The vision for downtown San Diego’s waterfront is evolving — again. Once set to include a landmark hotel development, the Navy’s long-anticipated revitalization of the 1220 Pacific Highway site has taken a dramatic turn: the hotel is officially off the table, at least for now.

Citing a lack of available financing, developers behind the project — a team led by Lane Field developers Portman Holdings, Hensel Phelps, and Lankford & Associates — have confirmed that the hotel component is no longer feasible. “There’s just no capital out there that is chasing new construction hotels,” said Alexander Guyott of Hensel Phelps. With construction costs soaring and investor interest low, the numbers simply didn’t pencil out.

Instead, the development team is pivoting. The new plan now centers on building a large, waterfront entertainment venue on a 1-acre parcel just north of the existing Lane Field hotels, paired with a small public park adjacent to Broadway and Pacific Highway. The updated vision, approved by the Port of San Diego in early May, reflects a broader move to make the most of what’s financially and logistically viable while still adding vibrancy to the bayfront.

But this parcel is just one piece of a much larger puzzle.

Just a few miles away, the Navy is continuing forward with its bold plan to revitalize over 70 acres of underutilized land at the Old Town Campus (OTC) — home to NAVWAR, the Naval Information Warfare Systems Command. The project, known as the NAVWAR Revitalization, is one of the most ambitious public-private redevelopment efforts in San Diego history. At stake is the modernization of NAVWAR’s cybersecurity and defense infrastructure, alongside opportunities to introduce new housing, retail, and transit options into a prime urban corridor.

The Navy has selected Manchester Financial Group and Edgemoor Infrastructure & Real Estate as its development partner and is currently undergoing an environmental review process in accordance with the National Environmental Policy Act (NEPA). Future plans could include a major transportation hub, commercial space, and updated military facilities — all designed to support NAVWAR’s $3.3 billion contribution to the regional economy while unlocking new community benefits.

Although the hotel plan for 1220 Pacific Highway was shelved, it underscores the financial and environmental complexities of redeveloping prime public land. Still, the broader Navy-led vision for the OTC site remains a once-in-a-generation opportunity to reimagine what a modern, mixed-use district could look like — one that supports national defense, housing needs, and economic development all at once.

For San Diegans, that means a lot is still in motion — and plenty of chances to stay involved. The Navy and Manchester/Edgemoor have committed to ongoing public engagement and transparency throughout the process. The community will have opportunities to weigh in as the Environmental Impact Statement is developed and alternatives are evaluated.

While the hotel may be on pause, the bigger picture is far from over. With new entertainment, public space, and long-term federal investment on the horizon, San Diego’s waterfront is still on track for transformation — just not the one we originally envisioned.