Office is Missing the Boat on Downtown San Diego

Walshok: “There are highly educated people who want to live and work Downtown, and those who don’t work Downtown say they would work there if there were jobs there.”

SAN DIEGO—More innovation start-ups are located Downtown than in any other part of the county, creating an untapped market for office developers looking to get a leg up on San Diego’s future, Mary Walshok, associate vice chancellor for public programs and dean of extension at the University of California San Diego, tells GlobeSt.com. We recently spoke with Kris Michell, CEO of Downtown San Diego Partnership , about a demographic study her firm did with the help of Walshok’s team. We also spoke exclusively with Walshok about the thought process behind the study and how the real estate industry can help meet the needs of the growing demographic groups in Downtown San Diego. GlobeSt.com: What was your involvement with the demographic study recently completed by the Downtown San Diego Partnership? Walshok: I was the study director. They contracted with my team at the UCSD Extension , a group that does a lot of work in economic trends in the region. My team put together the study, and I was its principal writer. There were some surprising takeaways from the study. I live and work on the Torrey Pines Mesa , and the most surprising thing was the number, quality and excitement related to companies that are starting up Downtown. Most of them are in the IT software space—I think we found about 111, which we put in the report. Downtown San Diego has the highest innovation equation in the whole county. There are more innovation companies starting Downtown than anywhere else in the county. And the organizations that are making it happen are grassroots organizations—this hasn’t been organized by the City; it’s happened on its own. And that’s why understanding Millennials is important because the people making this happen are younger, like an urban lifestyle and are incubating companies there because that’s where they like to live and work. Kris suspected that this was happening because she kept bumping into them, and she said, “I think something is going on, but I don’t know how to find out.” Well, we know how to find out—look at the business-license data. Also, look at how well educated the Downtown residents are. On a per-capita basis, they have much higher levels of education. Most people who live Downtown work outside of Downtown. There are highly educated people who want to live and work Downtown, and those who don’t work Downtown say they would work there if there were jobs there. GlobeSt.com: What can the real estate industry do to meet the needs of the growing demographic groups in this submarket? Walshok: I think there’s a real challenge here because the cost of a lot of the core Downtown space is very high. Nonetheless, you’ve got companies incubating there and a lot of people living there. A lot of people live in North Park, Golden Hill and other neighborhoods adjacent to Downtown’s core, and we recommend that Kris, the mayor and others look at a somewhat wider geography than the core of East Village, Little Italy, and the baseball and library districts. If you look at the maps, Barrio Logan, the diamond district and Golden Hill are a 10-minute bike ride from the core of Downtown, but nobody is asking if there are opportunities for developing complementary housing stock. Are there opportunities to develop office parks or incubation space for very-early-stage entrepreneurs developing a concept? As they get more mature, they may need more high-end, sophisticated space. We feel having looked at the demographics and the cost of land, plus public and private foundation funds for developing in some of those neighborhoods, you would have a much more flexible landscape to grow the innovation economy if you include those contiguous neighborhoods. Right now, there’s not a lot of talk going on between Bosa and Irvine Co. and a lot of the core Downtown developers and the smaller, yet significant, families or organizations like the Jacobs family about the diamond district or Barrio Logan. If those conversations happened, there might be some synergies to get more young people, companies and jobs Downtown. And then it becomes an engine for growth. That was the second key finding: we realized since we’d been doing work in the diamond district and other parts of the city that you talk about the I.D.E.A. District being 10 blocks, but what if you created a community that crosses a lot of boundaries? The third thing we were struck by was, when we did a survey with tech-company executives on the Torrey Pines Mesa, it became very clear that the tech and financial leadership—and even the academic leadership—at UCSD and on the Mesa doesn’t realize what’s going on Downtown. They see it as hotels, museums and tourism, but not as an economic asset in their sector. That’s what we have to start: computer science and IT are impacting all development, healthcare delivery is about iPhone apps, and it’s all about software—and software is happening Downtown and on the Torrey Pines Mesa, where other science is developing. GlobeSt.com: What else should our readers know about the demographic study and your role in it? Walshok: As social scientists, we must be careful to grow companies and incubate them. That’s why I’m so high on Barrio Logan and Golden Hill—companies are going to need kids from all walks of life who can do coding and other technical jobs in science-based industries. We have to have a more inclusive Downtown strategy, to provide the chance to engage with innovators, entrepreneurs, working-class residents and new immigrant families in a much better way. Equally important about Downtown San Diego is its proximity to Mexico; it could be a larger landscape, a hub of diverse tech and social interaction that really allows our population to share in the benefits of an innovative economy in a way that Torrey Pines Mesa and La Jolla have not been able to do as well. Those are my values, but the data suggests a real possibility for this in San Diego. GlobeSt.com: You will be speaking at the Southwest Riverside County Regional Healthcare/Economic Development Summit in Murrieta, CA, next month. What do you feel are the most important factors for creating strong economic development around health and biotech and exploring options for healthy cities? Walshok: One of the important factors is that innovations that are occurring in the diagnosis and treatment of health-related conditions are in part coming out of research and development in these entrepreneurial clusters. Start-up companies are developing health-related iPhone apps , new devices to monitor health and new drugs, and you have got to be close—ideally, physically or in some virtual way—to the centers of ideas. Also, you have to have institutions — hospitals and clinics—since many clinical-trial companies and proof-of-concept innovators are proving the value of healthcare technology . That’s easier than setting up a big pharmaceutical lab, so the applications and proof-of-concept work has to go on. And then, as you begin to see the emergence of certain kinds of products—there is a whole series of health-monitoring products—and you have to have a business infrastructure that helps turn a product or idea into a real company. There is a food chain there, and the places this is happening in are all in the same geography. The challenge in the Riverside County/Murrieta area is how to integrate all of these components even though they’re not in the same geographic area. Grand Rapids, MI, which has no university specializing in bio or medicine, has hospitals active in clinical trials, so MU started opening components of its medical schools in Grand Rapids. They didn’t relocate, but they established a presence. Maybe Murrieta needs something like that, where medical schools or major health-provider partners in the region set up a presence because that region has value. They just need to figure out what those assets are. San Diego CRE is in a solid recovery phase with some creative trends leading the way.   Are You In The Know?  Join us  at RealShare SAN DIEGO on May 17 for impactful information from the leaders in San Diego CRE. Learn more .