SAN DIEGO—San Diego is a historically resilient market that doesn't appear to be experiencing as much economic uncertainty as the national market is, although there are some concerns, CBRE's executive managing director for the San Diego region John Frager tells GlobeSt.com. According to a report from the firm, while talent continues to reign supreme on the list of top concerns for companies today, a new survey of corporate executives underscores the challenges they are facing in today's economic environment. Of the 176 Americas executives surveyed by the firm, 52% named economic uncertainty as a top-three concern, up from 36 percent in 2016.

We spoke with Frager about the level of economic uncertainty in San Diego in particular and how it is impacting real estate investment here.

GlobeSt.com: Is economic uncertainty evident among San Diego companies?

Frager: In terms of the overall economic climate, I would say local companies remain confident. San Diego is a historically resilient market, due in large part to the innovation and defense sectors providing a level of stability. A recent San Diego Regional Chamber survey of local businesses showed that confidence is high, according to the Business Outlook Index. Additionally, the University of San Diego Burnham-Moores Center for Real Estate's Index of Leading Economic Indicators is forecasting solid growth in 2017. Overall, we're seeing a lot of optimism.

GlobeSt.com: How is economic uncertainty currently affecting rising the San Diego commercial real estate market?

Frager: We continue to see strong tenant demand in 2017 in San Diego, especially in sectors such as life science, defense and technology. Companies are evaluating their corporate footprints in order to “right size” their local needs, while allowing for future flexibility for their real estate requirements. San Diego companies continue to plan for future growth while ensuring that their real estate aligns with their business projections. Both local San Diego and larger global companies want to understand how their work environments are functioning on a daily basis in order to drive more efficiency within their spaces. Understanding the business operations within a space is a critical function of optimizing the real estate portfolio against future uncertainty.

GlobeSt.com: How do you see it affecting the market here moving forward?

Frager: Overall, I don't think we're experiencing the same kind of economic uncertainty locally that was realized by the national report. Most local economists and businesses appear confident about the next 12 months. From the perspective of occupiers, I think we're still in a steady growth environment that we've been in for the last couple of years. There may be some challenging sectors like retailers or tech-disrupted industries, but that's no different than any other time in this upward portion of the cycle. San Diego will be positively impacted as the Department of Defense looks to pivot resources to the West. Meanwhile, there are concerns over possible decreases in federal research dollars, which could negatively impact our research institutions and life-sciences community. Our proximity to the border also makes us particularly sensitive to changes in trade policy with Mexico. Despite these concerns, the local economy looks poised to continue steady growth.

GlobeSt.com: What else should our readers know about corporate occupiers in San Diego?

Frager: Last year, the 100 largest San Diego office tenant deals totaled more than 3.8 million square feet, and more than 50% of the transactions were new deals (not renewals or expansions) across the county. CBRE represented more than 40% of these tenants on the largest 100 deal list. Corporate occupiers in San Diego, whether local or global, expect the same level of service, analytics and access to new technology in order to increase efficiency and ensure alignment with their business objectives. Corporate occupiers in San Diego need more than just someone who can execute a transaction; occupiers of all sizes need advisors who can leverage specific resources that are relevant to their business including financial consulting, labor analytics, supply chain and workplace consulting.

Lastly, talent is always a top challenge, and San Diego is comparatively strong as a region for attracting and developing top talent. The numbers show that we're competitive with other major markets on talent indicators, and reports have shown that San Diego is a top desired destination for young talent across the US. In addition, UC San Diego, SDSU, USD, CSUSM and other regional institutions have nationally-renowned or industry-focused programs, developing a strong pipeline of talent.

We spoke with Frager about the level of economic uncertainty in San Diego in particular and how it is impacting real estate investment here.

GlobeSt.com: Is economic uncertainty evident among San Diego companies?

GlobeSt.com: How is economic uncertainty currently affecting rising the San Diego commercial real estate market?

GlobeSt.com: How do you see it affecting the market here moving forward?

GlobeSt.com: What else should our readers know about corporate occupiers in San Diego?

Instant Insights /

How Much Is Economic Uncertainty Affecting SD Real Estate?

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