San Diego is home to a vibrant manufacturing cluster that spans many industries, including defense, shipbuilding, medical devices, cleantech, craft brewing, and sports and active lifestyle. And thanks to a highly-skilled workforce, robust training programs, and close proximity to Mexico, the San Diego region boasts nearly 3,150 manufacturing companies currently supporting more than 108,000 jobs. More on the industry here.
It’s hard not to spend time outdoors when you live in year-round sunshine. Luckily, San Diego companies have you covered, whether you need to capture your adventures on camera or protect your skin for a day in the sun.
San Diego knows how to deliver on taste, whether you’re in the mood for craft beer or something sweet. Though North County leads the way with its many breweries and Bitchin’ Sauce, there are plenty of treats to go around no matter where you are in the region.
From research to medical device manufacturing, San Diego is a thriving hub for biotech in all its forms. Device companies like BD and Illumina are leading the way when it comes to both preventative health and effective care.
Welcome to the second edition in EDC’s Changing Business Landscape Series, which will be published bi-monthly in the San Diego Business Journal and here on our blog. If you missed the first edition, read it here.
Surveying the changing business landscape in San Diego
The COVID-19 pandemic has impacted every facet of life, including how businesses operate. Companies in every industry are rapidly re-evaluating how they do business, changing the way they interact with customers, manage supply chains and where their employees are physically located. This has massive immediate and long-term implications for San Diego’s workforce and job composition, as well as regional land use decisions and infrastructure investment.
To identify evolving trends in local business needs and operations, ensuring their ability to grow and thrive in the region, EDC is surveying more than 200 companies in the region’s key industries on a rolling basis throughout 2021 to monitor and report shifts in their priorities and strategies. In addition, EDC constructed the San Diego Business Recovery Index (BRI)—a sentiment index to measure companies’ perceptions of current conditions, as well as expectations for the future across several factors such as business development, employment and commercial real estate needs. Review the BRI concept and methodology here.
These insights will help inform long-term economic development priorities around talent recruitment and retention, quality job creation and infrastructure development. Companies are surveyed on several topics, with varying emphases in each wave.
Here are three key findings from the second wave of surveying conducted in April 2021:
The worst of the pandemic is behind us. Companies are very bullish about the next six to 12 months and, as a result, plan to accelerate hiring.
San Diego’s innovation cluster is (mostly) booming. Life Sciences companies lead the way while Cyber and Aerospace firms are still working through pandemic-related challenges.
Companies are seriously reevaluating their space needs. Smaller firms are looking to expand their footprint, while traditional Tech companies may be scaling down.
The worst is behind us
San Diego companies indicated that they think the worst of the pandemic has passed. With a BRI of 58.9 in April, regional firms noted that they plan to hire or rehire workers at a slightly faster pace than they have up to this point, while also expanding remote work capabilities going forward.
Last month’s index reading reflects bullish assessments of, both, present conditions (the present conditions subindex registered a value of 56.1) and expectations for the future (subindex of 65.4). Companies noted some lingering effects from a full year in lockdown, including difficulties with business development and job losses, and neutral to slightly negative feelings on remote work over the past year. Nonetheless, firms reported bright views on the current state of the regional economy and noted that San Diego businesses and key industries have adapted to the pandemic better that those in peer regions.
Regional companies were even more upbeat when it came to expectations for the future. All of the index’s expectations subindex values were north of 50, and companies overwhelmingly believe that the regional economy will have improved significantly in the next six months (subindex of 72.7) and even more so within the next 12 months (subindex of 86.2). This is important because many companies make decisions today based on their assessments of business conditions in the near future.
Most companies shared in the optimism, but to varying degrees. Small companies with fewer than 50 employees that were hardest hit during the pandemic held slightly dimmer, though still generally positive, views than their larger counterparts. In particular, smaller firms cited ongoing difficulties accessing new customers, managing suppliers and vendors, and hiring and retaining workers. Even so, assessments of current earnings trends were only slightly negative, and small firms held a sunny disposition when it comes to the current state of the San Diego economy and business climate.
Interestingly, however, companies with fewer than 50 workers had the highest level of optimism for the future across business size cohorts, which could signal an inflection point for the pace of hiring in the coming months. This bodes especially well for the jobs recovery heading into the second half of 2021, as 96 percent of San Diego’s businesses have fewer than 50 employees and small businesses have historically accounted for roughly half of all job growth.
San Diego’s innovation cluster is (mostly) booming
San Diego’s innovation cluster overwhelming expressed optimism entering 2021, as companies shifted toward meeting the demand for life-saving technologies, treatments and personal protective equipment leading to record venture capital investment and renewed job growth. However, a closer look reveals mixed results within the cluster. Industries like Cleantech, Software and Biomedical Device producers all held especially confident views (BRIs in the mid-60s), while Telecommunications, Cybersecurity and Aerospace each signaled ongoing challenges from the pandemic (BRIs ranging from 43 to 50).
Biotech and Biomedical Device manufactures hold strong expectations for the regional economy, with plans to increase their headcount and real estate footprint during the next year. In addition, they expect to increase their use of remote work over the same time frame. While this may seem contradictory, it reflects the modifications and enhancements that many companies are making to protect workers on the production floor, as well as those necessary to attract workers back into the office. Workers want to feel safe once back on company property and they also want to maintain the flexibility that working remotely has provided. To accommodate these needs, employers are preparing for a flexible or hybrid workplace once reopen. In addition, many companies are reconfiguring and even seeking new space to keep workers spread out, adapting space to be more comfortable in a post-pandemic environment. This includes ‘hoteling’ and ‘neighborhooding’ models to help reduce the flow of people and simultaneously allow teams to collaborate in person. Companies are preparing for a gradual return to the office to give workers adequate time to warm up to pre-pandemic routines. More on that below.
While Telecommunications and Cybersecurity firms all share this optimistic regional economic outlook with their Life Sciences peers, these industries are much more subdued about their own expansion plans for the next year. On net, they see their needs for space as unchanged, with some modest reductions in hiring compared to typical years. This reflects the challenges these industries have faced during the pandemic, namely with respect to increased difficulty with sales, hiring and, somewhat surprisingly, inefficiencies from remote work. Aerospace has not yet recovered from the initial impacts of the pandemic, still reeling from significant hits to both sales and employment, as well as disruptions in their supply chains from lockdowns and restricted international travel and transportation.
Smaller firms are looking to add space
After more than a year of implementing remote work and reduced onsite staffing, companies are beginning to plan for a return to the office. However, how much space awaits those returning to the office will vary by industry as well as firm size.
It is small- and medium-sized firms that are looking to expand their commercial real estate footprint over the next year rather than larger firms. In fact, the proportion of firms surveyed that expect to increase space by 10 percent or more of their current square footage is nearly double that of those planning to reduce their current space by 10 percent or more (16 percent to 8.4 percent, respectively). However, when you factor in the size of each company, those planning significant real estate growth represent only three percent of the jobs compared to 13 percent of jobs for those looking to reduce space significantly (companies surveyed collectively employ nearly 200,000 workers).
When we look at the innovation companies, we see some stark differences between traditional Technology and Biotechnology industries. Eight percent of respondents representing 22 percent of jobs plan to reduce their space by more than 10 percent—mostly in the Telecommunications industry. However, nearly 26 percent of respondents representing 41 percent jobs expect to add modest amounts of space less than 10 percent of their current footprint. Here many respondents are in the Biomedical Device and Biotech industries and likely in need of additional production or lab space.
Understanding these evolving and distinct trends is important because San Diego’s innovation cluster is leading the region out of this pandemic-driven economic downturn, just as it has in each past downturn. Each job added in the innovation cluster supports another two jobs elsewhere in the economy. Yet, these innovation companies do not necessarily need to be physically located in San Diego in order to operate. Making sure these companies have the infrastructure and access to talent that they need to flourish is critical to our region’s prosperity.
Stay tuned for more on San Diego’s changing business landscape. EDC will be back every other month with more trends and insights. For more data and analysis visit: sandiegobusiness.org/research.
San Diego Regional EDC is excited to kick-off our Changing Business Landscape Series, which will be published bi-monthly in the San Diego Business Journal and on our blog.
Surveying the changing business landscape in San Diego
The COVID-19 pandemic has impacted every facet of life, including how businesses operate. The San Diego region began the year with near-record high unemployment and widespread small business closures. Meanwhile, large companies across the globe have extended remote work well into 2021 and are even abandoning their corporate campuses. Companies in every industry are rapidly re-evaluating how they do business and changing the way they interact with customers, manage supply chains, and where their employees are physically located. This has massive immediate and long-term implications for San Diego’s workforce and job composition, as well as regional land use decisions and infrastructure investment.
To identify evolving trends in local business needs and operations, ensuring their ability to grow and thrive in the region, EDC began surveying more than 200 employers in the region’s key industries in January. Given the uncertainty of this moment in history, EDC will continue to survey these companies on a rolling basis throughout 2021 to monitor and report out shifts in their priorities and strategies. These insights will help inform long-term economic development priorities around talent recruitment and retention, quality job creation, and infrastructure development. Businesses are surveyed on several topics, with varying emphases in each wave.
Here are three key findings:
Everything is different, yet the future is bright. The pandemic has fundamentally altered how businesses operate across key industries. However, most companies are optimistic about their ability to pivot and emerge even stronger.
Remote working is no longer a perk or competitive advantage—it’s the standard. Most companies view remote working as here to stay. This is viewed as both a benefit and as a threat to employee retention.
Long commutes have been replaced by a blurring of work-life boundaries. Companies are struggling in maintaining employee morale and engagement. While many are seeing signs of employee burnout and isolation, few report significant concerns with retention.
San Diego’s innovation cluster rises to meet the challenge
One year into a global pandemic, San Diego’s most innovative companies and industries are well on their way to economic recovery. In fact, high-wage jobs—many of which are concentrated in aerospace, life science, and technology industries—have more than recovered from the pandemic-driven recession. This is welcome news as these are key drivers of economic growth in the region. In fact, every “innovation” job supports another two jobs elsewhere in the economy.
Even though growth has returned to the innovation cluster, the pandemic has disrupted the way these companies operate. The overwhelming majority (83 percent) of companies surveyed agree that the pandemic has fundamentally altered their industry. Yet, nearly as many (81 percent) feel that their industry has been able to adjust and remain healthy. Even more encouraging, 87 percent believe their industry will emerge even stronger once the pandemic has ended after adopting new ideas and implementing new strategies. However, those in the aerospace industry express somewhat lower levels of optimism, as the industry faces continued uncertainty around travel safety and demand.
Confidence is somewhat lower among smaller firms. Only 77 percent of those with fewer than 50 employees agree that their industry would emerge stronger and 10 percent strongly disagree. This likely reflects the disproportionate impact that the pandemic has had on small businesses, regardless of industry. While those in leisure and hospitality have certainly been the hardest hit, even small firms in professional and business services, including scientific and technical services, are currently experiencing lower revenues compared to before the pandemic.
Yet, the strongest signal for optimism comes from the direct response in combatting the novel coronavirus. San Diego companies have been among those leading the fight in everything from personal protective equipment and diagnostics to therapeutics and vaccine development. The life-changing and life-saving companies have pivoted and innovated yet again, drawing in record levels of venture capital investment. In the fourth quarter of 2020 alone, the region received nearly $2.7 billion in venture funding—with almost three-quarters going to life sciences and healthcare companies—which is more than three previous quarters combined, and $2 billion more than Q4 2019. The surge in investment and jobs recovery has the majority of innovation companies confident in the region’s ability to grow in prominence, or remain steadfast as a global leader in tech and life sciences.
The war for talent has no bounds
Talent has always been San Diego’s competitive advantage. People come from all over the world to get educated and build meaningful careers in everything from software engineering and autonomous vehicles to genomics sequencing and cybersecurity. San Diego’s innovation industries are among the highest-paying and fastest-growing in the region. Despite a global pandemic, many of these industries are accelerating hiring. The information sector, including telecommunications and information technology services, posted 20 percent more unique job ads in December 2020 than the year prior.
However, top talent remains hard to find. And while many of the jobs in these industries have shifted to either partially or fully remote, there are mixed feelings about whether it is a benefit or a detriment to talent recruitment and retention. Perceptions are tied to a company’s approach to attracting remote talent (see below). On one hand, a majority of respondents think that their ability to hire and retain skilled talent will not be impacted by the pandemic because of remote work capabilities. Many have expanded their recruitment beyond San Diego’s borders and are willing to accommodate working from outside the region to retain the very best talent. These San Diego-based companies that view the world as their pool for talent are embracing a global workforce that can get the job done from anywhere.
Yet, there is also a large minority of companies that view the pandemic as impacting the way they hire and retain talent. Again, the shift to remote work is cited as the top reason, with an even larger proportion (35 percent) identifying it as the cause for their pessimism. In fact, 45 percent of survey respondents rate hiring new employees during the pandemic as either “difficult” or “more difficult” than before, compared to 18 percent who view it as “easier” or “much easier.” Furthermore, nearly half of respondents cite talent recruitment as an area needing assistance and 20 percent identify it as an “urgent need.”
The pandemic has leveled the playing field for markets aiming to attract the best and brightest knowledge. San Diego’s competition with companies and regions across the country has increased. The region’s high cost of living is by far the biggest impediment to talent attraction, with 44 percent of respondents identifying high home prices as the most negative attribute of the San Diego market. This is due in large part to housing production not keeping pace with employment growth. As a result, San Diego has the second highest median home price among the 25 largest metros in the U.S., behind only San Francisco, and home prices jumped another 11 percent in 2020. Ensuring San Diego is an attractive and affordable place for talent and business is critical to maintaining its regional competitiveness.
Responding to workers’ needs is top of mind for companies
Transitioning to a remote work environment has been challenging. Business leaders are acutely aware of the need to balance conducting business as usual and responding to the changing needs of a newly remote workforce. Survey respondents report signs of ‘zoom fatigue,’ blurred work-life boundaries, and isolation among employees. While it has not yet significantly impacted retention, a full 60 percent of respondents rated “maintaining employee morale” as more challenging during the pandemic.
Furthermore, respondents expressed concerns about returning to an in-person work environment, recognizing that not all employees will want to return to the office immediately or full-time. This next phase of work will bring about a new set of challenges and a need for new policies, systems, and support for San Diego workers. Many questions remain around how much space will be needed and how it might need to be reconfigured to accommodate a flexible work environment that is also responsive to new health and safety requirements.
Survey respondents rated individualistic factors related to professional growth and work-life balance as the most important attributes to a competitive market for talent attraction and retention. This differs greatly from perceptions from just four years ago, when top universities and an entrepreneurial spirit were more top of mind. The desire to adapt and respond to the most pressing needs of its workforce, reinforces the notion that San Diego businesses value talent above all else.
Stay tuned for more on San Diego’s changing business landscape. EDC will be back every other month with more trends and insights. For more data and analysis visit: sandiegobusiness.org/research.
Sysmex Corporation, a global medical device manufacturing company with its HQ in Kobe, Japan, was looking to enlarge their US-based presence.
With San Diego as a target destination for expansion, Sysmex contacted EDC with details on the company’s plans to expand its life science operations by leveraging proprietary technologies to create new testing and diagnostic technologies that help provide optimal healthcare for all. Sysmex distributes and supports automated in vitro diagnostic hematology, coagulation and urinalysis analyzers, reagents and information systems for laboratories and healthcare facilities throughout the Western Hemisphere.
The company was interested in piloting their US presence with a research and development lab staffed with ten initial full-time employees. EDC provided a list of properties using a site selection database that met Sysmex’s requirements for location characteristics. In order to coordinate site logistic tours and provide Sysmex additional market perspectives on the potential locations, EDC leveraged its connections with CBRE’s research team. CBRE was able to conduct a tour with Sysmex on nine different locations across the region.
Sysmex is now in the process of finalizing their internal budget by mid-October, in order to establish their research and development site by December of this year. The Sysmex team is very positive regarding San Diego and establishing a future here.
The first cohort of biomanufacturing students at MiraCosta College is half way through their two-year bachelor’s degree program. That’s right – Oceanside-based MiraCosta Community College is one of only 15 community colleges in California to offer a bachelor’s degree program (114 total community colleges in CA). MiraCosta’s existing biotech associates degree program, which is the oldest in the county, helped the school gain prowess as a leading community college focused on life sciences. Building on that success, this new bachelor’s program will prepare students for work within San Diego’s lucrative biotechnology industry. The pioneer behind the program is Mike Fino: a UC San Diego Jacobs School alum, former industry researcher in regenerative medicine, and current Dean of Math & Sciences at MiraCosta.
With a background in industry, Mike Fino made the ideal moderator for EDC’s Link to San Diego: Life Sciences event at MiraCosta College in May. Formatted as a panel discussion followed by a networking session, Link to San Diego: Life Sciences welcomed representatives from Human Longevity Inc., Genentech, and BD to campus to speak about industry trends and lend advice to students on how they can prepare for a career in the San Diego industry. While open to all students, the program was primarily designed for MiraCosta’s biomanufacturing students to begin making industry connections and thinking about next steps as they work through their program.
The group of students who attended came prepared with resumes and thoughtful questions for the speakers. MiraCosta’s biomanufacturing BA program is a prime example of how San Diego’s community college system prepares its students based on the needs of our local economy, providing opportunities and value for residents and employers alike. Now, it’s our job to keep this bright and eager talent pool in San Diego.
From 2025 to 2050, the 65-and-older population is projected to almost double to 1.6 billion globally, whereas the total population will grow by just 34 percent over the same period. With this, it has become increasingly important to support our aging population, with health and wellness among top priority.
San Diego medical technology company and 2016 MetroConnect participant AVACEN Medical has developed technology to help ease some of the common ailments afflicting seniors. The AVACEN 100 is an FDA cleared, over-the-counter medical device that provides non-invasive, temporary arthritis and muscle pain relief, and muscle relaxation. Using microcirculation enhancement on the palms, the locally-made device helps warm and thin the blood, thereby dissipating heat throughout deep tissues and relieving joint pain associated by arthritis, muscle spasms, sprains and more.
Taking this San Diego-made technology global, the AVACEN 100 has just received the CE (Conformité Européenne) Mark approval to treat widespread pain associated with fibromyalgia. The CE Mark allows AVACEN to market its AVACEN 100 to the European Union’s 28 member countries where many prescription drugs, available in the U.S., have been rejected by regulatory officials for treating fibromyalgia pain.
Founded by Tom Muehlbauer in 2009, AVACEN’s revolutionary technology was originally developed to help alleviate his sister-in-law’s chronic pain. The company currently sells in two countries, with plans to expand into 10 more over the next year (thanks in part to the CE Mark). Sales have climbed to more than $1.5 million, with more than 20 percent of the sales coming from international markets.