrell and Connor Arleo

2. The transition tocreative office space withinSanDiego presentsaunique challengewithinSan
Diegoanda significanteconomicopportunity.Inothercities,suchasSan Francisco,highcredittenants
needinguptoand over100,000 square foot isnot uncommon.Inthe San Diegomarket, however,itis
more typical to see buildings inthe 10,000-20,000 square foot range.The significance of this size
difference isthatthe creative office space modelusedinothermajorcitiesdoesnotapply inSanDiego.
Consequently,developerssuchasCruzanand Bixbymustdesignbuildingswithsmallerfloorplans,while
still keepingsimilarcreative layouts. Furthermore,thesedevelopersoftencannotdesignlarge buildings
for one specifictenant’sdesires;theymustaccommodate multiple differenttenantsinone shared
space.
In multi-tenantcreativeoffice space buildings,amenitiessuchas:outdoortables, benches,
patios,and fitnesscenters,mustbe designed withmultipletenantsinmind.Havingtwo-storyceilings
alsotakesaway fromthe feasibilityof these buildings, due tothe highbase cost.Companiesneedto
maximize theirrentablebuildingarea,making SanDiegocreative space aunique subsetof itsown.Loft
or mezzanine space maybecome amore commonfeature,justtogive some semblance of the high
ceilings.
Accordingto the developersandbrokerswe spoke to,there isageneral belief thatSanDiego’s
creative office demandwillbe pulledbythe small sample thatcurrentlyexists. If the new creative office
space buildingsare proventosell,there isanexpectationthatthere will be asignificantshifttowards
creative office spacesinthe market. However,giventhe highbase costof buildings,itishardto entera
situationwhere acompanymustinvest$100/SF. For thisreason,developers are watchinghow
companiessuchas BixbyandCruzan fare in the dispositionof theircreative projects. Bixby’sforayinto
KearnyMesa,and theirabilitytoattainabove marketrents,mightgive otherdevelopersmore courage
to testdifferentmarkets.
Since mostof whathas beendeveloped isinthe CarlsbadorLa Jollaarea,there hasbeena
majorfocus ongettinghightechand life science tenants.Thiswouldmirrorothermarketssuchas
Seattle andSan Francisco that have these tenants,aswell.At9797 Aero,the onlycreative office space
inKearnyMesa, the tenantsrepresent awiderspectrumof companies. For example,LPL,aswell as
some otherundisclosedprofessional service companies,placedcorporate officestherewhichmay
indicate ashiftinthinkinginSanDiego.SanDiegoisheavilydependentonitsservice industry,andif
these companiesbegintorecognize the benefitsof havingamore modernoffice,theymaybe more
willingtopaya premiumforthese spaces. Movingforward, companiesinthe service industryshouldbe
the primarytargets,because theytypicallyrequire lessspace thancompaniessuchasEli LillyandGoPro.
Bixbyisattemptingtotake advantage of the demandforsmall creative office spacesintheirunder-
constructionbuildingnamedThe Oberlin.Thisbuildingwillbe inthe SorrentoMesasubmarketandwill
be more significantlydivided thananyothercreative office spacesinSanDiego.
From a largercompany’sstandpoint,spendingthe extramoneytomake theiremployeeshappy
and retainthemisthe top priority.The costof real estate tendstobe relativelylow for larger
companies,sohavingstrongamenitybasesinthe buildingstheyoccupy issomethingtheydesire.For
example,accordingto BrettWard of DTZ, the biggestfactorforGoPro inchoosingMAKE was the ability

3. to maximize theiramenitybase.There wasanallowance of $50 per square footfor tenant
improvements,andGoProspentroughlythree timesthatamount. AtCampusPointe,Eli Lillyisactually
doublingtheiroccupiedspace.The drawof the amenitiesandthe beautyof the buildingare sucha draw
that theywere willingto waitforthe constructionof the secondbuilding,asopposedtolookingfor
openspace elsewhere inthe market.
It isclear that creative office space isnotjusta fad,itis a change in thinkingbasedonthe fact
that people workmore efficientlywhentheirworkplace isn’tsomewhere theydreadgoing. InSan
Diego,basedonthe successof the recentlybuiltcreativeoffice spacesandthe large presence of high-
tech,life science andservice companies,creative officebuildingsinthe rightsub-marketswill be leased
up quicklyandforabove marketrates.