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SAN DIEGO’S QUARTERLY ECONOMIC SNAPSHOT November 2017

IN THIS ISSUE

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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.

SAN DIEGO HIGHLIGHTS

This issue covers data from Q3 2017.

UNEMPLOYMENT

1.1%

year-over-year growth in employment

7.8%

year-over-year growth in median home price

25.1%

quarterly growth in VC dollars

39.1K

Unemployment Rate - 25 Most Populous US Metros

•

With an unemployment rate of 4.1 percent, the San Diego region had the 17th lowest unemployment rate among the 25 most populous metros, two spots lower than Q2.

•

San Diego’s unemployment rate remained below California’s rate of 4.7 percent, and was on par with the national rate of 4.1 percent.

•

When compared to its regional neighbors, San Diego’s unemployment rate continued to fare better than both Riverside (5.4 percent) and Los Angeles (4.5 percent).

•

Year-over-year, the region’s unemployment rate decreased by 0.5 percentage points.

jobs in San Marcos

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Rank

1 2 3 3 5 5 5 8 9 10 11 12 13 14 14 14 17

18 19 20 21 22 22 24 25

Metro

Denver Minneapolis Orlando San Antonio Boston San Francisco Tampa Dallas Saint Louis Washington DC Baltimore Charlotte Miami Atlanta Phoenix Portland San Diego US Seattle Detroit Los Angeles Philadelphia Chicago New York Houston Riverside

Q3 2017 Q2 2017

2.2 2.9 3.2 3.2 3.3 3.3 3.3 3.4 3.5 3.6 3.7 3.8 3.9 4.0 4.0 4.0 4.1 4.1 4.2 4.4 4.5 4.6 4.7 4.7 4.8 5.4

2.5 3.5 4.0 3.9 4.0 3.6 4.1 4.0 4.0 3.9 4.4 4.0 4.5 4.8 4.5 3.9 4.3 4.5 4.0 3.7 4.4 4.8 4.9 4.3 5.3 5.5

PP Change

-0.3 -0.6 -0.8 -0.7 -0.7 -0.3 -0.8 -0.6 -0.5 -0.3 -0.7 -0.2 -0.6 -0.8 -0.5 0.1 -0.2 -0.4 0.2 0.7 0.1 -0.2 -0.2 0.4 -0.5 -0.1

Source: Bureau of Labor Statistics Note: Data not seasonally adjusted. Quarter-end monthly data.

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CALIFORNIA’S UNEMPLOYMENT12 BY COUNTY

UNEMPLOYMENT TRENDS Quarter-End Unemployment Rate San Diego & Select California Metros

10%

10

San Diego

Unemployment Rate (%)

Los Angeles

> 9.9 7.0 - 9.9 8 6.0 - 6.9 5.0 - 5.9 4.0 - 4.9 6 3.0 - 3.9 < 3.0

SF

9%

San Francisco Riverside

8%

California US

7%

4 6%

5.4%

2 Q2 2011

Los Angeles Riverside San Diego Source: Bureau of Labor Statistics Note: Data not seasonally adjusted.

5%

Q2 2012

Q2 2013

Q2 2014

Q2 2015

Q2 2016

4%

3% Q3 2013

Q2 2017

4.7% 4.5% 4.1% 4.1% 3.3%

Q3 2014

Source: Bureau of Labor Statistics Note: Data not seasonally adjusted. Quarter-end monthly data.

Q3 2015

Q3 2016

Q3 2017

November 2017 EMPLOYMENT

Quarter-Over-Quarter Change in Employment

•

Following an increase in employment during Q2, total nonfarm employment fell 5,800, or 0.4 percent, in Q3. Job gains in the private sector helped offset some of the losses seen in local and state government. Compared to a year ago, total nonfarm employment was up 16,100, or 1.1 percent.

•

With the holiday season approaching, retail trade recorded the largest gain, adding 1,400 jobs during the quarter. Healthcare and social assistance continued to grow, adding 1,200 jobs.

•

Other strong contributors to the quarterly employment growth were other services, real estate and rental and leasing, and construction, totaling 2,900 additional jobs. These three sectors also saw the three largest year-over year gains, increasing by 9.0 percent, 7.9 percent, and 5.2 percent, respectively.

•

Professional, scientific, and technical services, as well as transportation utilities, saw the largest declines in the private sector, losing 1,900 and 1,700 jobs, respectively.

•

There were 1,364,906 total job postings during the quarter, of which 192,814 were unique. This means that on average, employers are posting the same job opening more than seven times.

•

With nearly 8,000 unique job postings during the quarter, registered nurses continued to top the charts, indicating continued demand in one of the region’s fastest growing sectors - healthcare.

25 Most Populous US Metros

Phoenix San Antonio 0.40% Seattle 0.17% Portland 0.14% Orlando 0.04% Dallas 0.00% Charlotte 0.00% Los Angeles 0.00% Riverside -0.01% San Francisco -0.11% Baltimore -0.20% Atlanta -0.24% United States -0.31% San Diego -0.40% Philadelphia -0.49% Boston -0.54% Saint Louis -0.58% Tampa -0.59% Denver -0.69% Miami -0.79% Washington DC -0.80% Minneapolis -0.81% Chicago -0.99% Detroit -1.02% New York -1.49% Houston -1.55%

2.01%

Source: Bureau of Labor Statistics Note: Changes in quarter-end monthly data.

TOP IN-DEMAND OCCUPATIONS BY JOB UNIQUE JOB POSTINGS

7,547

Registered Nurses

6,820

5,830

Heavy & TractorTrailer Truck Drivers

Retail Salespeople

5,266

4,912

Supervisors of Retail Sales Workers

Applications Software Developers

Source: EMSI, Job Posting Analytics, Q3 2017

EMPLOYMENT CHANGES BY SECTOR

Employment by Sector (in thousands) Total (Private and Government) Total Private Professional and Business Services Prof., Scientific and Tech. Services* Mgmt. of Companies and Enterprises Administrative

Trade, Transportation and Utilities Wholesale Trade Retail Trade Transportation and Utilities Education and Health Services Education Services Healthcare and Social Assistance Leisure and Hospitality* Manufacturing* Financial Activities Finance and Insurance Real Estate and Rental and Leasing Construction Other Services Information* Mining and Logging Total Government Federal Government State Government Local Government

Q3 2017

Q2 2017

Q3 2016 1427.3 1188.0 235.1 129.3 21.3 84.5

Change Prev. QTR -5.8 2.9 -2.4 -1.9 -0.3 -0.2

Change Prev. YR 16.1 12.6 -2.5 -1.3 0.3 -1.5

% Change Prev. QTR -0.4% 0.2% -1.0% -1.5% -1.4% -0.2%

% Change Prev. YR 1.1% 1.1% -1.1% -1.0% 1.4% -1.8%

1443.4 1200.6 232.6 128.0 21.6 83.0

1449.2 1197.7 235.0 129.9 21.9 83.2

219.3 44.9 146.6 27.8 202.7 29.0 173.7 196.6 107.7 76.0 45.9 30.1 81.4 60.4 23.6 0.3 242.8 46.0 45.7 151.1

219.1 44.4 145.2 29.5 202.0 29.5 172.5 195.7 107.5 75.0 45.6 29.4 80.6 59.0 23.5 0.3 251.5 46.1 49.8 155.6

220.1 44.9 145.5 29.7 198.8 29.3 169.5 196.3 108.1 72.9 45.0 27.9 77.4 55.4 23.6 0.3 239.3 46.7 45.3 147.3

0.2 0.5 1.4 -1.7 0.7 -0.5 1.2 0.9 0.2 1.0 0.3 0.7 0.8 1.4 0.1 0.0 -8.7 -0.1 -4.1 -4.5

-0.8 0.0 1.1 -1.9 3.9 -0.3 4.2 0.3 -0.4 3.1 0.9 2.2 4.0 5.0 0.0 0.0 3.5 -0.7 0.4 3.8

0.1% 1.1% 1.0% -5.8% 0.3% -1.7% 0.7% 0.5% 0.2% 1.3% 0.7% 2.4% 1.0% 2.4% 0.4% 0.0% -3.5% -0.2% -8.2% -2.9%

-0.4% 0.0% 0.8% -6.4% 2.0% -1.0% 2.5% 0.2% -0.4% 4.3% 2.0% 7.9% 5.2% 9.0% 0.0% 0.0% 1.5% -1.5% 0.9% 2.6%

Source: Bureau of Labor Statistics Notes: Italics denote supersectors. Asterisk (*) denotes sectors strongly associated with San Diego’s traded economies. Quarter-end monthly data.

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November 2017 RESIDENTIAL REAL ESTATE

HOME PRICES

SALES & PRICE TRENDS

•

San Diego’s housing market stands as the second most expensive in the nation, although Los Angeles is not far behind after rapid price appreciation in Q3 2017.

•

Median home price appreciation has been strong and consistent since 2015, with a compound annual growth rate of 7.6 percent.

•

The region’s median home price rose slightly from the previous quarter, and is now up 7.8 percent compared to a year ago.

•

Despite a reprieve during Q3, price growth accelerated in 2017 to 8.8 percent, as supply remains constrained.

•

Home sales swung up and down in Q3, ending down 4.3 percent compared to a year ago.

Median Home Price for 25 Most Populous US Metros

Single SingleFamily FamilyHomes Homes

% Change From Prev. Year 10.2% 7.8% 10.1% 13.4% 6.6% 5.4% 8.1% 3.8% 8.6% 7.9% 7.9% 2.2% 7.3% 4.7% 5.3% 8.0% 5.8% 7.8% 1.7% 7.6% 8.0% 9.8% 4.0% 6.7% 3.8%

Change Year-Ago ChangeYear-Ago in Median Home Price & Sales Year-Ago Change 50% 50%

40% 40%

40% 40%

30% 30%

30% 30% 20% 20%

20% 20% 10% 10%

10% 10%

0% 0% 0% 0%

-10% -10% -20% -20%

-10% -10%

-30% -30% -20% -20%

MedianPrice Price(L) (L) Median

Sep-17 Sep-17

Sep-16 Sep-16

Mar-17 Mar-17

Mar-16 Mar-16

Sep-15 Sep-15

Mar-15 Mar-15

Sep-14 Sep-14

Mar-14 Mar-14

Sep-13 Sep-13

Mar-13 Mar-13

Sep-12 Sep-12

-50% -50%

Mar-12 Mar-12

-40% -40%

Sep-11 Sep-11

Metro San Francisco San Diego Los Angeles Seattle Boston New York Denver Washington DC Portland Miami Riverside Baltimore Minneapolis Chicago US Dallas Phoenix Orlando Philadelphia Houston Charlotte Tampa San Antonio Atlanta Saint Louis

% Change From Prev. Quarter -5.3% 0.3% 15.7% 0.7% -0.2% 1.2% -1.5% -4.7% 0.1% 1.5% -0.2% -2.5% -0.5% -3.3% -0.5% -2.4% 0.6% 1.2% -0.1% -0.7% -0.5% 2.2% -0.9% -0.3% 1.4%

Sep-10 Sep-10

Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Price Q3 2017 $900,000 $607,000 $595,100 $478,500 $464,100 $419,100 $418,100 $408,500 $389,400 $340,000 $339,900 $270,000 $257,800 $255,600 $254,000 $249,000 $248,900 $247,900 $238,900 $233,900 $233,200 $225,000 $220,700 $204,300 $176,500

Mar-11 Mar-11

(Q3 2017)

-30% -30%

Sales(R) (R) Sales

Source: California Association of Realtors

Source: National Association of Realtors Notes: Detroit not available. Single-family detached homes. Data not seasonally adjusted.

BUILDING PERMITS While building permits have been growing steadily since 2014, the total number of housing permits issued in Q3 2017 was down 2.3 percent compared to the same period in 2016.

Permit Activity

Building Permits by Housing Type

16,000

Single Family Multi-Family

1,117

12,000

1,090

61

248

8,000

2006

2007

4,000

2008

2009

2010

2011

2012

2013

2014

2015

2005

2006

2007

2008

Source: US Census Bureau, Building Permits Survey, 2004-2016 Notes: The survey universe increased in 2014.

2009

2010

2011

2012

2013

2015

2016

Single-Family Single Family

Multi-Family 147

Multi-Family (5+)

876

2014

132

Multi-Family Multi-Family (2-4) (2-4)

2,161

2004

557

Single Family

2016

0

682

Q3 2017 Q3 2017

Multi-Family (5+)

1,473

2,303

Q3 2016 2016 Q3

Source: US Census Bureau, Building Permits Survey Note: Quarter-end monthly data.

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November 2017 COMMERCIAL REAL ESTATE 11.0%

OFFICE MARKET

97.7K sq. ft.

Vacancy Rate

230.5K sq. ft.

Net Absorption

$2.92 FSG

Construction

Lease Rate

•

Positive market fundamentals continued to define the San Diego office market in Q3 2017. Average asking rates increased quarter-overquarter which led to a historically high asking rate and relatively flat vacancy.

•

Net absorption for Q3 2017 was positive at 97,729 sq. ft., marking five straight quarters of positive net absorption.

12.0%

$3.30 $3.30

12% 10.0%

1,600

$2.70 $2.70

8% 6.0% 6% 4.0% 4%

1,000

4.3%

Vacancy Rate

400

4.8% 12.0%

800 600

200

200

4.6% 11.5% 4.4%

-

11.0% 4.2%

-

2%

INDUSTRIAL MARKET

5.2% 12.5% 5.0%

400

2.0%

Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Class A Class B Class C Rent Growth

5.4% 13.0%

600

1,200

Sq. ft., Thousands

$2.90 $2.90

0.0% 0%

13.5%

Vacancy Rate

10% 8.0%

1,400

Thousands

$3.10 $3.10

$2.50 $2.50 $2.30 $2.30 $2.10 $2.10 $1.90 $1.90 $1.70 $1.70

Market Absorption & Vacancy Rates

800

Rent, year-ago change

Lease Rate (FSG) per sq. ft.

Asking Lease Rate & Rent Growth $3.50

10.5% (200) (200) 4.0% Q4 2015 Q1 2016 Q2 2016Q4Q3 2016 Q1 Q42016 2016 Q2 Q12016 2017 Q2 Q1 2015 Q2 2015 Q3 2015 2015 Q3 2017 2016 Q3 Q42017 2016

Net Absorption

1.1M sq. ft.

2.6M sq. ft.

Net Absorption

Construction

Contruction

$1.37 NNN

High-finish Lease Rate

Vacancy Rate

$0.87 NNN

Low-finish Lease Rate

•

After a relatively slow start to the year, the industrial market surged in Q3. Net absorption for the quarter was strong, which surpassed one million sq. ft. for the first time in two years.

•

The overall vacancy rate experienced a sharp decline quarter-over-quarter, dropping 50 basis points (bps) to 4.3 percent. The overall vacancy rate is now approaching the post-recession low of 4.2 percent set in Q4 2015.

• •

With 10 new projects breaking ground in Q3 2017, overall construction activity now totals over 2.6 million sq. ft., a post-recession high. Average asking rates for both high- and low-finish product remain at all-time high levels. Average asking rates for high-finish product decreased quarter-over-quarter by $0.02 to $1.37 NNN, likely due to large blocks of highly priced product leasing up. Low-finish asking rates climbed $0.01 to a post-recession high of $0.87 NNN. Asking Lease Rate & Rent Growth

$1.60

1,600

18%

$1.30

15.0%

$1.20

14%

10.0%

$0.90

12%

$0.80

$0.70

10%

5.0%

$0.60

8%

$0.50

6%

$0.40 $0.30

0.0% 4%

$0.20 $0.10

2%

Q32015 2015 Q1 Q42016 2015 Q2 Q12016 2016 Q3 Q22016 2016 Q4 Q32016 2016 Q1 Q42017 2016 Q2 Q12017 2017 Q3 Q22017 2017 Q4 High Finish

Low Finish

High-Finish Rent Growth

0% -5.0%

Low-Finish Rent Growth

1,000 800 600 400

4.8% 5.2%

2,000

5.0% 4.6%

1,500

4.8%

1,000

4.6% 4.4%

500

4.4%

-

4.2% 4.2%

200 (200)

(500) Q1 2015 Q4 Q22015 2015 Q1Q3 2015Q2 Q4 2015 Q1 2016 Q2 2016 Q3Q2 2016 2016 2016 Q3 2016 Q4 2016 Q1 2017 2017 Q4 Q32016 2017

Net Absorption

Contruction

Vacancy Rate

$1.00

1,200 Thousands

$1.10

5.0%

5.4%

2,500

1,400

16%

Rent, year-ago change

Lease Rate (NNN) per sq. ft.

3,000

20%

$1.40

-$0.10 $0.00

Market Absorption & Vacancy Rates

20.0%

Sq. ft., Thousands

$1.50

4.0% 4.0%

Vacancy Rate

Note: CBRE no longer reports an overall industrial asking rate. It now separately reports high-finish rates and low-finish rates. High-finish generally has more office build-out, multiple stories and consists of business park R&D and R&D subtypes. Low-finish has higher clearance, more dock doors and consists of business park industrial, light industrial, manufacturing and warehouse subtypes.

COMMERCIAL REAL ESTATE INSIGHT PROVIDED BY

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Venture Capital Dollars Received in San Diego by Funding Stage

November 2017 VENTURE CAPITAL

•

•

•

$600 $500 Startup/Seed

$400 Millions

•

Venture Capital Dollars Received by Funding Stage

In Q3 2017, the San Diego region saw 24 venture capital deals worth nearly $362 million. This places San Diego ninth out the 19 U.S. regions tracked by the PwC MoneyTree Report in terms of VC dollars and fourteenth in number of deals. VC investment into the region increased 25.1 percent compared to the previous quarter, despite having one less deal. Compared to the same period a year ago, VC investment is up 19.0 percent.

Early Stage Expansion

$300

Later Stage $200

Other

Venture Capital Dollars Received in San Diego by Industry

$100 $0

More than half, or $195.3 million, of the venture capital received in Q3 went to technology companies, for the first time since Q3 2016. VC investment into the technology cluster doubled compared to the previous quarter, with more than 70 percent going to software companies.

Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017

Venture Capital Dollars Received by Sector $600 $500

Expansion stage funding jumped 64 percent to $253.4 million, commanding more than 70 percent of all VC dollars for the quarter. Later stage funding made up 20 percent of the quarter’s total.

Millions

•

$400

Healthcare Technology

$300

Other

$200

The top five deals went to companies in either expansion or later stage funding rounds; three of these are in healthcare. The largest investment was in Brain Corp, a software company developing artificial nervous systems, for $114 million.

$100 $0 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017

Source: PwC/CB Insights MoneyTree™ Report

TOP VENTURE CAPITAL DEALS

$114M

$67M

Brain Corp

Amplyx Pharmaceuticals

Technology

Healthcare

$39M

eFFECTOR Therapeutics Healthcare

$32M

$25M

Sotera Wireless

Venture Capital Investment Trends in San Diego

PatientSafe Solutions

Healthcare

Technology

Source: PwC/CB Insights MoneyTree™ Report, Q3 2017

VENTURE CAPITAL TRENDS Venture Capital Investment Trends $600

45 40

Millions

$500

35

$400

30 25

$300

20

$200

15 10

$100 $0 Q1 2010

5 Q2 2011 Q3 2012 Q4 2013 2015 Venture Venture Capital Capital Investment Investment Activity Activity in San inQ1San Diego Diego Dollars Dollars Invested Invested Dollars Invested (L)

Q2 2016

0 Q3 2017

Number Number of Deals of Number ofDeals Deals (R)

Source: PwC/CB Insights MoneyTree™ Report Note: Data is subject to revision, as VC activity is not always disclosed during the quarter of investment. PwC’s methodolgy can be found here.

$1,400 $1,400 $1,200 $1,200

120 120

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November 2017 CIT Y SPOTLIGHT:

SAN MARCOS

EDC produced a regional profile for the City of San Marcos, detailing the city’s recent demographic, socioeconomic, and economic trends. The profile is a powerful tool for economic development as it provides clarity and insight into San Marcos’ regional strengths, in addition to identifying the fundamental drivers of the local economy. It is clear that the city is an economic powerhouse with a diverse economic base, a highly-educated workforce, and significant growth opportunity.

DEMOGRAPHICS San Marcos has the smallest population along the 78 Corridor, with 93,300 people. Yet, the city’s population has grown by more than 11 percent since 2010, outpacing the other four cities along the Corridor.

93.3K

POPULATION 2016

SOCIOECONOMICS

33.5

MEDIAN AGE 2016

The proportion of people with a bachelor’s degree or higher in the city exceeded 33 percent in 2015, four percentage points shy of the San Diego region and second among the five 78 Corridor cities. Although the city’s median household income is slightly lower than the region’s median, it has grown significantly faster than the region’s.

$66.3K

MEDIAN HOUSEHOLD INCOME 2016

THE ECONOMY

33.2%

BACHELOR’S OR HIGHER 2016

7K+

ACADEMIC PROGRAM COMPLETIONS 2016

San Marcos boasts a robust and diverse economic base. With nearly 40,000 jobs and more than 4,000 businesses, San Marcos is a major player along the 78 Corridor’s economic landscape.

39,100 JOBS 2016

LIVING IN SAN MARCOS

4,075

BUSINESSES 2016

3.7%

UNEMPLOYMENT RATE 2016

San Marcos is the birthplace of San Diego’s most iconic craft beer company, Stone Brewing Co., as well as home to the 78 Corridor’s only university, CSU San Marcos. The city also has ample public space, including 16 community parks and 18 mini parks.

$529K

MEDIAN HOME PRICE 2016

FOR A COPY OF THE PROFILE AND INTERACTIVE DASHBOARD VISIT For more information, please contact our research team: Kirby Brady, Director Eduardo Velasquez, Manager Marcela Alvarez, Coordinator [email protected] | 619-234-8 484 sandiegobusiness.org

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MILES OF MULTI-USE TRAILS

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BREWERIES

2016

2016

San-Marcos.net/demographics San Diego Regional EDC’s mission is to maximize the region’s economic prosperity and global competitiveness.

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