Tech Sector Critical to San Diego’s Economy

The technology sector is critical to San Diego’s economy. The Tech Cities 2.0 report from Cushman & Wakefield analyzes the importance of technology to local economies, ranking on a scale of critical to the economy, a key driver of the economy or important to the economy. San Diego achieved the highest ranking, based on both workforce and capital, according to Jolanta Campion of Cushman & Wakefield. San Diego has a robust tech economy that has been integral to the market for years.

“In comparing to the prior year, the share of employment in tech jobs in San Diego remained virtually unchanged at 8.4% of total employment in 2018, ranking 9th in the U.S in this category, compared to 8.6% in 2017,” Campion, director of research for San Diego at Cushman & Wakefield, tells GlobeSt.com. “San Diego-Carlsbad is just a few thousand positions shy of having 100,000 tech jobs according to the Bureau of Labor Statistics. However, share of tech employment is likely much higher if you consider the many industries utilizing or relying heavily on technology today. Notably, the U.S. market average of tech as a proportion of total employment is 4.8%.” San Diego’s tech workforce is largely linked to the market’s university system, which churns out talent. Accessibility to that workforce gives San Diego its “tech haven status,” according to Campion. San Diego also has a large millennial workforce, making up 24.3% of the region’s population and 56% of the population are younger than 39 years old.

Capital funding is also driving growth of the tech market in San Diego. Funding for tech start-ups and expansion of existing enterprises has been critical to the sector. “The other key area used to define attributes that create a ‘tech haven’ is capital, to which San Diego has recorded a significant increase in capital funding,” says Campion. “Venture capital firms, critical fuel behind the tech sector, expanded funding during the latest 12-month reporting period—using whole quarter metrics—from Q3 2017 to Q2 2018 investing nearly $2 billion across all industries, a significant upshift of 28.6% versus the full calendar year of 2016 with $1.55 billion.”

The technology sectors in San Diego are vast. They include life sciences, communications industries, computer and electronics, aerospace and maritime tech, environmental technology, recreational goods manufacturing and software. Together, these industries contribute $55 billion to the annual San Diego economy or 25% of the total economic impact. “San Diego’s technology sector is part of the region’s innovation economy and is comprised of knowledge-based sectors on the leading-edge of research, innovation, and development of the technologies,” Dan Broderick, regional managing principal of Southwest and Mexico at Cushman & Wakefield, tells GlobeSt.com. “Including indirect and induced jobs impact, the multiplier effect on jobs is 2.7. This means for every technology job, another 2.7 jobs are dependent or created. Employment generated from technology innovation business is equivalent to more than 400,500 jobs, or 30% of local private sector jobs and more than 40% of the region’s total labor income, according to Connect 2016 Innovation Report.”

While this is an important aspect of the local economy, there are some concerns on the horizon, namely housing affordability. “Like many growth markets across the country, housing affordability is becoming more and more of a concern for San Diego, especially amongst millennials who make up nearly one quarter of the region’s population and who play a vital role in fueling future job and economic growth,” adds Broderick. “However, San Diego is still a more affordable place to rent or buy a home when compared to other leading tech markets. When it comes to talent attraction and retention, cost of living is also something companies are having to weigh when it comes to location selection. Notably, San Diego also boasts one of the shortest commute times among the major metros.”

With growing workforce and capital investment, the tech sector will continue to grow in San Diego. “We expect the technology sector to continue to grow and positively impact demand for commercial real estate,” explains Broderick. “San Diego is an ideal location for today’s companies seeking the pleasures of a coastal workplace, largely due to its incredible year-round weather and an abundance of outdoor activities and entertainment destinations that make it a really enjoyable environment for workers and residents, alike. Our region also touts a highly educated and tech-savvy workforce, which companies are able to draw from and that has helped to drive the tech growth occurring across our region.”