How Will Tech Companies Impact the San Diego Market?
Apple is moving to the San Diego, following a string of other tech companies that have planted roots in the last few years, and there is expected to be a ripple effect.
The life science and defense industries have been the major driver of office activity in San Diego, but new tech companies arriving on the scene could shake up the market. Amazon, Google and Walmart Labs have planted roots in the market in the last few years, and this year, Apple is expanding in the market, adding 1,000 jobs. “The growing tech presence is expected to have a ripple effect in the market.
Since 2017, technology tenants overall have leased approximately 3.5 million square feet of space countywide, split by nearly 2.6 million square feet of office space, and nearly 1 million square feet of industrial classed space,” Larry Cambra, director of brokerage in San Diego at Cushman & Wakefield. “Brand name technology companies continue to grow their presence in San Diego. Amazon, Google and Walmart Labs committed to the region over the past couple of years. And now Apple is setting up a significant operation in San Diego to take advantage of the region’s STEM talent. We expect to see a ripple effect around these companies similar to what we saw historically when Qualcomm was growing rapidly in the region.”
Despite the potential for tech growth, life science and defense remains the leading industries of San Diego’s office sector. “Since 2017, life sciences has accounted for approximately 2.7 million square feet of leasing activity across the office and industrial sectors, while the defense industry has accumulated more than 1.9 million square feet,” adds Cambra. “That equates to approximately 8 million square feet of office and industrial leasing activity driven by the tech, life sciences and defense industries since just 2017. Notably, the defense industry/federal government is the biggest customer of the tech industry in the region.”
It isn’t surprising that San Diego is seeing substantial growth in these industries. The market has seen job and economic growth. “While the region’s ongoing economic and job growth has led to tightening real estate and rising costs, San Diego tends to offer more upside than most other markets,” says Cambra. “Furthermore, many new or repositioned life science and office projects are helping to fulfill the demand for modern workspaces and progressing San Diego’s commercial landscape in the process.”
As a result, there are substantial opportunities in the San Diego office market this year. “With limited opportunities in primary markets, investors will turn their focus to secondary and tertiary markets such as San Diego,” says Cambra. “Our region boasts one of the most ideal environments in the world from a live, work and play standpoint, giving it a strong advantage. We see this as a specific advantage in the race to recruit and retain the best talent.”
In addition to opportunities in the office sector, Cambra says that industrial is ripe with investment opportunities. “Industrial remains a huge opportunity as ecommerce players continue to look for last mile distribution opportunities,” he adds. “With limited new modern industrial buildings, developers will look to the north and south ends of the county and for redevelopment opportunities in the central part of the county.”