San Diego hires real estate consultant to rethink downtown office needs

San Diego officials are turning to a well-known consultant as they evaluate how to better accommodate city employees who no longer need permanent work space downtown Monday through Friday.

The San Diego City Council on Tuesday unanimously approved a $725,000 consulting contract with real estate investment management and services firm Jones Lange LaSalle. The firm, which last year conducted a review of the city’s existing portfolio of downtown space, will now help determine over the next 12 to 18 months how and where the city should place its downtown workforce.

City Council members considered this item part of Tuesday’s consent agenda, meaning they did not receive a staff presentation or discuss it at length. But in an October presentation to the San Diego Land Use and Housing Committee, Niki Chalfant, a program manager in the real estate department, explained the rationale for the contract.

“The city recognizes the need for a new look at how and where we place our employees in the city center. As we all experienced, the COVID-19 pandemic forced us to adapt to a new hybrid work model, which also allowed the city the ability to ensure the establishment of remote work options,” said Chalfant. “Now that office occupancy levels are different from traditional levels, this deal will allow us to use existing and future space more efficiently.”

JLL is tasked with evaluating downtown office use and operating costs at four city-owned buildings, including the troubled 101 Ash St. tower. which the city bought as part of a $132 million settlement with the building’s landlord and lender. The firm will also look at downtown leased space, work with city departments to understand their different workplace needs and evaluate ways to increase square footage. The latter includes weighing whether options such as office sharing, “hoteling” or pre-booking tables, hot desks and open floor plans can work for city workers.

The work will take place in four phases, ending with a 60-day pilot program testing different formats.

That means the work won’t be finished in time for the city’s formal solicitation of bids to redevelop the City Hall property and adjacent properties, which is expected in February or March and is in accordance with the Surplus Land Act. However, the work will ultimately inform what’s being called a Civic Core revitalization effort, ideally providing clarity on how much replacement office space the city needs.

Early next year, San Diego expects to issue notices of availability for six or more blocks of municipal land. Mayor Todd Gloria’s high-level idea is to offer city land, through long-term land leases, in exchange for modern facilities and an abundance of affordable homes.

The city expects to offer the entire City Hall complex — including the auditorium, convention center, parking garage and 3,000-seat Civic Theater — to the City Operations building at 1222 First Ave. and a vacant tower at 101 Ash St. The properties that serve 1,768 city workers are said to be outdated or too expensive to repair. Together, the buildings require $262 million in deferred maintenance, according to JLL’s 2021 existing space estimate.

In October, members of the Land Use and Housing Committee questioned the timing of JLL’s latest contract in relation to the upcoming call. Chalfant noted that recently departed Chief Operating Officer Jay Goldstone, who remains in charge of the revitalization project as a special adviser to the mayor, is being kept in the loop and that JLL’s previous appraisal work can be used in the meantime.

JLL’s latest contract comes for five years, although the work is expected to be completed in 18 months. The firm also continues to advise the city as a real estate consultant on the sports arena project.