SAN DIEGO—Some speakers at RealShare San Diego said we aren't doing enough to keep businesses happy here, while others say corporations need to do their part to make things better. It made for an interesting and polite debate during the “Power Panel: A Visionary Market Outlook” panel at the conference here last week.

Jordan Levine, economist and director of economic research for Beacon Economics, started off by giving a positive overview of the San Diego economy, saying the market is moving forward at a solid clip, it's back above its pre-recession peak in job growth and is experiencing a broad-based recovery. “We are 8% higher in overall spending than the last bubble, rents are up and vacancies are down—but we are still in double-digit office vacancy throughout the county. We haven't yet seen solid office-space absorption, even with the new opportunities in the market; the office market has challenges ahead.”

Retail vacancy, however, is down, and multifamily is strong with 2% to 2.5% vacancy throughout the county, Levine went on. Construction activity has been mixed, with not a lot of new office construction and a lot of redevelopment. “Overall, things are looking good, but some sectors—multifamily, retail and hotels—are doing better than others.”

The other panelists gave their own overviews of the market, each from his point of reference. Gary London, president of the London Group Realty Advisors, called Kilroy Realty's much-beleaguered One Paseo suburban project in Carmel Valley a “poster child of misinformation” and said it would be “dumbed down” from its original intent because of stakeholder opposition and NIMBYism. He said Millennials want to be in the suburbs, “but they want to be urban in the suburbs.”

Wendy Lanahan, director of real estate for Qualcomm Inc., said her firm—a huge corporate user in this market—has acquired large properties in suburban submarkets here order to create amenitized campuses that will keep employees on site. She pointed out, “Not everybody wants to live in a Downtown environment.”

Kris Michell, president and CEO of the Downtown San Diego Partnership, said the business landscape is changing due to technology—“Your cell phone has more computer power than NASA did in 1969 when it put men on the moon.”—and asked rhetorically, “What does this mean for the future? We don't know, but it will be driven by employees.” She said that by 2050, seven out of 10 people will live in urban areas. “The only constant we can count on is change.” An increased importance on sustainability is a given, she added, and the occurrence of different types of tenants in one building—incubators, accelerators and large corporations—will become more common.

Moderator Brandon Sudweeks, CCIM, president of Coldwell Banker Commercial Sudweeks Group, asked Lanahan how technology is changing Qualcomm's space requirements. Lanahan said Qualcomm is a global company that needs to have collaboration, but can't have everyone in one place and doesn't want to do so. It bridges the communication gap with live screens—“Telepresence is big for us”—and real estate management is handled with technology. “We prefer our people come to work, but they don't have to—they can work anywhere.” She also said the shift to a more collaborative, open workplace has also hit Qualcomm. “We used to have everyone in their own office from day one, but interns kept leaving because they said we put them in an office and they couldn't talk to anybody.”

Sudweeks asked the panelists how technology has affected their projects, and London said, “Practical things have compressed the demand for office space. 'How do we keep Qualcomm happy?' should be more important than 'How do we keep Qualcomm Stadium occupants happy?' ” He added that Qualcomm doesn't house its employees, which is contributing to traffic problems as employees leave work and queue up to get on the freeway. He also said technology has been a game changer in office and retail since it has changed the demand for space.

Levine said technology is a huge piece of space demand reduction due to hoteling. “People are utilizing office space in a different way. They're collaborating. The economy will continue to grow, but I don't see a huge uptick in absorption. Rental rates will rise, but absorption will be slow.”

Michell said, “Highly amenitized buildings are the key. Millennials in the workplace want an experience. We don't know what we don't know yet, but we do know things are constantly changing in business. A good sign is that people are looking to develop spec office in the Downtown market.”

London said San Diego has a bigger percentage of Millennials than the national average, and he predicted that they will behave more like their parents in the long run.

Lanahan said people want light, fresh air, collaboration and outdoor spaces. “We're building a soccer field on one of our campuses because people want to work different hours—maybe work for a while, then go out and play before coming back in to work more.” She added that embracing other cultures has been key for Qualcomm, which employs a large percentage of foreign nationals.

Sudweeks asked the panelists what impact Baby Boomers and retirees will have on the San Diego market in the next several decades. Levine said, “That's going to be a big game changer. Millennials eventually want to move to the suburbs and have kids, and there will be turnover on the larger single-family side, but the outlook for multifamily is still strong. There will need to be more multifamily because of aging and densification.”

London spoke of Zephyr's Downtown development the Block, in which the concept of building units so that Millennials can expand next door when they have kids is being explored. He also said, “With Baby Boomers and seniors, I don't think it will be the same as with our parents. We will see different interpretations of senior housing. But we're just not delivering single-family homes in this market—we ran out of land.”

Michell mentioned the “barbell” of Millennials on one end and Boomerangs on the other end moving Downtown. “A highly amenitized lifestyle is what they all want. But we haven't grappled with the issue of impairment in seniors yet.”

Lanahan said Downtown “should be looking at setting up for the Baby Boomers, not just the Millennials.”

Sudweeks ended by asking the panelists for their predictions and thoughts on where we are in this cycle. London said we're in the fifth inning with a good long run in front of us because we had a long downturn and sluggish upturn. Levine said he is “optimistic about San Diego. Job growth has been strong in high-growth, high-wage industries, and this 'expansion' has legs. We also don't have massive asset bubbles.”

Lanahan said, “Hopefully we're starting the seeds for change, with the City embracing business. We need real incentives for companies to stay, and we need the city and county to make this a welcoming place. The current mayor is doing a good job, but we need to improve traffic—why isn't CalTrans at the table with the City? People need to stop demonizing companies.”

Michell commented to Lanahan, “We love Qualcomm, and sometimes we take it for granted, which we shouldn't do. San Diego has changed since the '90s—it has gone from a primarily military economy to one that is based on knowledge, tourism and defense. We need to thank businesses here and be doing all we can to keep them.”