Tag: research

Study: San Diego’s $47B Manufacturing sector supports 121K jobs, a third of which are in small businesses

By EDC Research Bureau,

This week, San Diego Regional EDC released “Manufacturing in San Diego: Local Impact, Global Reach,” which quantifies the economic impact of the region’s Manufacturing sector and explores the firms, innovation clusters, and talent building and creating the goods and technologies of the future.

While federal priorities shift to reduce dependence on foreign supply chains, prioritizing the resilience and competitiveness of San Diego’s Manufacturing sector is key. In fact, over the last five years local manufacturing firm growth has outpaced that of California and the U.S. at large. The Manufacturing sector not only creates jobs and fosters innovation across key industries in our binational region, but it ensures a stable supply of essential goods and technologies.

“As is always our mission, this report aims to provide actionable insight for regional decision makers with data and guidance needed to preserve and enhance San Diego’s competitiveness in the global economy. Manufacturing is core to San Diego’s innovation identity, offering onramps to quality jobs, and will need coordinated support to sustain growth,” said Eduardo Velasquez, Sr. Director of Research & Economic Development at San Diego Regional EDC, the report’s author.

Released as part of National Manufacturing Month, the interactive web report includes a deep dive on the $47 billion Manufacturing sector, and includes company profiles, a metro-by-metro comparison, and a set of recommendations for better supporting manufacturers in a costly and highly regulated environment.

KEY report FINDINGS

  • San Diego’s Manufacturing sector is a significant part of the regional economy. There are 121,027 jobs supported by 4,429 establishments tied to the Manufacturing sector. This means that manufacturing employment accounts for nearly one in 10 private sector jobs across the region. Altogether, this amounts to a $47 billion regional economic impact annually.
  • Manufacturing jobs are high-paying and increasingly accessible. Average annual wages are more than $103,000, which is 31 percent higher than the region’s average. The proportion of manufacturing jobs not requiring higher education continues to rise, opening opportunities to a wider range of candidates.
  • Growth in the sector is driven by small businesses. More than one-third of the manufacturing workforce is employed by a small business, with fewer than 100 employees. Nearly nine in 10 manufacturers employ fewer than 50 employees.
  • Manufacturing is tied to innovation. San Diego manufacturing encompasses industry verticals from Consumer Goods and Craft Beer to Life Sciences, Technology, and Aerospace. Innovation-related industries make up 46 percent of all manufacturing employment in the region.
  • High cost of living and operational challenges hinder the sector’s growth. Success stems from companies finding unique pathways to grow and expand. However, a high cost of living, limited space, and higher operational costs in San Diego pose challenges for attracting and retaining manufacturers and their workers.

Manufacturing in San Diego is made up of world-class brands and consumer goods like Taylor Guitars, Dr. Bronner’s soaps, and Stone Brewing’s IPAs. Yet San Diego’s Manufacturing sector also has a strong tie to the region’s innovation ecosystem—producing everything from satellite navigation equipment to genome sequencers. In fact, San Diego’s innovation manufacturing employment concentration is more than double the national average.

“San Diego brings something special beyond biotech innovation—it’s the collaborative spirit and vibrant energy here that truly enhance what we create,” said David Arida, COO at Biolinq, a San Diego startup focused on developing biowearable sensor devices.

However, the region’s high cost of living, expensive and hard-to-come-by real estate, and higher operational costs pose challenges for attracting and retaining talent and manufactures alike. Even more, San Diego ranks low in ease of doing business compared to competitor regions, which can impact company decisions on where to locate or expand operations.

“As EDC’s report demonstrates, it is critical that our region commits to cultivating talent and catalyzing innovation, as well as investing in critical infrastructure and easy-to-navigate policy frameworks to better support local manufacturers. In Carlsbad, we are dedicated to strengthening our manufacturing community by fostering collaboration and ensuring businesses have the resources needed to succeed. From streamlining processes to providing access to new opportunities, we are committed to making Carlsbad a hub for innovation and sustainable growth in manufacturing,” said City of Carlsbad Mayor Keith Blackburn.

The report was sponsored by the City of Carlsbad, CMTC, San Diego County Water Authority, and Walmart, and was unveiled October 30 at an industry event together with Carlsbad Mayor Keith Blackburn and San Diego City Councilmember Raul Campillo.

SEE THE FULL REPORT

LEARN MORE ABOUT MANUFACTURING IN SAN DIEGO

Plus, explore our Spotlight on Manufacturing series

About EDC

San Diego Regional Economic Development Corporation (EDC) is an independently-funded economic development organization that mobilizes business, government, and civic leaders around an inclusive economic development strategy in order to connect data to decision making, maximize regional prosperity, enhance global competitiveness, and position San Diego effectively for investment and talent.

Harnessing the power of cross-border manufacturing in San Diego

By Lindsey Silvia ,

This blog post is a part of a larger series in celebration of Manufacturing Month, sharing key trends from our report on San Diego’s Manufacturing sector.

READ THE NEW REPORT

Cross-border manufacturing in San Diego has significant untapped potential. With five ports of entry, the Baja California region is one of the most accessible and lucrative for international expansion. While some companies are just beginning to explore it, many of San Diego’s most successful, innovative brands have already established a manufacturing presence in Tijuana and surrounding cities.

According to Tijuana EDC, Baja California already has 960 manufacturing facilities with plenty of room for growth. The manufacturing industry represents 65 percent of Tijuana’s GDP. Just 30 minutes to the south, manufacturing in Mexico offers cost effective products without compromising quality, backed by a steady supply of highly skilled labor.

Here are three common myths about cross-border manufacturing and how San Diego companies have been able to flourish in the binational region.

    1. The myth: Lack of infrastructure makes it more expensive to manufacture in Mexico than advertised.

      The region has made significant strides with modernizing infrastructure including upgrades to many points of entry. For example, major investments in the Otay Mesa II Port of Entry, funded primarily by the US, are set to reduce traffic congestion by up to 50 percent. This improvement will further enhance the cost efficiency of cross-border trade and manufacturing operations, making it even more attractive for San Diego companies to consider these opportunities.

      Taylor Guitars is a prime example of a San Diego company benefiting from cross-border manufacturing. Its operations in Tecate are thriving due to cultural alignment and strategic advantages. A business leader at Taylor Guitars highlights the key benefits and programs it utilizes, such as the IMMEX program, which allows temporary importation of goods that are transformed or repaired and then exported.

      “Manufacturing in both San Diego and Tecate gives Taylor Guitars a competitive advantage. Our Tecate operation allows us to produce quality guitars at accessible price points, reaching a broader audience, while our San Diego facility focuses on more specialized, premium instruments. Together, they enable us to deliver a diverse range of products without compromising on craftsmanship or innovation.”

      – Ed Granero, VP of Product Development, Taylor Guitars

    1. The myth: Mexico doesn’t offer high-quality manufacturing. 

      Many manufacturers in Tijuana work with leading global companies in high tech industries including Medical Devices, Electronics, Automotive and Aerospace. These companies require high quality and rigorous quality control measures to ensure compliance with international standards. For instance, ResMed operates a manufacturing facility in Tijuana, producing advanced medical devices like CPAP machines with stringent quality assurance protocols. Similarly, other high-tech firms like Qualcomm and Medtronic trust local partners to deliver precision-engineered products that comply with their exacting requirements.

    1. The myth: There isn’t a strong talent pipeline present in Mexico.

      The presence of high-quality manufacturing and modernized infrastructure is complemented by access to a highly capable talent pool, supported by top universities in Tijuana and advanced manufacturing capabilities in the region.

      Tijuana provides a hub for a strong pool of high-skilled workers. Baja California is home to many world class universities, 37 of which are in Tijuana. Among these include top-rated schools University of Tijuana and the Tijuana Institute of Technology, which contribute to more than 3,700 annual degrees in STEM fields. Many graduates choose to remain in the region, where they can live at a lower cost and help drive the local economic growth.

Cross-border manufacturing offers San Diego companies a powerful combination of cost efficiency, advanced capabilities, and access to world class talent. By leveraging the benefits of San Diego’s proximity and relationship with Baja California, manufacturing companies not only reduce their costs but also enhance production capabilities and increase competitiveness. As infrastructure investments continue to improve cross-border logistics, and with the support of programs like IMMEX, the future looks bright for San Diego’s cross-border manufacturing landscape.

Resources to explore cross-border trade opportunities

  • World Trade Center San Diego and its Export Specialty Center works directly with companies—free of charge—to help them expand internationally and grow in San Diego.
  • Tijuana EDC provides specialized business consulting and logistics services for companies that are considering choosing contract manufacturing in Mexico to grow.

This blog post is a part of a larger series in celebration of Manufacturing Month. Click here to look at our previous deep dive on San Diego’s strong manufacturing talent pool. To read our full analytical manufacturing report click here.

Building a bright future: The faces of San Diego Manufacturing

By Lindsey Silvia ,

This blog post is a part of a larger series in celebration of Manufacturing Month, sharing key trends from our report on San Diego’s Manufacturing sector.

READ THE full REPORT

San Diego’s Manufacturing sector is not just a cornerstone of the local economy; it also provides unique and well-paying career opportunities for San Diegans with great prospects for advancement. With an average wage of $103,000 per year, manufacturing jobs in San Diego pay 31 percent more than non-manufacturing jobs in the region on average. The industry supports approximately 100,000 jobs across a diverse array of industries including Craft Brewing, Life Sciences, Aerospace, and Tech as well as emerging fields like Cleantech.

Talent is a key driver for many manufacturers looking to setup or expand in the region. Companies are actively seeking local graduates, offering summer internships, and creating opportunities for individuals from historically underrepresented communities. This proactive approach to talent acquisition ensures that manufacturers in San Diego continue to thrive and innovate—and supports real San Diegans in building meaningful careers.

EDC sat down with a few local manufacturing experts to hear their experiences and insights. The goal is to showcase the diverse range of individuals and companies within the manufacturing sector and highlight the opportunities available to those interested in pursuing a career in this industry.

Employee spotlights: Real stories, real success

ASML: Working at the cutting edge of technology

Austin graduated with a degree in materials physics from UC San Diego in 2021 and holds a master’s in engineering from UC Irvine. After his stint in Orange County, he was determined to build a life in San Diego and returned to the area seeking a career in manufacturing. Although his education opened doors at top companies nationwide, Austin knew San Diego was home and was determined to carve his path here. With experience in research, he pivoted to manufacturing where he could see the direct impact of his work. Now working at local tech giant ASML on the New Product Introduction team, he integrates new products into the manufacturing process and ensures they meet customer expectations. Reflecting on his journey, Austin emphasized the importance of internships for gaining industry exposure and building professional networks. His connection to the San Diego community, formed during his undergraduate studies, has motivated him to pursue a career in the region. Austin is optimistic about the future of the semiconductor industry, noting its growth and increasing demand for chips driven by AI, and computing and electric vehicles.

TriLink BioTechnologies: Cultivating a culture of quality and inclusion

Jennifer is a dedicated member of the TriLink BioTechnologies team, part of the Maravai LifeSciences parent company, which helps other businesses develop and manufacture products vital for understanding genetic processes and developing biotechnological applications like vaccines and gene therapies. A graduate of UC San Diego, Jennifer started her career as a lab assistant in 2001, and over the years has taken on multiple roles leading to her current role as Associate Director for Quality Product Lifestyle, where she is dedicated to enhancing quality control within the company. Jennifer is passionate about mentoring and advancing female leadership in the Life Sciences industry, aiming to elevate women in executive roles. She values San Diego’s collaborative Life Sciences ecosystem, where companies share knowledge to develop life-saving treatments.

Dr. Bronner’s: Growing up in the culture of care

Blanca has navigated an inspiring career since joining Dr. Bronner’s in 2007. Joining the Vista-based company directly out of high school, she found her niche in manufacturing, driven by passion for the products she helps create. Over the years, Blanca has ascended through various roles, culminating in her current position as Director of Production. She cherishes the culture at Dr. Bronner’s, which prioritizes employee care and work-life balance, and she appreciates the company’s approach to challenges like the high cost of living in San Diego. Blanca’s experience as a woman in a traditionally male dominated industry has equipped her with resilience and determination, and inspired her advocacy for other women. Her passion for San Diego’s vibrant, inclusive culture mirrors her dedication to shaping manufacturing in the region.

Finding skilled talent for your manufacturing facilities

San Diego’s manufacturing sector is not only an economic force but it’s also a community of innovators and skilled technicians where professionals like Austin, Jennifer, and Blanca have built rewarding careers with opportunities for advancement. More than offering a job, this industry can provide fulfilment and a well-balanced and thriving lifestyle in the San Diego region.

If you’re a manufacturer looking for skilled talent like those profiled above, leverage these recruiting tools:

  • Develop an apprenticeship program: In partnership with Apprenti, EDC can assist companies with establishing apprenticeship programs in non-traditional fields like advanced manufacturing, information technology, cybersecurity, and more.
  • Connect with Verified Programs: To strengthen your company’s talent pipeline, EDC can connect employers with local post-secondary training programs that have been vetted and recognized for strong efforts to teach relevant curriculum and serve a diverse student body.

What’s next?

This blog post is a part of a larger series in celebration of Manufacturing Month. Click here to look at our previous deep dive on San Diego’s unique manufacturing strengths and opportunities. To read our full analytical manufacturing report click here.

Manufacturing in San Diego: More vital than you think

By Lindsey Silvia and Emily Irion,

This blog post is a part of a larger series in celebration of Manufacturing Month, sharing key trends from our report on San Diego’s Manufacturing sector.

READ THE full REPORT

San Diego is known for its sunny coastlines, vibrant tourism, and thriving biotech industry, but its Manufacturing sector is equally as diverse and dynamic. Manufacturing in the region is done using the most cutting-edge technology as well as traditional craftsmanship. This diversity reflects the region’s ability to adapt and evolve while creating a robust economic landscape with opportunities across a variety of industries.

The impact of the Manufacturing sector on San Diego’s economy may go unnoticed, but it’s a crucial contributor to the region, generating more than $47 billion annually when accounting for direct, indirect, and induced effects on the economy.

By the Numbers

 

With significant job concentration in Life Sciences, Technology, and Aerospace and Navigation technologies industries, manufacturing in San Diego is both sophisticated and advanced.

Why San Diego stands out

Three key factors set San Diego apart as a Manufacturing hub: talent, innovation, and proximity to key customers. See how local companies are taking advantage of all three below:

    1. Staying close to key customer base

      Stone Brewing is a unique story and part of a larger narrative of the region’s diverse Manufacturing landscape. A homegrown brewery, Stone Brewing was founded in San Diego County in 1996, playing a key role in establishing the region as a thriving craft beer hub. Its strategic location keeps it close to target customers and suppliers, while the vibrant brewing community attracts top talent. Now the largest craft brewery in California and the ninth-largest overall in the U.S., Stone continues to expand, reinforcing its presence in San Diego. Acquired by Japanese brewery Sapporo in 2022, Stone invested $20 million to expand its Escondido brewery. Now branded Sapporo-Stone Brewing, the brewer makes Sapporo’s beers in addition to its own, doubling output and expanding the Japanese brewery’s reach into the U.S. market. Its San Diego presence remains a strategic asset, benefiting from the region’s collaborative brewing community and loyal customer base.

    1. A hub for cutting-edge ideas

      San Diego consistently ranks in the top three Life Sciences markets in the U.S., often recognized as a hub for research and development (R&D). However, the region’s strength in manufacturing frequently goes overlooked.

      Founded in San Diego in 2017 by former Illumina leadership, Element Biosciences develops genetic analysis tools and human genome sequencing, reflecting the region’s cutting-edge genomics work. One of the key advantages to San Diego is the robust biotech ecosystem, specifically within Genomics, which fosters continuous innovation and cutting-edge ideas, creating an environment where a startup like Element can thrive. Element’s rapid growth in under seven years is partly due to the decision to continue manufacturing key components in San Diego, driven by proximity to critical R&D activities, access to top talent and reliable industry partners, and collaboration with local universities and industry giants. Like many Life Sciences companies in the region, Element stands out as both an R&D innovator and precision manufacturer, solidifying its role in San Diego’s innovation Manufacturing landscape.

    1. Driving San Diego’s next innovation cluster

      When people think of Manufacturing, they often picture large-scale assembly lines. In San Diego, smaller-scale Manufacturing with a greater emphasis on quality and precision is the region’s sweet spot.

      Aptera launched in 2019 out of co-CEO Steve Fambro’s garage. The solar electric vehicle company embodies the region’s burgeoning Cleantech hub, utilizing a micro-factory model. Aptera opts for smaller-scale operations and strategically selects markets close to its customer base. California’s environmental goals made the state an ideal fit for its innovative product. San Diego was also a natural choice for its founders, who had prior experience launching companies in the region.

      Beyond being a key market for customers, San Diego’s innovation ecosystem continues to provide access to top-tier talent for high-tech, cutting-edge roles. It also offers strategic supply chain advantages due to proximity to Los Angeles and, more importantly, to Tijuana, Mexico.

Supporting the ecosystem

Manufacturing in San Diego is a vital sector that supports more than 100,000 jobs, contributes significantly to local GDP, and fosters a thriving environment for innovation and growth. By focusing on nurturing talent, fueling innovation, and leveraging its strategic location, San Diego is well-positioned to sustain and grow its manufacturing expertise.

Local industry resources:

To read our full analytical manufacturing report click here.

San Diego nearly surpasses Inclusive Growth goal for quality jobs, and why the work isn’t over yet

By Teddy Martinez,

On August 14, EDC hosted its second Inclusive Growth Roundtable of the year, convening 40 regional stakeholders, service providers, and small business leaders to share the latest data on quality small business jobs and ground-truth our findings.

The 2030 Inclusive Growth goals focus on three key pillars core to any strong regional economy: quality small business jobs, a skilled talent pipeline, and thriving households. EDC analyzes the region’s progress to each goal annually. During the August gathering, we focused specifically on the region’s progress toward adding 50,000 new quality small businesses jobs by 2030. EDC currently defines a quality job as a business with fewer than 100 employees that offers at least $23 per hour and provides health insurance.

EDC’s Vice Chair of Inclusive Growth Lisette Islas kicked off the dialogue reminding us why this work matters, and celebrating the intentional and collaborative journey we have been on as a region since 2017. We’ve seen significant progress in San Diego becoming a more inclusive economy, but there is more work to be done. Below is a recap of the data shared, insights gathered, and issues we see on the horizon.

The backbone of San Diego’s economy

In San Diego, small businesses represent 98 percent of all firms and account for 59 percent of total employment. The impact that small business owners have on local jobs cannot be overstated. Despite significant contributions, small businesses struggle to keep up in an increasingly expensive market.

The smaller the business, the larger the challenge for providing a competitive wage. In fact, small businesses offer 38 percent lower average wages compared to companies with more than 100 employees. Microbusiness (<4 employees) face the largest challenge when it comes to relative compensation. This trend has worsened since EDC began tracking quality jobs data in 2017, with the relative wage gap widening even more last year.

Quality small business jobs surge

The latest data shows that small businesses have steadily increased the proportion of quality jobs, with 28.8 percent of all small business jobs now meeting the wage threshold including health benefits. The latest data refresh shows that quality small business jobs surged last year. So much so, the region has nearly surpassed the 2030 Inclusive Growth goal, adding 48,481 new quality jobs.**

The data is gratifying and certainly reflects the importance and impact of efforts to increase opportunities for more small business owners, but there is more than this metric to unpack.

Inclusive Growth remains paramount

The world has changed dramatically in the last seven years since EDC launched the Inclusive Growth Initiative. In that time, the region experienced tremendous economic growth followed by a global pandemic that curtailed progress. Those hit the hardest were women and people of color in San Diego. Since then, we’ve seen a strong economic recovery, yet rising tides have not lifted all boats.

San Diego’s lowest paying occupations are disproportionately held by marginalized and under-invested-in populations. While the surge in quality jobs is reassuring, the reality is that more than two-thirds of small business jobs still fall below the wage threshold and larger businesses still have the advantage when it comes to paying competitive wages.

Also important to note, lower paying jobs are disproportionately held by people of color who are noticeably underrepresented in the highest paying occupations in town. For example, more than half of Healthcare Support occupations in San Diego, which include nursing, medical, and dental assistants, are held by Black or Latino people, but the average total wage is below $20 per hour. Conversely, less than 20 percent of Computer and Mathematics occupations, which include statisticians, programmers, and software developers, are held by Black and Latino people but pay more than $50 per hour on average.

During the event, we also shared recently conducted survey results of 603 local small business owners which found that people of color have contrasting challenges when it comes to owning a business. Done together with SBDC, the survey results revealed that securing necessary funding is a major challenge for nearly two-thirds of minority small business owners. This highlights the importance of programs that tailor outreach, education, and funding resources for minority business owners to stay competitive in San Diego.

EDC’s commitment to increasing quality small business jobs with an inclusive lens is embedded into our programmatic work, yet we recognize that the road ahead will require sustained regional collaboration. We invite you and your organizations to join this movement so that San Diego remains competitive, and that all businesses and their employees continue to benefit from the region’s economic success.

Teddy Martinez
Teddy Martinez

Sr. Manager, Research

** A previous version of this blog incorrectly stated 30.3 percent of all small business jobs now meet the wage threshold including health benefits, and that small businesses added 60,234 new quality jobs to the region, surpassing our Inclusive Growth goal. The data has been corrected and updated in line above as of September 5, 2024.

EDC, SBDC research show talent acquisition is greatest challenge to small businesses

By Sang Nguyen,

Small businesses are one of the cornerstones of San Diego’s regional economy. More than 61 percent of all jobs in the region are within a business that employs less than 100 employees, which is nearly double the national average.

However, small businesses are also the most prone to economic downturns relative to their larger peers. The pandemic caused approximately half of all small businesses to face extended closures locally, with many shutting down permanently. On top of that, a job at a small business will pay 34 percent lower wages, on average, than a job at a larger business.

To better understand where small businesses currently stand and their evolving needs in this ever-changing business climate, EDC, San Diego & Imperial Valley Small Business Development Center (SBDC), and BW Research conducted a survey of small businesses across San Diego and Imperial Counties. This survey was done in partnership with SBDC to inform its network of advisors to best provide support and programming. Here’s what we learned:

expansion of workforce

Job growth for small businesses has been flat for the past two years. Nearly half of small businesses surveyed indicated no change in employment and an additional 19 percent reported a decrease in employment. This trend is applicable to small businesses in most industries. Businesses in food service, tourism, and hospitality industries experienced less of a decline in employment since the end of 2021. This could be due to pandemic-induced tourism slowdowns when travel was limited. On the other hand, firms in the construction and design industries reported an expansion in employment 12 percentage points above the average, reflecting the region’s investment in infrastructure and development.

However, when asking small businesses about their near-term outlook, nearly one out of three expect to increase hiring over the next 12 months. Firms in the high-paying innovation economy (life sciences, emerging technologies, information, and communication technologies industries) stood ahead of the pack, with 43 percent expecting to add to their workforce. Additionally, 48 percent of small businesses that have a customer base that expanded outside the region had a positive outlook, compared to only 23 percent of firms that serve customers primarily in the region.

Hiring is the greatest challenge

The most significant challenge that small businesses face is recruiting and hiring qualified staff. More than half (55 percent) of small businesses reported some level of difficulty in talent acquisition. Mid-sized (10 to 24 employees) and larger small businesses (25 to 100 employees), as well as firms with more years of experience under their belt, struggle more with finding talent relative to micro businesses (two to nine employees) and younger firms. As a firm grows over time, expansion in its workforce is necessary, but finding the right people to fill roles is hindering most small businesses. This becomes more of a problem when considering that larger businesses are competing for the same talent. Read more about San Diego’s talent outlook on our talent dashboard.

Other significant challenges for small businesses include navigating rules and regulations (44 percent), retaining qualified staff (43 percent), finding affordable commercial or working space (43 percent), and securing necessary funding (43 percent). Younger small businesses are more likely to have difficulties with issues in the early stages of a business like finding an affordable working space or securing necessary funding. More experienced firms are more likely to have difficulties attracting and retaining talent as they look to expand.

Relocation risk

Of small businesses surveyed, seven percent revealed they are planning or exploring a move out of the region. Additionally, 20 percent indicated that although they plan to stay in the region for now, they have considered a move out of the region at some point in the future. When looking at retention by industry, the distribution and logistics industry has the highest proportion of firms planning to leave the region. Furthermore, 35 percent of responding firms in the high-paying, fast-growing innovation economy industries have considered leaving the region—the highest among all industry groups.

Those small businesses that have considered or are planning to leave the region have more difficulty with facets of doing business. Three in five small businesses that are planning to move out of the county report difficulty in navigating these rules and regulations. More specifically, labor regulations, permitting, and taxes are the most common issues that firms run into. Finding an affordable working space and securing funding are also challenges more commonly found in firms that are likely to leave.

Small businesses that rated local programs and resources as a weakness are more likely to leave the region than those that rated it as a strength. Connecting these small businesses to the right resources can help alleviate the challenges they are facing. Greater and more targeted awareness of what is currently available to help small businesses, like EDC business services and SBDC services, could help.

Tap into local resources

If you are a small business in need of assistance, connect with SBDC and its network of advisors, and access on-demand training and live workshops. For additional resources to help your business grow see EDC’s Doing Business Here page. Additionally, learn more about EDC’s Anchor Institution Collaborative, which aims to increase small business resilience by connecting them to large buyers in the region.

SEE THE ADDITIONAL FINDINGS FROM THE SURVEY HERE

Q4 2023: San Diego’s employment and what it means post-pandemic

By Sofia Nelson-Ferezi,

Each quarter, EDC’s Research Bureau releases its Economic Snapshot to analyze key economic indicators in San Diego’s economy. Read on as we dig deeper to assess the region’s job recovery journey in a post-pandemic economy by looking at economic trends through the end of 2023.

San Diego’s job recovery journey

As San Diego’s unemployment rate has remained up and above the national average, at 4.3 percent and 3.5 percent respectively, and as job growth has slowed compared to early 2023, it is worth examining the region’s progress recovery in a post-pandemic economy.

From March to April 2020, San Diego lost 233,900 jobs, and employment dropped by 18.5 percent causing the unemployment rate to spike to 15.7 percent. In November 2021, the region officially recovered the total number of jobs lost during the pandemic. While recovering lost jobs is an indicator of a healthy economy, it does not tell the whole story. The following explores San Diego’s employment data to understand where the region stands as of the end of 2023.

Not all industries are created equal

While San Diego has regained the total amount of lost jobs, this is not the case for each industry. Total employment in San Diego stands two percent higher than at the onset of the pandemic. However, more than half of industries in San Diego don’t currently match pre-pandemic employment levels. Top growing industries such as Utilities, Transportation, and Healthcare help offset other sectors that are lagging in job growth.

Comparing current employment levels relative to pre-pandemic numbers is not always a reflection of recovery. Such is the case for Finance and Insurance, which made up for pandemic-related job losses by December 2020, but currently sits at 5,300 jobs under original pre-pandemic levels. In fact, several other industries initially recovered pandemic job losses and now find themselves with lower total employment. This includes Retail Trade, Real Estate, Accommodation and Food Services, and Management of Companies.

While it is hard to assume this negative trend is related to pandemic effects, the new conditions it spurred can potentially have a lagging impact on employment across sectors. For example, as remote work trends have become more prevalent, commercial real estate is affected as firms continue to reduce their office footprint, which could potentially lead to a lower demand for commercial real estate talent. In 2019, remote job postings made up only eight and four percent of total job postings in Finance and Information, respectively. In 2023, those proportions grew to 26 and 15 percent.

The industries that recovered the fastest are Transportation and Warehousing in November 2020, followed by Finance and Insurance in December 2020, and Professional, Scientific, and Technical Services in March 2021. Employment in the Utilities industry was hardly impacted after March 2020, which might explain why it has added the most jobs since the pandemic started.

What if the pandemic didn’t impact jobs?

While jobs have been recovered, the pandemic has also impacted the job growth that would have occurred absent the pandemic. Before the COVID hit, San Diego’s annual employment growth rate was averaging at 1.1 percent. This typical annual growth rate was disrupted in 2020, as annual employment fell by 10 percent.

To get an idea of where employment would stand today if jobs had not declined amid the pandemic, we apply the average growth rate from 2019 to 2023. Below, we can see how this potential growth compares to the actual annual employment levels in San Diego. From this, we see that the region is still 1,488 jobs below the potential growth, assuming employment has been growing at a fixed annual rate of 1.1 percent. This recovery had a significant economic impact on the region beyond number of jobs. In 2020, the annual growth of San Diego’s gross regional product (GRP) was barely 0.1 percent, while the annual GRP growth rate in 2021 and 2022 was 10 percent.

San Diego relative to California

While San Diego has not fully closed this gap between actual employment and potential employment growth, it is ahead of the state. This aligns with the fact that San Diego’s unemployment rate has remained below California’s throughout the pandemic until now. Additionally, the region was able to reach pre-pandemic labor force levels back in 2022, while the state remains 1.57 percentage points below 2019 participation.

Where does San Diego stand?

While San Diego’s recovery from pandemic employment impacts is not over yet, it is very close to completion at a macro level. However, it is important to monitor individual industries as their employment trends differ from one another. Even after San Diego is aligned with its potential growth, there will likely be industries falling behind; some might even experience new disruptions due to emerging economic conditions in a post-pandemic economic climate.

When comparing to California, the region has held a stronger position and experienced an overall faster recovery, with lower unemployment rates, faster labor force growth, and more rapid return to potential growth.

Learn more in our Quarterly Economic Snapshot

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San Diego’s Economic Snapshot: Q4 2023

By EDC Research Bureau,

Every quarter, San Diego Regional EDC analyzes key economic indicators that are important to understanding the regional economy and the region’s standing relative to the 25 most populous metropolitan areas in the U.S. Thank you to our sponsor Verizon Wireless.

EDC explains San Diego’s Q4 2023 economic data:

 

Key findings from Q4 2023:

  1. COMMERCIAL REAL ESTATE: Office and industrial real estate utilization fall for sixth straight quarter. In Q4, the region experienced sharp increases in negative net absorption of 441,867 sq. ft. in office space and 525,516 sq. ft. in industrial space. These declines mark the sixth consecutive quarter of negative net absorption. The office market ended 2023 with an additional 1.5 million sq. ft. of unoccupied space, bringing the total amount of vacant office space to more than 10.5 million sq. ft. In response, construction activity has generally declined in both office and industrial, most especially office where we see high interest rates and remote work trends continue post-pandemic.
  2. HOUSING PERMITS: In 2023, the number of housing construction permits reached its highest level since 2005. In Q4 alone, 3,500 housing construction permits were issued in San Diego, totaling 11,468 permits for 2023 and beating the average 8,635 permits granted annually since 2004. This was driven primarily by permits for five or more units, at almost 8,000 permits, while permits for one to four units decreased compared to 2022. Despite an increase in permitting activity, affordability remains woefully low. In fact, only one in nine households in San Diego can now afford the median home price, which reached $931,600 in Q4.
  3. VENTURE CAPITAL: More deals and more dollars in Q4. VC funding in Q4 was split almost equally between San Diego tech and life sciences companies, at $526 million and $570 million respectively, while the consumer companies raised $9 million. This brought the region’s total in Q4 to $1.1 billion, $134 million more than Q3. Making up more than half of Q4’s tech funding, Shield AI secured the region’s largest deal to buildout its AI pilot for autonomous aircraft systems. Overall, San Diego saw a total of $3.9 billion in funding across 182 deals in 2023, $1.9 million short from 2022, but ranking fifth in total VC funding among all U.S. metros.

Check out our most recent Economic Snapshot below

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Looking into the 2024 crystal ball

By Eduardo Velasquez,

Sticking the ‘soft’ landing

Happy new year from your local, recovering economist!

After another year filled with uncertainty and the seemingly ever long tail of pandemic-related disruptions, we enter 2024 with a whole host of questions—some new, some recurring.

The past year was dominated by the prognostications of a looming recession. Goldman Sachs famously gave it a 100 percent probability and even the Federal Reserve was bracing for an economic downturn as recently as the summer.

However, it is worth stating the obvious here that the United States did not go into a recession. Throughout 2023, measures of economic growth consistently beat expectations. In the fourth quarter of the year, the economy grew at an annualized rate of 3.3 percent fueled by consumer spending as well as business investment. We saw record corporate profitability, a strong labor market that added nearly three million jobs, and even inflation slow significantly and come close to the Fed’s comfort level of two percent.

Locally, we ended the year with 23,400 more jobs. Investment also came into the San Diego region from both public and private sources. Startups raised another $4 billion in venture capital funding and San Diego received $950 million in federal funding for cleantech development.

There are more jobs in San Diego than ever before, however there are fewer people available to do them. Over the last 12 months, the labor force declined and it is expected that our prime-working age population will shrink in the coming years. Part of this is due to accelerated retirements brought about by the pandemic; part is due to the ever-increasing cost of living. The median-priced home is now more than $1 million with a monthly mortgage payment of more than $5,300.

So, 2024…

Looking to the year ahead, we are approaching a unique moment to accelerate large scale transformation around the future of work and the built environment.

Employers are offering remote and flexible work arrangements at higher rates than during the height of the pandemic. The rapid adoption of generative AI tools is changing how work is done and re-defining what skill development means, favoring agility over ability. There are 32,000 employers nationwide competing for workers with AI skills. In San Diego, there have been more than 5,200 unique job postings seeking AI skills since the launch of ChatGPT just over a year ago.

The permanence of remote work offerings has led to a re-imagining of the office with a flight toward quality. Many employers remain unsure of when and who should return to the office (we can help). These decisions will have profound implications for the future use of office space across our region, of which there is more than 10 million square feet currently vacant, with several million more planned, under construction, or with leases coming due in the next year.

While affordability remains abysmally low, housing production has ramped up with permitting activity expected to match levels not seen since 2017. This is still not enough new housing to meet demand, but still very welcome development (pun intended!). Additionally, rent growth seems to have plateaued and returned to pre-pandemic rates giving renters a much-needed pause in increases.

And yet, nothing that our region will face in 2024 is inevitable. What lies ahead is both a familiar challenge and a new opportunity for inclusive growth. A challenge to meet the talent needs of our employers, and an opportunity to remove barriers to entry into the workforce. A challenge to promote quality job growth in small businesses, and an opportunity to shift spending toward local, diverse suppliers. A challenge to address affordability, and an opportunity to re-imagine our urban core to retain high-paying jobs and provide housing for working families.

It’s a tall order, but our region is hungry. Let’s get to work!

Eduardo Velasquez
Eduardo Velasquez

Sr. Director, Research & Economic Development

 

Read 2023’s edition: Looking into the crystal ball…

More FROM EDC’s research bureau

More on inclusive growth

Q3 2023: San Diego’s remote work policy and the impact on commercial real estate

By Sofia Nelson-Ferezi,

Each quarter, EDC’s Research Bureau releases its Economic Snapshot to analyze key economic indicators in San Diego’s economy. Read on as we take a closer look at how remote work trends are reshaping the workplace and the broader economy.

Remote first work

As the cost of living in San Diego continues to outpace compensation, remote work flexibility has emerged as a valuable incentive for job seekers—often, the most valuable. With San Diego median home prices reaching an all-time high of $1 million in Q3, working remotely opens affordable housing markets to employees without being limited by geographic constraints. Meanwhile, this allows employers to hire out-of-county or even out-of-state, increasing the pool of talent available to them.

Even still, employers grapple with concerns about the potential impact on employee productivity, leading to a spectrum of opinions on the efficacy of remote schedules. Yet, cutting overhead costs by adopting fully remote schedules has become an attractive possibility for firms.

SANDAG’s recent report on Remote Work Policies and Practices shows how the percentage of businesses that offer remote work options to their employees jumped from 27 percent pre-pandemic to 47 percent during, and 57 percent post-pandemic. This has had an obvious and indelible impact on commercial real estate demand.

What this means for real estate now

In the Q3 2023 Economic Snapshot, we saw that San Diego office real estate experienced its fifth consecutive quarter of negative net absorption, which reflects the difference between space that became physically occupied and space that became vacant. When this number is negative, it means more space became vacant than occupied during the quarter, perhaps because tenants decided not to renew leases as they became due.

San Diego’s negative net absorption trend is noteworthy for two reasons:

  1. Despite net absorption remaining negative for five quarters, asking rates remained at an all-time high throughout, reaching $3.31 per square foot in Q3 2023. Typically, asking rates would be expected to decrease in response to a slower demand for office space.
  1. Since 2010, the only other time the region has experienced five consecutive quarters of negative net absorption was during the onset of the pandemic, from Q1 2020 to Q1 2021.

Find this and other data trends in our interactive dashboard.

We know that office spaces became unoccupied during the pandemic due to public health mandates and safety protocols. But why are we seeing this trend again and what could be causing it? The answer could be observed in the previous graph, leading firms to cut office space.

While net absorption remained negative in Q3 2023, the number recovered greatly and indicated potential recovery from past quarters. In Q3, the office market experienced 37,868 square feet of negative net absorption, compared to 159,262 square feet in Q2 and 874,036 in Q1.

The negative net absorption in Q3 was primarily driven by larger office vacancies in areas such as UTC, Kearny Mesa, and Del Mar Heights, according to CBRE’s quarterly report. Similarly, the highest asking rates in Q3 were found in UTC, Torrey Pines, and Del Mar Heights. The low tenant demand and the continuing construction of office spaces combined might generate more available, yet unoccupied space.

Looking ahead and how you can get involved

As the San Diego region anticipates continued changes in commercial real estate, EDC is scoping a unique study of the local workforce in which we’ll survey the employees of large and small companies throughout the county. The first local study of scale on workforce requirements and desires (to our knowledge), our goal is to identify evolving local trends in how work is done, workers’ needs, workforce trends, and workplace requirements to inform company return to office plans as well as office tenant attraction strategies.

Updated survey work and studies combined with tools such as EDC’s Investment Map can help private and public investors better understand workforce and workplace trends when making commercial real estate development decisions that benefit both employers and workers. To get involved, contact EDC’s Senior Director of Research and Economic Development:

Eduardo Velasquez
Eduardo Velasquez

Sr. Director, Research & Economic Development

 

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