One of California’s largest office owners is cutting back on its holdings in downtown San Diego, joining a host of landlords responding to nationwide struggles for big-city central business districts in recent years.

Irvine Co., a dominant Southern California office landlord with properties across the country, recently offloaded its second office tower in downtown San Diego for well below its prior cost.

Property records indicate Irvine sold 101 W. Broadway for $43.9 million, less than one-third the price of $148.5 million that the firm paid for the 452,436-square-foot tower in 2005. The sale closed at the end of November, about two months after Irvine sold the second-tallest tower in downtown San Diego for just under $45.7 million, a 66% discount from its 2003 sale price.

Irvine has yet another downtown office tower on the market; a sale of all three would cut in half the six towers that for decades represented the largest collection of such properties owned by one firm in the city.

The sales mark a rare shift in the decades-long buy and hold strategy for the largest office owner in San Diego. The 160-year-old company is now looking outside the downtown core to the region's second-largest office neighborhood — University Town Center — that has benefited from mixed-use diversification in recent years.

The company is "conducting a long-term strategic review that we anticipate will include the sale of certain downtown San Diego office properties and reinvestment in others," Irvine said in a statement.

The Newport Beach-based owner isn't the only one shifting its geographic and property type focus in the wake of the pandemic that upended downtowns across the country, due to the high concentration of downtown office space.

From 2020 through the first half of 2024, the U.S. office market retracted by nearly 200 million square feet in negative absorption, the net change in occupancy. That retrenchment hit downtown areas harder than their urban and suburban office peers.

Downtown San Diego's office vacancy rate of 31% is more than triple the 10% level in nearby University Town Center, or UTC, named for its proximity to the University of California, San Diego in nearby La Jolla.

Struggles for San Diego's downtown mean UTC’s status as the second-largest office neighborhood could change significantly in the next few years. Irvine and local commercial brokers said a major catalyst is a community plan update approved by the city earlier this year for UTC.

Irvine already owns nearly 40% of the existing office inventory in UTC, according to CoStar data. The firm's development focus is going to be more on mixed use in nature rather than traditional office, as remote-work trends in the wake of the pandemic have prompted some companies to cut back on their office use.

“Guided by the city’s vision and our experience creating world-class mixed-use districts, we are beginning our master planning to create quality housing connected to office campuses, retail, transit and open spaces,” Irvine said in a statement.

City officials and local brokers have said multiple regional and national developers are expected to put forward plans in the coming years for mixed-use developments in UTC that will likely include office, retail and multifamily elements.

San Diego Mayor Todd Gloria signed into law an updated community plan for the UTC neighborhood, replacing a blueprint that was established in 1987. The city now seeks to add 29,000 housing units to UTC, which would nearly double the neighborhood’s population to around 130,000 over the next 25 years.

The plan also seeks to add 72,000 new jobs to what is already a bustling business hub, by attracting new commercial projects to the area. Plans come as San Diego like many cities is looking to boost the housing supply in response to chronic statewide problems with affordability, while also getting polluting vehicles off roads and encouraging development of pedestrian-friendly mixed-use projects.

Many of downtown’s office buildings are older, including some dating back 40 or more years, that would be challenging to renovate with the sort of high-end amenities some companies demand. It hasn't helped that a number of the region’s biggest job-creating industries, such as technology and life science, have long been migrating north to match where company executives and workers are residing, putting downtown at a disadvantage.

The big employers already know to establish their operations to enable their workers to get to work in the quickest way possible, including shortening their commutes.

Like Los Angeles and other large cities nationwide, San Diego’s older downtown office towers experienced rising vacancies and sublease opportunities well before the COVID-19 pandemic caused a sharp ramp-up in remote and hybrid work arrangements. Data shows downtown San Diego’s office vacancy rate at 31.5%, close to a historic peak. Its availability rate, with space for sublease factored in, is 36.8%.

The same situation has been mirrored in multiple U.S. cities such as Los Angeles, San Francisco, St. Louis, Chicago, Cleveland, New York and Seattle, as owners sell off older towers in urban hubs at well below their previous deal prices. In some cases, like in downtown Los Angeles, towers have been sold by lenders or special servicers after property owners walked away from troubled loans.

Irvine Co. counts a 129 million-square-foot office portfolio in California, Chicago and New York; it also develops and owns retail, hospitality and housing throughout California.

Located in what is known as the city’s Golden Triangle, where state Route 52 crosses interstates 5 and 805, the UTC enclave has become increasingly attractive to residents of northern San Diego, including corporate executives, and also commuters living in suburbs to the north, such as Carlsbad and Oceanside.

Downtown remains a big hub for the local tourism industry, with the San Diego Convention Center feeding steady year-round business into neighboring hotels. But the downtown’s current office trajectory will likely spur owners and developers to rethink their plans for big projects in the region as the center of business gravity shifts northward. The reality in San Diego at this point is that the true central business district is moving north towards UTC.