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Downtown San Diego Continues to Innovate

Downtown San Diego Continues to Innovate

San Diego has always been on the cutting edge of technology, being among the country’s leaders when

it comes to important scientific research and advances in technology. Going forward, there is no reason

to expect that change, with the region continuing to be a pioneer in fields ranging from life sciences to

computer software to engineering. Innovation will continue to be at the forefront of the city’s identity,

but where in San Diego it is happening could change.

 

Traditionally, the Torrey Pines Mesa has been the epicenter of advances and innovation happening in

San Diego, with dozens of research institutions located in the area. While those will continue to play a

key role in shaping the future for the city, downtown San Diego is also seeing an uptick in activity,

research, and advances in fields such as science and computer science.

When business first began booming in the region, it was in large part due to the defense industry, which

brought talented physicists to the area. Over time, life sciences and wireless communications became

more prevalent, which brought with it an influx of some of the best biologists, chemists, and engineers

in the world.

 

As we move toward the future of the city, computer science and software is growing more and more,

providing innovation across a variety of different areas such as science, social media, and business. Thus,

a major key to luring some of best talent in the field to San Diego is building an environment, culture,

and infrastructure that makes them interested in living and working in the city.

These days, that means creating an urban environment with an emphasis on social interaction, as well

as the ability to walk and bike to work, restaurants, shops, and other interesting attractions. Data and

research shows this is what millennials are interested in, and this is the environment that can best

attract and retain the top talent.

 

One study performed by The Nielsen Company discovered that 62 percent of millennials would like to

live in mixed-use communities, such as those typically found in urban centers. The study also found that

millennials are already living in these types of areas more than any other generation. This is the type of

environment and culture that the downtown area can provide.

 

Latest research shows that 34,500 people live in the downtown San Diego area, with millennials making

up a third of that population, the highest among any demographic group. Among those living

downtown, more than half of the people have a college degree, with an average salary of around

$73,000, which is much higher than the average throughout the region.

 

Part of the reason for this is because millennials are showing a preference for living close to where they

work, and there are more than 110 tech start-ups located in the downtown area. This translates to more

than 15 start-ups per 10,000 people, which is much higher than the national average of 1.35 start-ups

per 10,000 people. More than any number, this shows the growth and future of the San Diego business

area.

 

Of those who live downtown but work in other locations, two-thirds of the people said they would

rather work at a downtown location if they could. Thus, the business and start-up community still has

room to grow in the downtown San Diego area.

 

The main reason that downtown San Diego has been so attractive for companies looking to expand and

grow is that it is a perfect situation to attract and retain the top talent necessary for these companies. It

is a great area for walker’s, showcased by the fact that almost 20 percent of all residents in the area

walk to work. Additionally, over 90 cultural institutions and 20 parks are all relatively easily accessible,

giving residents access to activities and social engagements more easily.

 

An added benefit of these urban areas in San Diego is that they are much affordable than similar

environments in other urban areas in California such as Los Angeles or San Francisco. When it comes to

things such as housing prices or office rents, prices could be 50 percent less than comparable spaces in

those cities, making it an enticing place for millennials to settle down and live.

 

All of this adds up to make downtown San Diego a key piece in growing the city and region’s economic

future. This seems to be understood by both civic and business leaders in the region, who are designing

and promoting programs that help put downtown San Diego on the map, and in the minds of the top

millennial talents.

Photo credit: Keven Harris

West Broadway & 1st Avenue

West Broadway & 1st Avenue

One of downtown San Diego’s landmark towers combines convenience with breathtaking views. The downtown courthouses are directly across the street from the office space and Horton Plaza is just steps away. Leading customers include AT+T, Morgan Stanley, Gordon and Rees, and Washington Mutual. 20-stories totaling 401,000 SF, LEED Platinum Certified by USGBC, Ample subterranean parking, Close to the 5, 163 and 94 Freeways, Minutes to San Diego International Airport and Proud Energy Star Labeled property.

Downtown San Diego Office Trends

Downtown San Diego Office Trends

Since the peak of its price in 2009 at approximately $27.00/SqFt (a monthly rate of $2.25) the asking rent rate for office space in San Diego declined and has begun to stabilize towards pre-2006 prices.  While city areas maintain slightly higher prices they remain close to those in the county and metro areas and have tended to parallel the total market’s price swings with only some short term spikes and lulls.  The increase in costs of rents can be attributed to the return of the economic energy into San Diego through the expansion of several large firms as well as large acquisitions of office space made in the 2012 fiscal year.  We can expect the rent costs to continue to rise at a similar rate of growth as the economy returns and vacancy rates decrease.  The stability of the prices across all types of property locations can also be expected to be maintained barring any unforseen major change to the business landscape.

 

2013 Market Trend Chart

At Synergy Real Estate Group, Corporate Advisory finding the proper space for you is our only priority.  We search the entire market to find all the options for your business and because we only represent tenants we avoid the possible conflict of interest that occurs when representing a landlord as well.  Please contact us and we will begin finding your ideal place of business.

Downtown San Diego Office Vacancies Fall

New reports released in March 2013 from leading brokerage firms suggest that vacancy rates in downtown San Diego have fallen since 2010. Latest figures show the vacancy rate at roughly 16% versus 18% three years ago.

Positive indicators such as lowered vacancy rates, an influx of new tenants, and renewed investor activity are all pointing to a measured recovery in the top tier of properties in San Diego’s central business district.

Overall, asking rents have remained flat, but it is expected that there will be a steady increase over the next 12-18 months. Rent concessions are also expected to flatten, with stronger properties expected to eliminate concessions all together.

More information can be found here:New report sees vacancies inching down and rent rates creeping up – UT San Diego

Office Spaces Shrinking

Since the recession hit a few years ago, companies large and small have been looking for ways to cut costs and keep themselves afloat.  Recently, an increasing number of businesses are honing in on a big cost to be cut, office space.  Companies across the country are opening up their office spaces and eliminating private offices, which now only account for 5% of office space, to reduce the amount of space necessary and use space more efficiently.

Across the nation, the average square feet of office space per worker is 176, down from 225 sqft just two years earlier.  This decrease is only the beginning of a much larger trend as well as over 40% of managers report that they expect to reduce their office space needs by more than 100 sqft per person within the next five years.

This more efficient, less is more approach to office space needs, has meant some bad news for those downtown high rise office buildings.  These types of buildings have not recovered from the recession as quickly as some expected due to businesses converting condos and lofts available in lower rent districts into office space.  Some examples of companies successfully implementing this approach are Panasonic, who is moving their US headquarters to an office half the size of their existing 575,000 sqft space next year and LivingSocial, who has been able to keep overhead costs low by using just 80 to 110 sqft of office space per employee.

Employees have mixed feeling about the more open but often more cramped workspaces.  One employee of an SEO company in San Diego enjoys the new open layout, saying it is an “engaging and fun environment” that increases productivity but a financial manager at a new jersey non-profit disagrees seeing it as “ the biggest waste of productivity I can imagine”.  Her view that people need privacy in order to work efficiently is supported by a 1985 study of computer programmers who were more likely to perform better when given more privacy.

While this new trend may not work across all industries, it appears companies will continue to try and use their space as efficiently as possible to reduce costs.  Synergy Real Estate Group can assist you in assessing how much office space your company needs and guide you through the process of locating suitable spaces and negotiating your lease.