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Work Begins on Mixed-Use Project Set To Replace Hospital Near San Diego

Development Seen As Important for Downtown Rejuvenation in Escondido, California

Plans for the mixed-use Palomar Heights in Escondido, California, include apartments, offices and retail space. (Integral Communities)

By Lou Hirsh CoStar News

August 9, 2021 | 3:53 P.M.

Developer Integral Communities has started demolition of a closed hospital that is set to be replaced by a new mixed-use project that some say is crucial to the revival of downtown Escondido, California, near San Diego.

The developer on Aug. 6 began dismantling a 68-year-old hospital that closed six years ago after operator Palomar Health relocated operations to another site in Escondido, San Diego County’s fourth-most populous city. Integral’s plans for its new 14-acre project at 555 E. Valley Parkway, called Palomar Heights, include 510 residential units, as well as rental and for-sale housing, with 10,000 square feet of retail and office space in a total of four buildings.

The project received final city approvals earlier this year after several years of planning. The first residential units are expected to be completed in 2023, though new construction won’t begin until after the hospital is dismantled and removed in a process expected to take several months.

“Palomar Heights will deliver a variety of housing types to meet the needs of a diverse population and bring new residents and liveliness to downtown Escondido,” said Lance Waite, principal with Encinitas, California-based Integral Communities, in a statement.

Retail and office tenants have not been announced. The residential mix is planned to include 258 market-rate apartments, 90 senior apartments and 162 for-sale townhouses. The developer is also planning a retail farmer’s market, collaborative shared office spaces, a dog park, recreational amenities and a “Sky Lounge” bar and restaurant.

The developers and city officials envision Palomar Heights, among several other projects in development, as potential catalysts to bring new business life to the neighborhood since the closing of the hospital, which has several older retail and office buildings nearby. Consultants for the developer estimate the downtown project will create $11.8 million in new annual taxable spending and create 272 permanent jobs.

CoStar data shows the apartment market in northeastern San Diego County, including Escondido, has tightened considerably in the past year amid limited new construction. Just one apartment project with 127 units was delivered in Escondido, and that area’s vacancy rate is now 1.1%, down 3 percentage points from a year ago.

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