The U.S. and San Diego economies have more in common with those of 1991 than with those of the last five years, Marino says. Prudent managers may delay capital expenditures until a time of greater economic certainty, he said, and San Diego companies of all sizes are deciding not to take expanded space or are reducing their existing facilities, Marino says.
"Investment of capital--from the IPO market and from venture capital/angels investors--is what has fueled the San Diego and the technology-oriented submarkets from Carlsbad south to Del Mar Heights, Sorrento and University Towne Centre east to the I-15 corridor submarkets for the last five years," says Marino. "Now, the IPO market is dead, and will be for some time."
Venture capital investors are doing fewer deals and are busy performing triage with existing portfolio companies, he says. Potential angels are skeptical about new investments and in many cases are out of the market entirely.
"People have been saying this is a six-month downturn for the last nine months," he said. "Speaking personally with executives across industry sectors and with capital sources, the message is that it is time to cut costs and make every dollar count."
Marino forecasts that business shutdowns will continue through the remainder of the year. "There are dozens of San Diego companies with less than six months worth of cash," he says. "These companies' potential customers are hesitant to do business with them because of their weak financial position, and existing investors are through funding the losses or cannot afford to."
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