In November 1999 I wrote a column in this publication titled “The South Will Rise Again.” In it, I discussed how San Diego County is “slipping south” after years of lagging growth relative to North County. I argued that available land and lower cost housing was the key to future South County growth. The premise was correct and much of what we anticipated has played out in large and diversified developments like the 850,000-square-foot Otay Ranch Town Center, the 661,300-square-foot Ocean Villas Corporate Center and the 330,000-square-foot Three Piper Ranch retail project.

The recent groundbreaking of the $30 million Marina Gateway Plaza shows major development continues in South County for a very simple reason — it is just about the only place with room to grow. The San Diego Association of Governments reported in 2003 that about 60 percent of the “South Suburban” vacant properties were privately owned. Much of this is developable and will enjoy near-term market opportunity.

South County property also is among the cheapest in the county, a fact reflected in new housing prices, which in March dropped to a median of $410,000, well off the 2005 peak of $610,750. Yet because many first-time buyers focus on South County, this most vulnerable part of the housing sector population has caused the area to be inordinately hit with foreclosure notices. A total of 4,063 of these documents were filed against South County properties in 2007, a 161.6 percent increase from 2006 and nearly 22 percent of the total number of notices in San Diego County. This number is likely to accelerate throughout 2008.

Lost Opportunity

From a real estate perspective, South County is divided into two distinct sectors. The eastern area encompasses the suburban development east of Interstate 805 and straddles the new state Route 125 toll road, where a vast acreage of undeveloped property is located. The western region hugs either side of Interstate 5 and includes the downtowns of Chula Vista and National City, in places down to the water. Unfortunately, what has yet to work in these older communities is urban types of development, and it probably will struggle to do so for the foreseeable future.

Chula Vista Mayor Cheryl Cox recently quipped at an Urban Land Institute meeting that her city is the only one in the county where real estate values are actually lower near the water than inland. She couldn’t have been more on point. The urban areas of Chula Vista and National City, both having been touted as having the potential to revitalize tired areas on a grand scale, are now stalled in their redevelopment efforts. Each of these communities missed the window of opportunity, and with it new urban infrastructure, great architecture and revitalization. It will be five to 10 years before that window reopens.

Even when housing prices eventually correct, the price points are likely to be such that the suburban parts of the county will be perceived as “bargains” over the near-term future, leaving little buyer incentive to pioneer in redevelopment projects.

In Chula Vista’s case, a no-growth political movement has stymied efforts to add intensity and height to the urban areas, and consequently knocked the momentum out of its redevelopment plans. Too bad, because Third Street downtown represents a lovely area to build around and could one day resemble some of the very nicest small downtowns in our state, such as San Luis Obispo or Walnut Creek in Contra Costa County.

The difference between Chula Vista and National City is that National City lacks a distinct downtown but isn’t afraid to think big. The city has launched an ambitious plan — 11 active projects mostly located along National City Boulevard — to add 143,000 square feet of commercial space and 1,586 units of residential.

Both cities have good political leadership in Cox and National City Mayor Ron Morrison. Both are sophisticated and tireless supporters of their respective city’s economies, development and prosperity. The problem is the local concerns about these issues bogged down the process such that the window was missed.

The Bayfront As Game Changer

Redevelopment of the Chula Vista Bayfront could change this gloomy urban development forecast, but let’s not get too excited. The community has trod this path before, with sputtering starts and ultimate failures, a path this version easily could follow. Still, the possibilities are exciting. The Chargers may commit to replacing a power plant with a stadium, particularly if the Gaylord hotel and convention center plans go forward. If successful, the nearly $1 billion Gaylord project would bring conference and tourist activity into this region by both supplementing the San Diego Convention Center when it is booked, and by discovering new markets. Its impact would spread beyond tourism because of its potential as a centrifugal force for businesses and commerce to expand into this area. In other words, big projects tend to create big potential, including the adjacent older areas with welcoming redevelopment districts.

Border’s Siren Economic Song

The region’s long-term economic future starts at the international border. At the Otay Mesa border station, nearly 16,000 autos cross every day while 47,000 autos do the same at the San Ysidro crossing. After absurdly long wait times, much of the traffic passes through South County. A key marketing target is to “capture” more of the money and jobs traveling through.

For more than 10 years my firm has worked San Ysidro redevelopment projects. I recall the brief, shining moment when San Ysidro’s downtown was one of the select “City of Villages” sites picked to showcase a mayor’s demonstration of new urbanism. Amidst the wreck of the real estate market and the specter of infeasibility, none of this has yet played out into real development.

The common theme in all of these plans? The propensity of South County interest groups to stake out turf and raise the ire and fear of their elected representatives such that nothing gets done. Special interests concerned about air pollution and an array of environmental issues, fair housing, fair labor practices, urban form and other single-issue advocacy combine to perpetuate inertia.

Ultimately, this translates into an absence of vision and courage. A much more heightened level of trust will be required throughout South County if it is to realize its potential.

Gary H. London is president of The London Group Realty Advisors Inc., providing real estate consulting and economic analysis. Check him out on the Web at www.londongroup.com or e-mail him at glondon@sandiegometro.com.