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How to support SD’s emerging growth industries

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Commercial real estate users spoke loud and clear at a recent panel discussion hosted by NAIOP San Diego, the commercial real estate development association. A majority of the attendees shared the sentiment that they wanted innovative, sustainable real estate that shows an understanding of San Diego’s industries.

Panelists representing the defense, wireless medical device, clean tech and brewing industries spoke at NAIOP San Diego’s “Emerging Growth Industries: From Drafts to Drones” event.

Reoccurring themes included green building design, proximity to collaborators and flexible spaces.

Moderator Mark Cafferty, CEO of San Diego Regional Economic Development Corporation, highlighted the importance of the relationship between growing San Diego’s economy and the local commercial real estate industry.

“Commercial real estate plays an important part in shaping San Diego,” he said.

Cafferty reminded the audience that biotech companies were not the only driving force behind creating BIOCOM, San Diego’s world-class biotech industry association.

Rather, developers and architects saw a need in the market and helped establish the biotech organization to support the life science industry growth.

“When Soitec (a technology firm that generates and manufacture semiconductor materials for electronic and energy industries) ran the numbers, it did not make sense for them to come to San Diego, but the San Diego lifestyle, some key relationships and the collaboration within the business community brought them here,” Cafferty said.

Panelist Tom Watlington, CEO of medical device company Sotera Wireless, said that his firm was attracted to San Diego for the convergence of multiple industries relevant to their business, including wireless, medical device and wellness.

“San Diego is one of the top three innovation clusters in medical technology in the country,” he added.

A more nascent San Diego cluster industry, beer brewing, is still mostly home grown, but it’s grown enough strength for the Mayor Jerry Sanders to declare San Diego “the Napa Valley of beer brewing.”

Don’t expect this emerging growth industry to slow down anytime soon. “Twelve to 15 new breweries are expected this year,” said Tomme Arthur, president of Port Brewing Company. “San Diego is going to go from about 38 to 50 craft breweries by the end of the year.”

Arthur pointed out that the real estate needs of breweries are highly specialized and center mostly around infrastructure. “One threat for new brewers is the 12 to 15 months it takes to get started,” he said.

Arthur attributed this partly to the specialized permits required, including those for water and wastewater.

He also pointed out that breweries need to be able to grow.

“We began in 2006 with three employees, and now we’re in a 25,000-square-foot building,” he said. “We’re looking to grow and expect to need new space in three years.”

Watlington added that most startup technology companies will expect to grow over time as well, and they will need to tailor their real estate space accordingly.

Sotera Wireless has had to move every year to year and a half, because the company is in a growth stage.

“For you commercial real estate professionals, I recommend taking a little risk on the small businesses that will grow later with the market recovery,” Watlington said. "Spend a little now on general tenant improvements and maintenance to make the small business client loyal, so when growth returns you’ll win.”

Jim Waring, president and CEO of CleanTech San Diego, added that San Diego real estate professionals should think about the local market as the entire region — including Imperial County and Baja — to best assist emerging growth industries.

“Someone on your team should be familiar with the entire region because a company could be doing manufacturing in Baja and R&D and marketing in San Diego,” he said.

Waring also encouraged developers, building owners and building managers to go green. “Running a building efficiently is clean technology,” he said.

Waring added that San Diego is now involved in Commercial PACE, a program that allows property owners to finance energy efficiency and renewable energy projects as a property tax assessment.

Jim Zortman, senior vice president of Northrup Grumman Aerospace Systems (NYSE: NOC), said that commercial space with sustainable and operational efficiencies appeal to the defense industry as well, and that this is an innovative approach that could distinguish San Diego from other markets competing for the same emerging growth industries.

“Make buildings sustainable and efficient, ahead of other markets,” he said. “There’s an opportunity for that.”

NAIOP San Diego president Brigham Black later summarized the importance of the panel discussion.

“Many people do not realize how inextricably linked the commercial real estate industry is to our regional emerging growth industries,” Black said.

“It is more important than ever that commercial building owners take a collaborative approach to our business, to design and maintain structures that attract and retain companies with emerging technologies.”

Whitelaw is a senior consultant with TW2 Marketing, Inc.

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