From alcoholic beverages to potentially life-saving mobile devices, and an array of products and services in between, San Diego’s opportunities for commercial growth stretch far beyond its more well-known biotechnology sector, according to a panel of four local business executives recently.
The executives spoke at a gathering hosted by the National Association of Industrial Office Properties, or NAIOP, and said there are four sectors of business likely to make ripples in San Diego’s real estate future.
Clean and sustainable technology is still a rising market in San Diego, and that will provide opportunity for growth in commercial real estate as clean technology manufacturers and service providers continue to flock to San Diego, said Jim Waring, chair of the nonprofit CleanTech San Diego.
Waring, a former real estate investor himself, having dabbled in the market prior to his time in the office of San Diego Mayor Jerry Sanders from 2006 to 2007, explained what he believes makes clean tech such a hotbed for growth. He told the real estate professionals that, having watched CleanTech San Diego grow from an idea in the mayor’s office to a thriving cluster in just a few years, he has an eyewitness view of the clean tech potential in San Diego.
Before CleanTech San Diego was officially formed, a meeting was held in the mayor’s office and a theme Waring said came up among the group was that regardless of one’s politics or world view, there were trends throughout the world, calling for a more sustainable economic system. And that’s how CleanTech San Diego began.
The group came up with the idea of simply calling the city a “center” for clean technology and running with it. The thought was that by announcing to the world that the city was willing to embrace clean technology, the clean technology companies would warm to San Diego as a good host.
The result has been “phenomenally exciting,” Waring added.
From an initial pledge in 2007 of $45,000 from just a few people sitting in a room with CleanTech San Diego co-founder Duane Roth, the nonprofit group — aimed at developing a cluster of clean technology companies — now has more than 100 members investing anywhere from $5,000 to $50,000 each.
The recent emergence of the Commercial PACE, or property assessed clean energy, program, through which owners of commercial properties are given access to a financing mechanism to fund performance upgrades through property tax payments, a significant opportunity is not far off for commercial real estate, Waring said.
“I would say, within 60 or 90 days, this region will be part of a joint powers authority and a vehicle for pace,” Waring said.
Another potential driver for local commercial real estate has a much different flavor, but according to Tomme Arthur, president of San Marcos-based Port Brewing Co., can be just as refreshing: Beer.
Port Brewing, founded in 2006, is about to outgrow its three-suite space in its San Marcos building, just like Stone Brewing Co. outgrew the same space before re-locating to its current Escondido hub and expanding into Liberty Station, and Green Flash Brewing Co. moved from Vista to Mira Mesa, Arthur said. Since opening, the company has expanded from just three employees to 30, not including those employed at its business affiliate, the Pizza Port restaurants.
The stories of the craft beer industry’s 15-year growth in San Diego are numerous — all the more reason, Arthur said, for real estate types to pay attention and familiarize themselves with the brewers, market, permit process and the people. Befriend them, Arthur said.
“A lot of people want to promote the notion that San Diego is the Napa Valley of beer, and because of that, we are seeing an explosion of growth,” Arthur said, noting that he knows of about 15 local breweries planning on opening doors to the public in 2012, adding to the 38 that already exist.
“I don’t know of a lot of categories that went through the Great Recession and did as well as the craft brewing business,” Arthur said.
Tom Watlington, chief executive officer for the relatively new Sotera Wireless, suggested the convergence of information technology companies in the region is also creating opportunities in commercial development. In October 2011, Sotera secured a $100 million fund agreement with the founders of West Wireless Health Institute that provides risk capital for companies with new health care technologies and services. A device recently developed at Sotera could soon change the face of in-patient patient care, Watlington said. Worn on the wrist like a watch, the 110-gram VisiMobile monitors all the vital signs a patient would normally have monitored from a hospital room or critical care unit on a continuous basis, keeping doctors connected to patients.
Watlington said San Diego’s standing already as a medical technology hub will soon make for a perfect marriage with emerging information technology companies and wireless device-makers like Sotera, which was the first medical device company to secure an investment from Qualcomm Inc. (Nasdaq: QCOM).
“With the smaller, but rapidly growing, category of local wireless technology in the medical space, we are going to be in a hub worldwide for the innovation that’s taking place in that space,” Watlington said. “This new market that combines mobility, portability, miniaturized electronics with wireless communication is being created with a convergence of industries that happen to have strong representation here.”
According to Jim Zortman, senior vice president of Northrop Grumman Aerospace Systems, another technology that may spur commercial development is unmanned vehicles. Drones, as they are often called, are clearly in the long-term investment plans of the Department of Defense, Zortman said, but the opportunities in the civilian commercial world, he believes, will eventually dwarf military interest.
“If FedEx is trying to cut their costs, and if you’re flying a load of rubber dog chew toys out of China, do you need a crew of four or five on that airplane?” Zortman asked.
The continued investment by the military will drive the commercial investment, he said, into areas such as insurance, which may find interest in using unmanned aircraft in surveying insured property from the air.
The challenge, he said, will be relaying to interested investors information on how to get started. In San Diego, that may be a little easier, he added.
“San Diego’s got a very privileged position because of the work and the things that have gone on here, by both Northrop Grumman and General Atomics and a host of other smaller companies,” Zortman said.
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