New Tech Industry’s Impact on San Diego’s Office Market · 2020. 2. 17. · Diego (UCSD) and numerous research institutions, San Diego’s ... in emerging sectors such as cybersecurity,

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Tech Industry’s Impact on San Diego’s Office MarketFebruary 2020


San Diego has tomorrow’s

workforce today

Home to the highest concentration of tech

employment in the U.S. as a % of total jobs

Tech Employment by Metro Top 10 Tech Cities | February 2020


#1 San Jose

#2 San Francisco

#3 Raleigh-Durham

#4 Austin

#5 Boston

#6 Washington DC

#7 Seattle

#8 SLC-Provo

#9 San Diego

#10 Denver

SD 8.9% vs. U.S. 4.8%


San Diego Market MetricsSan Diego County | February 2020

CLASS A SALES PRICE $/PSF FS% chg. 2010 vs. Q4 2019

$396 +46%

MILLENNIAL POPULATIONAges 25-39% of total population

24%

TECH COMPANY EMPLOYMENT % of total employment

8.9%

CLASS A OVERALL RENT2010 vs. Q4 2019 $/psf. monthly FS

$3.71 +42%

EDUCATIONAL ATTAINMENTAges 25+ % of bachelor's degree or higher

39%

TECH EMPLOYMENT Number of people % chg. 2010 vs. 2019

134,000 +26%

Key Takeaways

• With a complex military ecosystem, the University of California, San

Diego (UCSD) and numerous research institutions, San Diego’s

technology cluster has positioned the region as a hub for innovation

in emerging sectors such as cybersecurity, aerospace, navigation

and maritime, software, health IT, bioinformatics and cleantech.

• With established companies including Qualcomm and Intuit, as well

as many innovative start-ups, San Diego firms are developing unique

technologies that have global impact. San Diego’s research

institutions account for $4.6 billion in the local economy and are the

core of the region’s $14.4 billion scientific R&D cluster. San Diego

also has the second-highest concentration of science and

engineering professionals in the U.S. and has attracted $15.2 billion

in venture capital in the last 10 years with $8.9 billion invested in

healthcare/life sciences/medical devices sectors.

• San Diego’s tech economy is anchored by the life science ecosystem

around UCSD in Torrey Pines and the telecommunications

companies clustering around Qualcomm in Sorrento Mesa. While

Qualcomm recently reduced its local footprint, companies such as

Illumina, Viasat and Nuvasive continue to expand their presence in

the region.

• Apple occupied 97,000 sf in Eastgate in the fourth quarter of 2019,

and recently leased an additional 360,000 sf in Eastgate which it is

anticipated to occupy in 2021. Last March, the company publicly

announced their intent to hire 1,200 employees in San Diego with an

expectation to grow further in Central County. The tech titan’s

presence is expected to have a lasting and ripple effect in myriad

ways in San Diego.

Tech in the News

OFFICE-USING EMPLOYMENT% of total employment

25%

TECH AVERAGE WAGE2019 vs. 2024

$129,900 +3.9%

VC FUNDING2018 vs. 2019

$2.5B -6%YOY

TECH EMPLOYMENT Number of people % chg. 2019 vs. 2024

3,500 +2.6%

AVERAGE WAGE2019 vs. 2024

$74,600 +3.2%

LEASING BY TECH COMPANIES2018 vs. 2019

1.48 MSF +3.8%


San Diego Tech EmploymentSan Diego County | February 2020

Hottest Tech SubmarketsTech jobs as a % of total employment

• Based on 2019 leasing, Eastgate and

Sorrento Mesa attracted the most tech

tenants. Eastgate vacancy is almost

nonexistent at 2.6%. Companies, such as

Apple and ServiceNow, among others, are

leasing all sizable blocks of space both

existing and new development.

• Landlords are trying to push existing tenants

out of their projects to have path for these

tech companies to lease large blocks of

space. Neighboring submarkets are realizing

a significant boost in leasing velocity due to

tenants being forced to migrate elsewhere.

• 2019 was a banner year for Sorrento Mesa

with respect to leasing velocity and overall

net absorption. The story of the submarket

continues to be the trend of creative office

and biotech conversions and repositions, as

evidenced by Alexandria Real Estate’s JV

with CalSTRS for The Park, and Biomed

Realty continuing to increase their footprint

within the market with the recent acquisition

of Oberlin Labs. Both product types continue

to drive demand and leading market rents. In

the past three years the submarket has

undergone over 1.5 msf of office repositions

and over 1.2 msf of lab conversion with

another 750,000-sf planned.


Technology Sector Leasing TrendsSan Diego County | February 2020

TECH LEASING ACTIVITY IN 2019Office sf leased incl. renewals by tech industry as % of total leasing

TECH LEASING BY SUBMARKETAnnual leasing above average for the last six consecutive years

•In 2019, tech sector accounted for 18% or

1.5 msf of 8.4 msf total office space leased

countywide across all industry sectors.

•Over the last 10 years combined, tech

tenants have leased 11.6 msf or 16% of total

office space (73.7 msf) leased by all industry

sectors combined countywide since 2010.

•Central County submarkets accounted for

78% or 9.1 msf of total sf leased, with Sorrento

Mesa attracting the most tech tenants (24% or

2.8 msf leased countywide and 31% in Central

County).

•In North County, Carlsbad attracted the most

tech tenants (14% of leasing countywide and

87% in North County).

•In South County, Downtown accounted for

4% of leasing countywide and 69% in South

County.

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10-yr. annual avg. = 1.1 msf

8%

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22%

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SHARE OF TECH LEASINGTech tenants accounted for 18% of total leasing in 2019

10-yr. annual avg. = 16%

24%

18%

3%2%

53%

Life Sciences

Tech

Defense

Telecom

Other

+3.8%

YOY

18%

Top San Diego Tech Deals in 2019

Tenant Submarket SF

Apple Eastgate204,000

Undisclosed Eastgate160,444

ServiceNow Eastgate93,744

Seismic Del Mar Heights72,332

SmartDrive Systems Eastgate63,412

ServiceNow Eastgate47,000

Brain Corporation Sorrento Mesa43,053

Housecall Pro/Codefied Sorrento Mesa34,397

Epsilon Data

ManagementEastgate

31,706

Office Submarkets

Stage Total Deals Funding in $M % of Total

Expansion 336 $9,486 41.2%

Later 115 $6,815 29.6%

Early 356 $4,432 19.2%

Other 202 $1,453 6.3%

Seed 315 $839 3.6%

Total 1,324 $23,025 100%

www.cushmanwakefield.com |

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•In 2019, the majority of leasing activity by tech

tenants took place in the top 10 submarkets.

These top 10 submarkets combined accounted for

96% of total 1.48 msf leased countywide by tech

tenants in 2019.

•Central County submarkets accounted for 88%

of total sf leased countywide in 2019.

• In Central County, Eastgate attracted the most

tech tenants accounting for 43% or 630,322 sf

leased countywide and 49% in Central County.

• In North County, Carlsbad attracted the most

tech tenants accounting for 7% of leasing

countywide and 85% in North County.

• In South County, Downtown accounted for 3% of

leasing countywide and 78% in South County.

Total SF Leased by Tech Tenants in 2019

Submarket SF Leased in 2019

Eastgate 630,322

Sorrento Mesa 238,332

Del Mar Heights 138,328

Carlsbad 110,422

UTC 88,956

Mission Valley 80,344

Scripps 45,611

Downtown 41,350

Miramar 21,738

Sorrento Valley 20,040

All other 64,608

Grand Total 1,480,051

Total SF Leased by Tech Tenants in 2019

Market SF Leased in 2019

North 129,149

Central 1,298,003

South 52,899



Total SF Leased by Tech Tenants in 10 Years

Submarket SF Leased 2010-2019

Sorrento Mesa 2,780,755

Rancho Bernardo 1,880,761

Carlsbad 1,595,590

Eastgate 1,426,893

Del Mar Heights 778,917

Scripps 662,235

Downtown 488,740

Mission Valley 374,127

Kearny Mesa 372,413

UTC 330,325

All other 933,581


•Over the last 10 years, the majority of leasing

activity by tech tenants took place in the top 10

submarkets. These top 10 submarkets combined

accounted for 92% of total 11.6 msf leased

countywide by tech tenants since 2010.

•Central County submarkets combined accounted

for 78% of total sf leased countywide.

• In Central County, Sorrento Mesa attracted the

most tech tenants accounting for 24% or 2.8 msf

leased countywide and 31% in Central County.

• In North County, Carlsbad attracted the most tech

tenants accounting for 14% of leasing countywide

and 87% in North County.

• In South County, Downtown accounted for 4% of

leasing countywide and 69% in South County.

Total SF Leased by Tech Tenants in 10 Years

Market SF Leased 2010-2019

North 1,828,650

Central 9,082,558

South 713,129




Average Monthly Rent by Rent Type Paid by Tech Tenants in 2019

Submarket +E +U +U+J FS NNN Average*

Encinitas - - $4.71 - - $4.71

Del Mar Heights $4.32 - $3.60 $3.62 - $4.15

Del Mar/Solana Beach $3.78 - $4.30 - $3.60 $3.86

Eastgate - - - - $3.52 $3.52

UTC - - - $3.33 - $3.33

Old Town - - $3.23 - - $3.23

Rancho Bernardo $3.12 - - - - $3.12

Mission Valley $3.24 - - $2.68 - $3.10

Point Loma/Sports Arena - - - $2.97 - $2.97

Kearny Mesa - - $2.60 $3.03 - $2.89

Downtown - - - $2.85 - $2.85

Carlsbad $2.54 - $1.79 $3.99 $2.35 $2.66

Sorrento Mesa $2.92 $2.17 $3.55 $2.28 - $2.61

Sorrento Valley $2.36 - $2.53 - - $2.47

Escondido $2.40 - - - - $2.40

Scripps $2.65 - - $1.74 $2.43 $2.38

Chula Vista - East - - $2.30 - - $2.30

Miramar $2.15 - - $2.32 - $2.24

San Marcos - - $1.29 - - $1.29

Overall Market Rent $3.15 $2.17 $3.09 $2.92 $ 3.22 $3.05

Source: Cushman & Wakefield. Office sf leased incl. renewals by tech industry in 2019.

*All Rents converted to FS with gross up (+$0.2 for +E & +U, +$0.3 for +U+J and +$0.5 for NNN).


San Diego Tech EmploymentSan Diego County | February 2020

Key Takeaways

• Tech industry has added 28,800 jobs

over the last eight years (2012-

2019), averaging 3,600 per year or

3.1% annual growth.

• Tech job growth has exceeded a 30-

year annual average of 2,100 for the

past six years (2014-2019),

averaging 4,000 per year or 3.4%

YOY growth.

• In 2020, tech employment sector is

expected to grow at a combined

growth rate of 2.0% (+2,700 jobs), in

line with the 30-year average growth

rate of 2.2% (+2,100).

• Over the next five years (2020-

2024), growth is forecasted to slow,

averaging 0.5% or 700 jobs per

year.

Total Tech Employment - Number of Jobs

Annual Tech Employment Growth – Number of Jobs Added Each Year


Tech Employment Growth by MarketSan Diego County | February 2020

Key Takeaways

• The biggest percentage increases

over the next five years are in

lower cost markets, though the

most expensive markets (New

York, Washington DC, San Jose,

Boston) have huge talent pools

and will continue to expand as well.

• Look out for the Florida markets as

Orlando and Miami (not included

on chart) are each expected to

have growth rates over 5.0% over

the next five years.

• Between 2019 and 2024, San

Diego tech employment is

forecasted to grow 2.6% (+3,500

tech jobs) from 133,960 in 2019 to

137,420 in 2024.

Markets Ranked by the Highest % Growth Over the Next Five Years


Employment GrowthSan Diego County | February 2020

Key Takeaways

• Tech employment annual growth

has outperformed overall job

growth, including office-using

employment growth over the last

30 years.

• Over the next five years (2020-

2024), growth is forecasted to slow,

averaging 0.5% (adding 700 tech

jobs per year) compared to

0.9%(+3,300) office-using jobs and

0.8% (+12,000) overall jobs.

Employment - YOY Growth Comparison

Avg. YOY Growth Rate of Jobs

Office Tech Total

30-yr 1.5% 2.2% 1.5%

20-yr 1.0% 1.7% 1.3%

10-yr 1.6% 2.3% 1.9%

5-yr 1.8% 3.5% 2.3%

5-yr-F 0.9% 0.5% 0.8%


Income ComparisonSan Diego County | February 2020

Key Takeaways

• An average wage for tech jobs has

a significant premium compared to

an average job in the market.

• In 2019, average wage was

$74,600 compared to $129,900

average tech wage, resulting in a

55,300 premium for a tech job.

• Over the next five years, tech

wages are forecasted to grow

greater YOY compared to an

average wage in economy.

YOY Growth Rate of Avg. Wage

Total Tech

30-yr 3.4% 4.4%

20-yr 3.2% 2.6%

10-yr 2.6% 2.3%

5-yr 2.7% 2.7%

5-yr-F 3.2% 3.9%

Average Wage vs. Average Tech Wage


Office Market ComparisonSan Diego County | February 2020

Source: Cushman & Wakefield.

Vacancy Rate & Average Asking Rent – Q4 2019


Population & Job Growth by MarketSan Diego County | February 2020

Current Figures & Change Over the Past Decade (2009 to 2019 estimate) & 5-year Forecast (2020-2024)

Source: U.S. Census Bureau / Moody’s Analytics Forecasted. MSA Level / Population in Millions / Nonfarm Job Growth.


San Diego has tomorrow’s

workforce today

Home to the highest concentration

of Millennials ages 25-39 in the U.S.

#1 Austin

#2 Seattle

#3 Denver

#4 Salt Lake City

#5 San Francisco

#6 San Jose

#7 San Diego

#8 Portland

#9 Columbus

#10 Los Angeles

Millennial Concentration by Metro San Diego County | February 2020



Educational Attainment

31%

34%

36%

36%

36%

37%

39%

40%

43%

47%

47%

48%

49%

57%

58%

59%

0% 25% 50% 75%

Phoenix

Houston

United States

Dallas

California

Salt Lake City

LA/OC

San Diego

Portland

Seattle

Austin

Denver

New York

San Francisco

Boston

San Jose

20%

20%

21%

21%

22%

23%

23%

24%

23%

25%

26%

28%

29%

26%

29%

27%

11%

12%

12%

13%

12%

12%

13%

15%

17%

15%

16%

16%

16%

22%

20%

24%

0% 20% 40%

Phoenix

United States

Houston

California

LA/OC

Dallas

Salt Lake City

San Diego

New York

Portland

Seattle

Denver

Austin

Boston

San Francisco

San Jose

Educational Attainment40% have at least Bachelor’s Degree or Higher, Ages 25-34

Educational AttainmentBachelor’s & Graduate or Professional Degrees, Ages 25 +

Educational AttainmentSan Diego County | February 2020

In San Diego, 40% of residents

ages 25-34 have a bachelor’s

degree or higher compared to

36% in CA and 36% nationwide.

Of residents 25 years & older,

24% have a bachelor’s degree

and 15% have a graduate

degree.


Graduate degreeBachelor’s degree


Jolanta Campion | Director of Research, San Diego & Nevada | [email protected] Dalton Brusseau | Research Analyst | [email protected]

Sources: Cushman & Wakefield, Moody’s economy.com, CA Department of Finance, SANDAG, SDAR, CA EDD. Millennial population (25 -39) rankings are based on: MSA with population 1.2M+ with millennial concentration of 21%+ of total population in the metro.

©2020 Cushman & Wakefield. All rights reserved. The information contained within this report is gathered from multiple sources believed to be reliable.

The information may contain errors or omissions and is presented without any warranty or representations as to its accuracy.

Coastal & Park AccessBeaches, parks and recreation are easily accessible for most residents

Live within

10 miles of the

coast

Live within

5 miles of the

coast

Live within

1 mile of the

coast

Quality of LifeSan Diego County | February 2020

Live within

0.5 miles of a

park

mailto:[email protected]

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New Tech Industry’s Impact on San Diego’s Office Market · 2020. 2. 17. · Diego (UCSD) and numerous research institutions, San Diego’s ... in emerging sectors such as cybersecurity,

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