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The private sector cannot provide a sufficient supply of industrial land in San Diego County in the foreseeable future to support the potential demand for space from high-technology businesses including biotechnology, communications and electronics. If the public sector fails to participate in some way — through public/private partnerships involving securing properties, streamlining processing or financial assistance — the evolution of these industries to full manufacturing in San Diego County is threatened.

These are the inexorable findings of a study my firm conducted over the past year — along with fellow columnist Alan Nevin — under contract with the San Diego Regional Economic Development Corp. and Biocom/San Diego.

During the next decade, high-techs will add between 3,200 and 5,250 new jobs per year. To accommodate those employees, the county will require between 13.2 million and 20.8 million square feet of commercial construction, buildings that will use between 756 and 1,196 acres of land. Over a 20-year period, the business sector will require between 26.3 million and 41.7 million square feet of new buildings atop 1,511 to 2,391 acres.

The problem is typified by Figure 1. The graphic demonstrates a limited supply of zoned, appropriately located industrial/manufacturing property throughout San Diego County. At the present rate of absorption, and with no additions to supply, it will take roughly 24 to 36 months to exhaust the supply of such immediately available land. (San Diego County employment land absorption is about 578 acres per year, yet earlier this year there were only 842 acres available.)

At a minimum, San Diego County should maintain at least a three-year supply of land immediately available, or 1,735 acres in any given year based on recent demand levels.

This is demand arising from current industries. It does not include any effort to make San Diego competitive for the next stage of its economic evolution, manufacturing. The companies likely to occupy this space are those that probably will pay an order-of-magnitude higher price to occupy increasingly precious land.

The industries we want to target cannot afford these manufacturing properties. The rising price of the properties drives this dwindling supply to high-intensity commercial uses, which can pay the price. Notwithstanding the current cyclical economic slowdown, which may have the temporal effect of stretching this absorption schedule, this remains a supply-constrained market.

Yet, in comparing San Diego with technology parks in other regions, as well as efforts to boost high-technology production in other West Coast cities, it becomes clear that San Diego is well positioned for manufacturing growth. For example, San Diego County has more than 250 biotechnology companies, as many as 20 percent of which are in the advanced clinical phases of their research. The biotech sector is testing 120 products (in various phases), suggesting that many of its most sophisticated products remain to be manufactured here in the next three to seven years.

In 2000, the San Diego electronics industry provided more than 110,000 jobs. The electronics industry targets the skilled labor sectors like telecommunications, R&D and software manufacturing, sectors where San Diego is strong and has great opportunity.

The region has many inherent advantages. For instance, San Diego has developed specialized infrastructure for high technology companies, including more miles of fiber optic cables than any other community in the United States. Jobs in telecommunications totaled 4,000 in 1990, but have grown to more than 23,000, representing a six-fold increase during the past decade. Software jobs have doubled since 1990, and stand at 14,000.

During the next 10 years, the study projects that San Diego County’s high-tech industries will add more than 40,000 jobs. This is an average annual increase of 4,375 jobs, or 5 percent annual growth. The county should add up to 105,000 new high technology jobs in the next 20 years.

Targeted Properties

Located within the county (see map) are nine properties that can support two types of high technology manufacturing parks:

• Regional Technology Park: This is conceived as a multiuse site anchored by high-technology manufacturing concerns. The challenge of such a concept is to assemble a large enough site (order of magnitude 1,000 acres, ideally more) that can accommodate manufacturing, R&D, commercial, educational and housing.
• Regional Technology Park Net-work: Targeted properties throughout the county of at least 200 acres could accommodate various technological manufacturing clusters, which are linked to provide communications access, engage in joint promotional strategies and form the framework for San Diego’s economic growth and prosperity for years to come.

The best locations are in the South County, but not exclusively. For instance, Fanita Ranch is a 3,000-acre property in Santee that has failed to pass the local communities’ test to develop a residential community. Perhaps an employment-based model deserves a chance. It is under new ownership and this owner may be persuaded to try a new approach.

Another great candidate is in the heart of the new master planned community of Otay Ranch in eastern Chula Vista. While the site is smaller, it is supported by massive new residential neighborhoods, an excellent location and a progressive City Council. Trouble is, the Chula Vista mayor isn’t sold on the idea, for now preferring it be used for a new state university.

The two concepts are not mutually exclusive. The university campus of the future is probably an urban university occupying between 50 and 150 acres, surrounded by R&D and manufacturing potential. The Otay location is a great site for an RTP but a nonstarter for a traditional university.

Other South County locations also show promise. The county of San Diego is partial to Otay Mesa properties, which hug the border. Not a bad idea, considering the potential to employ Mexican labor, a significant San Diego asset in our effort to expand a manufacturing base in our high-cost county. Also in the mix is the Brown Field site, which inevitably will be leased by the city of San Diego to house commercial and industrial concerns, probably much like the Palomar Airport area in Carlsbad.

Despite the good sites identified, most important is to get started on addressing the shortage of land before it is too late. A site for a large RTP must be targeted immediately, along with smaller sites for a regional technology park network. It is unlikely that an effort of this magnitude can be pulled off without a joint public sector/private sector cooperation to secure the properties at a reasonable cost and in the foreseeable future.

Without concentrated public/private leadership to seize the opportunity to address production demand by initiating an effort to target, entitle and improve land, the study projects that the region will be unable to accommodate the demand generated by high technology and biotechnology companies. Sufficient land must be made available at low enough prices. If the land shortage is perpetuated, this will preclude the long-term opportunity to evolve a high technology manufacturing base. And that is critical to ensure that San Diego County is competitive with other regional markets.

Gary H. London is president of The London Group Realty Advisors Inc., providing real estate consulting and economic analysis. Check him out on the Web at www.londongroup.com.