San Diego’s Healthcare, Defense Industries Ramp Up for 2019

Healthcare and defense industries—two of San Diego’s biggest job sectors—are expected to expand in 2019, growing over an already strong 2018. For healthcare, the growth is largely driven by venture capital investment. This year, the healthcare industry saw record breaking venture capital investment. On the defense side, growth stems from an increased defense budget, which has in turn spurred job growth.

“San Diego has experienced record breaking venture capital pouring into the region in 2018,” Brian Starck, executive director at Cushman & Wakefield, tells GlobeSt.com. “As of October 2018, there were 64 rounds totaling $1.7 billion in funding in the Life Science market alone. A majority of these rounds secured consisted of startup and early stage companies who will continue to gain momentum with top tier talent, allowing San Diego to compete as one of the top biotech hubs in the country.”

The venture capital activity will directly impact office activity in the market by helping to scale businesses and augment office spaces. “These significant funding rounds allow tenants to scale in size and employees in terms of commercial real estate, directly correlating to larger leases and better returns for landlords, creating this symbiotic relationship that compounds on itself,” says Starck. “Many of the largest funding rounds of 2018 have had a direct correlation with leases signed soon after. In conclusion, the more funding San Diego experiences, the more leasing activity will be recorded.”

The defense industry, on the other hand, has long been a pillar of the San Diego market, but the industry has been stagnant. However, increased defense budgets in the coming year will have a big impact on the market. “San Diego is home to the largest concentration of the military in the world,” says Starck. “After a decades-long trend of declines relative to the overall U.S. economy, military outlays are rising, as more defense resources are shifting to the Indo-Asia-Pacific Region, and San Diego is bound to benefit. The military sector is responsible for $25.7 billion in direct spending and 22% or $50 billion of San Diego’s economy and 22% or 340,000 jobs in the region based on the 2018 San Diego Military Economic Impact Study.”

There will likely be an increase of $1 billion in spending over 2018, and that will both directly and indirectly fuel job growth in the market. “The injection of $25.7 billion of military-linked dollars in 2018 represented a $1.0 billion increase over $24.7 billion in 2017 and is forecasted to increase another $1.0 billion to $26.7 billion in 2019,” adds Starck. “The jobs created as a direct and indirect result of defense spending span a wide range, including healthcare, engineering, transportation, real estate, construction, shipbuilding and repair, education, food services, retail and wholesale trade.”

Indirectly, firms in San Diego that are related to the defense industry will also benefit. “San Diego also has a large cluster of firms that benefit from military contracts—all of which is expected to result in a ripple effect locally in terms of space needs,” says Starck.