Q2 2012 San Diego, California Commercial Real Estate Economy

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Q2 2012 San Diego, California Commercial Real Estate Economy

San Diego has made it to the mid-point of 2012 in fairly good economic shape. Total non-farm employment is up 22,200 jobs (1.8%) in the 12 months ending in June 2012, according to Current Employment Survey (CES) data provided by the U.S. Bureau of Labor Statistics (BLS). This is a substantial 12-month increase, and indicative of a generally positive employment picture. There were big winners and losers across the employment spectrum, CES data indicate. Construction strongly reversed a falling trend seen earlier in the year and gained 2,300 jobs (4.2%). Manufacturing continued to fall, losing 1,600 jobs (1.7%). Total private employment was up by 24,700 jobs (2.5%) in the 12 months ending in June.

So where, exactly, does San Diego stand in the middle of 2012? According to the 2012-2013 Mid-Year Economic forecast by the Los Angeles County Economic Development Corporation (LAEDC), “The outlook for San Diego County for the second half of 2012 is for continued, though moderate expansion. Employment is improving, tourists have returned and many of the county’s key industries are growing again. Some important sectors continue to lag. Housing and new construction are getting better but have a ways to go before they are fully recovered.” This source notes that “The region is a thriving hub for the biotech and telecommunications industries. San Diego also has a significant high tech manufacturing sector and is a popular travel destination. While the military’s presence has diminished over the past two decades, it remains an important driver of the region’s economy.”

The city’s exposure to cuts in aerospace and defense-related activity was underlined in a July story published by the Union-Tribune, citing an analysis commissioned by the Aerospace Industries Association It “examines the potential economic impact of the Budget Control Act of 2011 and the process called ‘sequestration,’ in which $1.2 trillion in spending cuts will take place over 10 years, should Congress fail to act.” The report determined that about 16% of California’s anticipated job losses—about 36,000 jobs—would take place in San Diego. “Defense contractors will be hit the hardest, more so than uniformed military,” the report stated. As grim as that may sound, sequestration may not in fact take place.

In its stead, some sources see improvement for the rest of 2012. “San Diego County’s economy should continue to grow through 2012, picking up speed by the end of the year,” according to a study released at the end of May by the University of San Diego. “The study, called the Burnham-Moore Center for Real Estate’s Leading Economic Indicators, shows the county economy grew by 0.9% in March. That means there was some solid expansion in categories like job creation, production of goods and services, and consumer spending. A change of 1% shows solid growth,” according to the study’s authors. An earlier forecast by the UCLA Anderson Forecast, as cited by the Union Tribune, was more cautious. The city was not “out of the woods” in terms of economics and employment according to Anderson, but is well-positioned in terms of high-tech and tourism to weather the current economic storm.

To an extent, the mixed outlook is reflected in the current sector employment figures. Wholesale Trade employment is down 2,500 jobs (6.1%), while Retail Trade employment is up 5,200 jobs (4.0%). Transportation and Utilities is up a slight 800 jobs, (3.1%) most of which is accounted for in the gain of 700 jobs (3.8%) in the Transportation and Warehousing division of that sector. The Information sector, which ranges from publishing and motion pictures to data processing, saw a decline of 300 jobs (1.3%) in the 12 months ending in June. Professional and Business Services, which includes the bellwether Employment Services industry, increased by a notable 7,100 jobs (3.4%). This increase was weighted toward the Professional, Scientific and Technical services part of this sector, which saw 4,500 jobs (3.8%) added. Employment in the substantially government-funded Education and Health Services sector increased by 6,000 jobs (4.1%). And in a nod to San Diego’s tourism industry, Leisure and Hospitality employment is up 5,200 jobs (3.3%).