Every quarter San Diego Regional EDC analyzes key economic indicators that are important to understanding the regional economy and the region’s standing relative to the 25 most populous metropolitan areas in the U.S.
EDC explains San Diego’s Q2 2021 economic data:
Key Findings from Q2 2021:
VENTURE CAPITAL: Investment into Technology companies more than quadrupled. More than $2.4 billion in venture capital went to San Diego Tech companies during Q2, a 433 percent increase from the previous quarter and the first time that Tech received more VC funding than Life Sciences since Q1 2019. Life Sciences funding fell from record levels, but still pulled in more than $1.9 billion during the quarter, more than doubling the amount received in the same quarter last year. *Correction: Dollar values for Venture Capital in the preceding paragraph include other sources of funding, such as IPOs, mergers, and Acquisitions.
COMMERCIAL REAL ESTATE: Demand for office space jumps as State lifts lockdowns. Net absorption of office real estate was positive during the quarter, up more than 330,000 square feet, for the first time since Q4 2019 as San Diego businesses began transitioning back to the office. Additionally, Tech companies such as Apple and AppFolio are expanding their San Diego footprint, helping push office vacancy rates down and rent growth back up.
EMPLOYMENT: Job growth returns amid continued battle for talent. San Diego’s Q2 employment reversed the past year’s downward trend as the vaccine rollout led to loosened restrictions on businesses and increased consumer confidence. Year-over-year total nonfarm employment increased by 17,700 in Q2, with Leisure and Hospitality leading the way. However, total employment remains about 100,000 jobs lower than pre-pandemic levels and some key industries, such as Healthcare, are in dire need of more workers.
EDC study quantifies the impact of AI in region’s Cybersecurity cluster
Today, alongside Cyber Center of Excellence (CCOE) and Booz Allen Hamilton, EDC released the second study in a series on the proliferation of Artificial Intelligence (AI) and Machine Learning (ML) within San Diego County’s key economic clusters. “Securing the Future: AI and San Diego’s Cyber Cluster” quantifies the economic impact of the region’s Cybersecurity cluster and explores the proliferation of AI and ML technologies being used to thwart cybercrimes, among other critical needs by the private-sector and government.
While the term “Cyber” has become household nomenclature only in the past decade or so, the industry dates back 50 years. As cyberattacks and ransomware threats on local mega-brands fill our headlines, and our digital and non-digital worlds further integrate, the importance of and need for Cybersecurity cannot be overstated.
Underwritten by Booz Allen Hamilton, the web-based study—cyber.sandiegoAI.org—includes a timeline on the history of Cybersecurity, a roster of recent Defense-Cyber contracts and subsequent job growth, details on the $3.5 billion economic impact of the Cyber cluster, and a set of recommendations for driving the use of AI and ML across the region.
“This series serves to spotlight the importance of AI-ML application within the region’s key industries—which contrary to popular belief—is helping drive productivity, job growth, innovation, and security here and around the globe. While there is work to be done in getting more San Diegans plugged into Cyber and related jobs, the industry has proven to be an engine of growth, even despite disruptions brought on by COVID-19,” said Nate Kelley, Senior Research Manager, San Diego Regional EDC.
Key findings
The region’s Cyber companies are significantly more engaged with AI and ML technologies than firms in other industries. Cyber firms are developing AI at a rate 2.5 to three times the regional average. Moreover, half of all Cyber companies implemented AI at least three years ago compared with 43 percent across all industries.
AI has generated unparalleled productivity gains. Productivity in the Cyber cluster has grown 7.5 percent since 2018, nearly triple the average for all San Diego industries, thanks to the development and adoption of AI.
AI is producing jobs, not eliminating them. Some 61 percent of Cyber businesses plan to hire workers—including AI specialists—in the next year. Moreover, AI has helped the industry to sidestep chronic labor shortages by automating tedious, repeatable tasks and allowing current workers to do more with their time.
Talent shortages abound. Despite industry employment growing by 7.4 percent since 2018, 80 to 90 percent of local Cyber companies cited difficulty sourcing qualified workers. The region’s colleges and universities are expanding their course offerings to bridge these gaps, but more must be done to better draw students to these programs.
Home to the largest concentration of military assets in the world, San Diego—and its Cyber firms—are positioned for growth. Nearly three in five local Cyber firms work directly or indirectly for the federal government, including the Department of Defense, and 32 percent focus exclusively on fulfilling federal contracts. Defense contracts are typically big, multiyear investments that provide stability to San Diego’s Cyber industry.
“It should come as no surprise that San Diego is at the heart of transforming the defense industrial base leveraging today’s latest technology, while working to mitigate the risks inherent to increased connectivity and data-centric decision making,” said Jennie Brooks, Senior Vice President at Booz Allen Hamilton—underwriter of the EDC study series—and leader of the firm’s San Diego office, which employs over 1,200 professionals working on cybersecurity, analytics, engineering and IT modernization. “It’s clear that 5G, AI, ML, and cyber warfare will define our future battlefields, digital, and physical—and while we are encouraged by the report findings, we must all be ready to meet this new mission by fostering Cyber-ready tech talent, investing in up-skilling and reskilling programs, implementing rigorous cyber hygiene practices from the board level down, and coming together as a regional cluster to define how these new technologies will further—and safely—shape the San Diego region in the coming years.”
Cyber is an important and rapidly growing piece of the San Diego regional economy. Notably, every Cyber job generates another job in other industries in the region. The cluster accounts for 24,349 San Diego jobs across 874 firms, and has a total economic impact of $3.5 billion annually. This is about the equivalent of nine Super Bowls or 23 Comic-Cons.
“San Diego’s premier educational institutions, diverse industry base and robust federal assets seed not only the Cyber workforce but the innovation needed to protect our nation,” said Lisa Easterly, President & CEO, CCOE.
The study series is underwritten by Booz Allen Hamilton and produced by San Diego Regional EDC. The report was unveiled at a virtual, community event (video recording below) sponsored by CCOE and Thermo Fisher Scientific, with representatives from Booz Allen Hamilton, ESET, Analytics Ventures, Cal State San Marcos, and Naval Information Warfare Center Pacific, among others.
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.
Every quarter San Diego Regional EDC analyzes key economic indicators that are important to understanding the regional economy and the region’s standing relative to the 25 most populous metropolitan areas in the U.S.
EDC explains San Diego’s Q1 2021 economic data:
Key Findings from Q1 2021:
COMMERCIAL REAL ESTATE: Offices aren’t going anywhere. Regional shutdowns and new remote-work policies due to the COVID-19 pandemic have changed the nature of office space. While increased office vacancy (14.2 percent during Q1) suggests companies were abandoning their current offices, a recent survey of San Diego employers found that 39 percent plan to rent, lease, or purchase additional space in the next 12 months. Companies in the region’s innovation industries have more than recovered job losses from the early months of the pandemic and are looking to return to the office in some capacity over the coming months as health guidelines permit.
VENTURE CAPITAL: Biotech leads venture capital investment. In Q1, San Diego saw $2 billion in venture capital (VC) investment come into the region by way of 59 deals—the highest number in a quarter since 2000. The top three deals were worth nearly $1.2 billion, all to local biotechs Mesa Biotech, Fate Therapeutics, and Blacksmith Medicines, and account for more than half of all VC investment in the region. These continued VC inflows are a testament to San Diego’s position as a global life sciences leader.
HOUSING: Rising home prices further hinder affordability. The median home price in Q1 was $763,500—a historic high that has continuously climbed during the pandemic, despite job losses and economic uncertainty. Increasing home prices make it difficult for new homebuyers to enter the market. We can hope that increased vaccinations will encourage sellers off the sidelines and free up more inventory for buyers.
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.
A marketing initiative of EDC and the five cities along the 78 Corridor, Innovate78 serves to spotlight the businesses and innovators that make our region competitive.
Today, Innovate78 released a new report, The Future of Manufacturing in North County, which finds the industry will continue to prove its resiliency and positive economic impact in the region—even amid trends in automation, globalization and COVID-19 ramifications. According to the study, manufacturing accounts for $18 billion annually (or seven percent) of the area’s economy, and while many of the 813 local manufacturing firms were impacted by coronavirus, 58 percent of survey respondents are looking to increase their space.
The study analyzes trends in employment, which is concentrated in high-value goods like computer and electronic product manufacturing. This sub-industry specifically accounts for nearly one-third of all manufacturing jobs in North County, with 12,746 employees of the total 40,151 jobs reported in the study. This number is expected to grow nearly six percent in the next five years—continuing to position manufacturing as a key driver of North County’s economy.
Flux Power, a company represented in the study that manufactures advanced lithium-ion battery for industrial and commercial equipment, increased both their staff and revenue in 2020 amid the pandemic. With more than 100 employees, the Vista-based company is now looking to increase both its production and nonproduction space within the region.
“The need to be efficient, safe and environmentally-conscious is high, especially now, as businesses plan for post-COVID-19 recovery,” said Chuck Scheiwe, chief financial officer of Flux Power. “Manufacturing products that empower others to improve their day-to-day efficiencies will be critical in our industry and region’s future growth, and we’re proud to be part of it.”
The study reports that during COVID-19, North County manufacturing companies were undoubtedly impacted by the pandemic, with 43 percent of respondents reporting a loss of revenue in 2020. Looking at net growth, however, there was a reported one percent increase in manufacturing jobs, with 186 manufacturing jobs lost and 956 gained as noted by respondents. Most job losses were in medical manufacturing, while most job gains were in machinery manufacturing.
One company that reported job gains is Quik-Pak, an Escondido based computer and electronic manufacturing company. In addition to anticipating upscaling facilities in the future, during COVID-19 Quik-Pak hired staff and reported increased revenue.
“The strength of the manufacturing industry in North County San Diego is one of the reasons we wanted to expand here,” said Rosie Medina, vice president sales and marketing of Quik-Pak. “The talent pool is rich, and there is space to grow. We appreciate that not every region has both of these critical components that are needed for our industry to thrive.”
Automation, globalization and COVID-19 are obvious pressures affecting North County’s manufacturing industry. However, as Quik-Pak and Flux Power note, the need for innovation and talent remain strong. There are 9,804 manufacturing jobs with a higher-than-average risk of automation—that’s nearly 24 percent of all North County manufacturing jobs. Investment in upskilling and re-training will be needed to help move these workers into other quality jobs over time.
“From craft beer to surfboards, to life-changing medical devices and technology services, manufacturing has long been a pillar of the region’s economy, with impacts spanning beyond our community,” said Jordan Latchford, research manager of San Diego Regional EDC, the study author and managing entity of Innovate78. “This study confirms the manufacturing industry in North County is poised for a strong recovery, and will remain a significant economic driver for the San Diego region.”
EDC study quantifies the impact of increased local procurement
Today, as part of a commitment to inclusive economic recovery, EDC released a study and set of recommendations for large employers to support small businesses by buying local. “Anchor Institutions: Leveraging Big Buyers for Small Business“ analyzes the spend of more than a dozen local anchors and demonstrates the impact of increased local procurement on quality job creation.
Anchor institutions are defined as universities, hospitals, local government agencies, the U.S. Navy and other large employers that are physically bound to the region.
In San Diego, anchors represent eight of the region’s 10 largest employers—providing more than 72,000 jobs. They purchase tens of billions of dollars in goods and services every year, and yet, local anchors send about one-quarter of all procurement spend outside the region.
The web-based study—procurelocal.inclusivesd.org—includes a summary of local spending, a cluster map of anchor institutions in the region, estimated economic impact from increased local spending, and a set of recommendations for growing quality jobs across San Diego through procurement.
The COVID-19 pandemic has disproportionately impacted people of color and spurred the closure of one-in-three small businesses across San Diego. Local small businesses employ nearly 60 percent of the total workforce, which is double the national average, and are responsible for nearly half of all job growth in the last five years. Despite their critical importance to the region’s economy, many small businesses report struggling to attract customers and generate new sales.
“Small business resiliency will be key in getting this recovery right. This report further demonstrates the importance of connecting our region’s small and diverse businesses to large, institutional buyers,” said Eduardo Velasquez, EDC Research Director. “This will mean more quality jobs for San Diegans, more thriving businesses and a stronger regional economy.”
KEY FINDINGS
Collectively, 14 anchors surveyed spend more than $9.9 billion each year on a range of goods and services, and only about $247 million of this reported spend can be traced back to San Diego businesses. Further, only a small proportion of this spend is reaching small (14 percent) and minority-owned or diverse businesses (11 percent).
Small shifts in procurement can mean big economic impact:
If the 14 anchors surveyed increased local construction spending by just one percent, it would put around $32 million into local construction businesses, adding $466 million to the local economy and helping create nearly 4,500 jobs in the region.
The same one percent increase in professional services (e.g. legal assistance) spending would pump nearly $12 million into local suppliers, resulting in an economic impact of nearly $56 million and support another 800 jobs.
The majority of these new jobs would be in industries with a higher-than-average concentration of quality jobs (those that pay middle-income wages).
“As a large employer that works with many diverse suppliers to meet our mission of delivering clean, safe and reliable energy, SDG&E understands the value small businesses bring to the regional economy,” said Christy Ihrig, vice president of operations support, SDG&E, anchor event and study sponsor. “When they thrive, our region thrives. To support economic recovery from the pandemic, we are more committed than ever to grow our supplier diversity program and encourage other local employers to do the same.”
Beyond impacts to suppliers and the regional economy at large, anchor institutions that buy from local, small, diverse businesses also stand to benefit. Specifically, several local anchors note that setting goals for greater procurement from these suppliers has resulted in greater customer service, supply chain diversity and resiliency, and stronger brand equity in the communities they serve.
“‘Shop local’ is about more than individuals; it means big business and organizations choosing to support their neighbors by buying in their communities. The City of San Diego takes pride in its efforts to work with local companies, is seeking increased opportunities to buy local and implores other local organizations to follow suit. Together, this is how we ensure a more equitable and inclusive San Diego,” said Mayor Todd Gloria, City of San Diego, study sponsor.
A CALL TO ACTION
To maintain our regional competitiveness, we need to create 50,000 quality jobs in small businesses by 2030, as outlined in EDC’s inclusive growth strategy. To do that, it’s imperative we help San Diego’s small and diverse businesses recover and thrive.
San Diego needs its largest employers (and our largest buyers) to commit to redirecting their procurement to local, small, and diverse businesses. To do this we must:
identify spend areas with high potential for inclusive, local sourcing; and
define and track metrics that ultimately drive bidding processes.
We invite large firms to join San Diego Regional EDC’s Anchor Collaborative and help us shape and achieve this goal—join us here.
The report was unveiled today at the first in a series of Town Hall events. Watch a recording of the event here. Thank you to the study sponsors: SDG&E, City of San Diego, Civic Community Ventures, and the University of San Diego School of Business.
EDC study quantifies impact of artificial intelligence, machine learning
San Diego industries that are embracing artificial intelligence (AI) support an estimated 175,680 jobs and $33.3 billion in annual gross regional product, according to a study released today by San Diego Regional EDC. Underwritten by Booz Allen Hamilton, “Measuring the Future: AI and San Diego’s Economy” is the first in a series of reports that will identify key industries and clusters where AI and machine learning (ML) have been implemented, and ultimately quantify the impacts of these technologies on San Diego’s regional economy.
The study—available at SanDiegoAI.org—includes a historic timeline, cluster map, and cross-references AI patent language with job postings to anticipate the future impacts of AI and ML on the job market.
AI and ML technologies have swiftly infiltrated most every facet of our lives as computing power and speed increase. Self-driving cars, algorithmic trading, customer experience bots and AI assistants like Siri and Alexa have become commonplace tools used by people at home and at work.
“The proliferation of AI and ML technologies promises to be a transformative force for businesses worldwide—and like in many innovative industries—San Diego is at the forefront. With this report, the EDC Research Bureau helps paint a picture of the impact of AI, proving its potential to grow jobs and even help narrow gender and racial wage gaps,” said Mark Cafferty, president and CEO, San Diego Regional EDC.
Contrary to popular belief and despite current economic conditions, three in five AI developers (62 percent) expect to see the number of employees specifically engaged in AI-related work grow over the next 12 months. This means locally based AI talent could help meet growing demand across the U.S. as employers try to hire workers in earnest that possess skills readily available from San Diego AI. Notably, job postings data in Sun Belt metros like San Antonio, Austin, Dallas, Tampa and Miami show that employers are struggling to fill positions requiring facial and speech recognition skills—key specializations of AI developers in San Diego. Meanwhile, predictive and forecasting AI could help alleviate hiring difficulties among firms in major economic and financial centers, including New York, Philadelphia, and Chicago. More than eight in 10 AI developers in San Diego specialize in machine or deep learning technologies, a fundamental building block for predictive AI.
Large local companies in San Diego like Booz Allen Hamilton, Northrop Grumman Corporation, ResMed and growing startups and small businesses like Lytx, Lockton, Traits AI and Semantic AI are helping to lead the charge in AI—enabling people and firms to operate more quickly and efficiently. Specifically, the use of AI or ML technologies largely supports four areas of firm activity: the development of new products and services, improved efficiency and productivity, reduced costs and an increase in business revenues.
“Booz Allen Hamilton is at the forefront of AI adoption, development and implementation, and we believe that San Diego’s companies can leverage this technology to meet their missions, attract talent and fuel economic activity,” said Joe Rohner, a Booz Allen director and leader in the firm’s analytics practice and AI services business. “We are energized that EDC’s report findings show local respondents see AI as truly helping the San Diego economy by creating more jobs—not eliminating them. People are essential to the ethical application of AI, and this technology will enable organizations and their workforce to increase productivity, quality and efficiency—in San Diego and globally.”
Despite AI’s productivity-boosting, job-creating power, a number of challenges remain. Top of mind for most local employers is the inability to source qualified talent. However, COVID-19 and the subsequent increase in remote work has expanded the talent pool for San Diego County’s AI and ML employers.
“Rapidly developing machine learning/artificial intelligence technology that enhances the work our men and women in uniform do every day is critical to the future of defense. Northrop Grumman is well positioned to continue to grow the local talent pipeline through our San Diego-based education programs so businesses in our community have the right skill sets available to support this important and rapidly evolving field,” said Alfredo Ramirez, Vice President of Northrop Grumman’s San Diego Autonomous Design Center of Excellence.
OTHER KEY FINDINGS
Average salary in AI/ML-concentrated industries is $127,960—3.9 percent above the national average for these industries and more than 70 percent above San Diego’s average worker salary.
For every 1,000 jobs gained in this cluster, another 1,400 jobs are created in other industries.
Survey proves AI adoption is creating job opportunities in the region:
66 percent of firms agreed that the use of AI and ML has created new job opportunities
54 percent of firms agree that AI and ML are increasing the need for more workers at their business
31 percent of jobs in AI-concentrated fields require only a high school diploma and pay an average of $22.42 per hour
The boost to productivity and efficiency from AI and ML should lift wages in traditional or population-serving industries, which employ a larger share of women and non-white workers than other sectors, and could therefore potentially reduce gender and racial wage gaps as these technologies are adopted.
The report was produced by San Diego Regional EDC, underwritten by Booz Allen Hamilton, and sponsored by Northrop Grumman Corporation, ResMed, Lytx and Lockton.
San Diego is home to more than 350 precision health companies that hold 3,610 patents, according to a study released by yours truly: San Diego Regional EDC. “San Diego’s Precision Health Ecosystem” explores the impact of the region’s precision health cluster and quantifies the number of firms, venture capital and patents, as well the broader cluster across California.
The web-based study – precisionhealthSD.org – includes a historic timeline, cluster map, local and state overviews, and a series of video testimonials from local business leaders.
Large local companies like Illumina and Thermo Fisher Scientific, startups and small businesses like CureMatch, LunaDNA, and EpicentRX, as well as hospitals and research institutes are helping lead the charge in precision health and enabling people to live longer, healthier lives.
Using a person’s unique genes, medical history, and environment, the field of precision health seeks to customize effective therapies and disease treatment. More than genomics and pharmaceuticals, precision health also encompasses a wide range of related fields that allow for the collection, storage, analysis, and use of health data for more precise diagnosis of individual conditions and risk factors.
“From personalized cancer vaccines to record-breaking DNA sequencing of newborns, San Diego companies and research institutes are revolutionizing healthcare as we know it,” said Kirby Brady, research director, San Diego Regional EDC. “Consistently ranked among the top five cities for startups and life sciences, as well as the #1 region for genomics patents in the U.S., San Diego brings more to the table than its beaches – we are changing lives and curing disease from the offices and labs throughout the region.”
KEY FINDINGS
San Diego precision health companies secured $1.3 billion in venture capital in 2018, to date.
San Diego precision health companies hold 825 registered trademarks, and 3,610 patents.
San Diego is home to more than 350 precision health companies, 80 research institutions, 30 hospitals, and five universities.
Economic impact of precision health in California (2017):
The report was produced by San Diego Regional EDC, and sponsored by Alexandria Real Estate Equities, Inc., CBRE, Kaiser Permanente, PricewaterhouseCoopers and Scripps Research.
Today, EDC released the first-ever economic impact report on San Diego’s genomics industry. “Cracking the Code: the Economic Impact of San Diego’s Genomics Industry” explores the economic factors that have led to the proliferation of San Diego’s genomics industry, analyzes the region’s genomics standing relative to other U.S. regions, and quantifies San Diego’s genomics-related firms, talent pool, venture capital and more.
As the #1 most patent intensive genomics market in the U.S., San Diego is leading the charge in a new era of healthcare. Personalized medicine and technology are taking precedence, with local genomics companies, research institutions and universities at the forefront.
KEY FINDINGS
Leadership: San Diego is poised to continue its leadership in the field of precision medicine. With more than 115 genomics-related firms, San Diego has companies that handle every aspect of the genomics value-chain – from sampling and sequencing (e.g. Illumina, Thermo Fisher Scientific) to analysis and interpretation (e.g. AltheaDX, Human Longevity, Inc.) to clinical applications (e.g. Celgene, Arcturus Therapeutics), creating a complete ecosystem. Additionally, San Diego conducts the fundamental scientific research, due in part to the concentration of research institutes, that form the basis for many global genomics therapies and interventions.
Capital: While San Diego is home to just one percent of the U.S. population, it received 22 percent – $292 million –of the venture capital funding in genomics in 2016. Continually, San Diego’s numerous nonprofit research institutes command a large share of federal funding (e.g. NIH). In fact, San Diego received $3.2 million federal contract dollars in 2016 – more than any other U.S. region.
Talent: San Diego produces more genomics-ready graduates, relative to the size of its workforce, than any other U.S. region. With nearly 2,000 average genomics-related degrees (biochemistry, cognitive science and bioinformatics) conferred per year, San Diego’s genomics companies benefit from the preparatory work of the region’s top academic institutions. In that vein, it is projected that the local talent pool for key genomics occupations will grow by an additional 10 percent by 2021.
ADDITIONAL KEY FACTS
San Diego’s genomics industry has a $5.6 billion annual economic impact, impacting 35,000 jobs in 2016.
Among top life sciences U.S. metros, San Diego’s genomics industry ranks #2 overall, #3 in innovation, #2 in talent, and #4 in growth.*
From 2014 to 2016, San Diego generated 371 genomics-related patents. Collectively, 28 local firms generated 120 genomics-related patents in 2016.
San Diego is 3.1x more concentrated than the U.S. in key genomics occupations.
From 2011 to 2016, San Diego’s genomics talent pool grew by 11 percent, far outpacing the national growth rate of 5.1 percent.
*The genomics scorecard was calculated using a weighted ranking system divided into three categories approximating the genomics ecosystem: innovation, talent, and growth.
EDC’s study was underwritten by Illumina, and sponsored by Alexandria Real Estate, Barney & Barney, Biocom, Eastridge Workforce Solutions, Human Longevity, Inc., Latham & Watkins, Thermo Fisher Scientific and UC San Diego. Additional research support was provided by CBRE.
