Hazard Center in Mission Valley has a new owner and retail outlook

Once slated for redevelopment with hundreds of apartments, Mission Valley’s Hazard Center will remain as is under new ownership but get a facelift that promises to uplift its middling selection of storefronts and fill vacant office suites.

Los Angeles-based BH Properties purchased the retail and office complex that faces Friars Road on Aug. 28 for $68.25 million, property records show.

The privately held commercial real estate investor bought the 14.5-acre center at a deep discount from longtime institutional owner Principal Real Estate Investors, which paid $100.06 million for the parcels 21 years ago.

“We have had San Diego County on our list of preferred markets for quite some time,” BH Properties President Jim Brooks said in statement. “Hazard Center, with its terrific location in central San Diego along with its roster of strong retail brands, checks all the boxes and expands our footprint in California.”

The trade reflects a market that has shaved millions in value from office properties over the past few years as demand for space has waned considerably in the wake of the pandemic.

Opened in 1990, Hazard Center includes the 15-story office tower at 7676 Hazard Center Drive, a three-level retail center anchored by Barnes & Noble and UltraStar Cinemas, and the freestanding BJ’s Restaurant & Brewhouse building at the intersection of Friars and Frazee roads. The property, which abuts a trolley stop, includes 270,000 square feet of office space, 135,000 square feet of retail space, and both surface and underground parking.

The change in ownership puts to bed a more than decade-old plan to add housing to the site. In May 2010, the San Diego City Council approved the discretionary permits required for 473 residential units. The prior owner was moving forward with redevelopment plans before opting to sell the center at the end of last year, advisers on the deal said.

BH Properties is not eyeing residential redevelopment. It is focused instead on adding life back to a property that has struggled to find its footing in a crowded Mission Valley market dominated by large malls, the advisers said.

“Now that we’re not going vertical any longer, and with BH Property’s commitment to the retail, we’re embarking upon a first-class renovation of the shopping center to perhaps mirror the aesthetic nature of Del Mar Highlands,” said John Jennings, a retail leasing executive with Newmark who is involved with the project. “That quality of renovation will help us attract first-class tenants that are not located currently in Mission Valley.”

The retail renovation work, which will take 12 to 18 months, includes floor-to-ceiling glass storefronts, new paint and signage, and reimagined paseos and outdoor spaces with new seating options, he said. The hope is to bring in new restaurants and entertainment options that keep shoppers at the property longer.

The improvements could prove successful in a market where retail space is hard to come by. Just 2.1 percent of retail space in Mission Valley is available for lease, said Joshua Ohl, who is the senior director of market analytics for real estate tracker.

The new owner also plans to make improvements to the office tower so that the two uses better complement each other, said Derek Hulse, an office leasing executive with Cushman & Wakefield who is working on the project.

“BH Properties wanted to buy a well located, amenitized project that has historically had high (office) occupancy, 90 percent or greater, and add value through the creation of a new retail experience, and amenities and (move-in ready) suites within the office building — at what is otherwise perceived as a discounted price,” he said. “It’s certainly a good opportunity for the right buyer.”

The office tower was 77 percent occupied at the time of the sale, according to BH Properties’ news release announcing the purchase. Tenants include the law firm Kimball, Tirey & St. John LLP; workers’ compensation insurance company TheZenith; the San Diego Gulls and The San Diego Union-Tribune.

BH Properties owns 11 million square feet of a mix of different product types spread across 16 states, the news release said. While new to San Diego, the firm owns retail, apartment and office buildings in Orange County and Los Angeles. The investor is taking advantage of the depressed real estate market. BH Properties purchased eight different properties in the first half of 2024, the release said.

Principal was represented in the transaction by Adam Edwards, Justin Shepherd, Michael Kathrein and Bailey Bland of brokerage Eastdil Secured. BH Properties was self-represented. Mike Novkov and Hulse of Cushman & Wakefield acted as the office leasing advisers on the project and Jennings acted as the retail leasing advisor on the project.