San Diego Mall Conversion Distress Signals Trouble

San Diego’s major mall redevelopment projects are facing serious financial uncertainty as shifting market dynamics challenge office-heavy mixed-use conversions, as reported by CoStar.

Office Dreams Deferred

San Diego’s ambitious mall conversions are encountering financial trouble, mirroring broader uncertainty in US real estate.

Stockdale Capital Partners’ Campus at Horton, a $550M redevelopment of the former Westfield Horton Plaza, is facing foreclosure as leasing struggles persist. 

Meanwhile, Alexandria Real Estate Equities (ARE) sold Costa Verde Center for $124M after abandoning plans to turn the retail site into a biotech hub.

Both projects were conceived before remote work and changing CRE demand shifted away from traditional office space.

Now, developers are reassessing strategies as high vacancy rates and oversupply in key sectors, including biotech, challenge once-promising redevelopment.

Facing Foreclosure

Diving a little deeper, The Campus at Horton, nearing completion in downtown San Diego, has yet to secure tenants for its 770K SF of redeveloped office space. 

Stockdale Capital Partners acquired the former Westfield mall in 2018 for $175M and took out a $351M loan on the project. A notice of default filed in February gives the developer until May 7 to resolve its financial issues before the mall faces a foreclosure sale.

To adapt, Stockdale has pursued alternative uses, including adding 850 apartment units and leasing retail space to Sprouts Farmers Market, Studio Three, and SunLife Organics. However, with downtown office vacancies at 35.1%, the project remains in limbo.

Broader Biotech Slowdown

Alexandria Real Estate Equities had originally planned to transform the Costa Verde Center into a biotech-focused mixed-use campus. 

However, with San Diego’s biotech market saturated, the firm chose to sell the property for $124M, slightly less than its 2022 purchase price.

The buyer, London-based Global Mutual, teamed up with local firm GM Residential to redevelop the 14-acre site into a mixed-use project. Details are expected later in 2025.

Mixed-Use Struggles

San Diego’s stalled mall projects reflect broader national trends in mixed-use redevelopment:

• Financing challenges: Rising interest rates and stricter lending criteria have slowed construction activity.
• Shifting demand: Developers are moving away from office-heavy projects in favor of residential and hospitality components.
• Notable mixed-use shifts: Simon Property Group (SPG) is investing $400M to $500M into joint-venture mall redevelopments, while Brookfield Properties (BPYPP) plans to add 3.5K residential units to San Francisco’s Stonestown Galleria.

The good news is that despite hurdles, demand for well-located, live-work-play communities is strong.