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During World War II, San Diego was home to U.S. Pacific Fleet. After the war, the concentration of military installations gave rise to the city's aerospace and technology industries. With the downsizing of defense expenditures in the late 1980s, San Diego City officials looked into diversifying the area's economic base.
"Biotech was just getting under way in San Diego," says Joseph Panetta, president of BIOCOM, the regional development association for the life sciences industries in San Diego County. "We moved out of defense and developed a strength in medical research. Entrepreneurs were attracted, and it really began to take off in the early 1990s."
Drawn by four major research institutions -- The University of California, San Diego; The Scripps Research Institute; The Salk Institute; and the Burnham Institute -- 401 biomedical companies call San Diego home. Fifty-five percent of these firms specialize in the research and development of medical devices or diagnostics, with 39 percent engaged in biotechnical and pharmaceutical research and development.
Funding for research and development is also a big ticket in the San Diego area. The University of California San Diego ranks third in the nation in the amount of federal research dollars. In 1999, UCSD received US$351 million in funding. In 1998, San Diego area firms received more than $470 million in grants from the National Institutes of Health, making the area nine times the national average in NIH grants. This research and development is the impetus for many spin-off companies and commercialization.
"Companies are attracted to the area because they get access to such an enormous research community," says Panetta. "Research breeds more research." The biomedical community of San Diego invested more than $800 million in 1998 developing new products. Typically a San Diego biomedical firm invests 42 percent of its operating budget on research and development.
Meeting the demand for talented labor is foremost in the minds of city and business leaders. Roughly 7 percent of the San Diego area's biotech work force is on an H-1B visa. "Almost universally," says Julie Meier Wright, president and CEO of San Diego Regional Economic Development Corporation, "technology CEOs say that finding enough qualified workers is their biggest challenge. They are in a war for talent."
The San Diego Science Alliance (SDSA) was formed by 200 technology businesses, local research institutions and professional education organizations within the county to foster sciences. Since 1994, the program has assisted local schools in developing science-related education programs. SDSA sponsors a High-Tech Fair for high school science and mathematics students. The group also participates in bringing scientists into the elementary classrooms as visitors and partners for science instruction. This PICES (Partnerships Involving the Scientific Community in Elementary Schools) program has also received grants from the National Science Foundation and Hewlett Packard Foundation.
The hope of the SDSA and other science-minded organizations is that the San Diego area will grow talented workers in its own school system. Business leaders agree that even in the economic slow down the competition for tech talent remains fierce. "It takes the talent and attention of an entire community," says Meier Wright, "and clear action plans to develop a highly educated, tech-literate pool of workers."
San Diego officials also agree that fueling growth in the biomedical and technical fields will take both available water and power. City officials are watching the California energy crisis carefully. "We recognize that biotech, electronics, telecommunications, software, and space and defense industries are all heavily energy dependent," says Meier Wright. "Not only do many companies have limited ability to dramatically reduce their need for power; they must have highly reliable power."
The San Diego area sits in a desert region, and water is a precious commodity. Locally, the area averages only nine inches of rain. BIOCOM was originally formed to assure biotech industries would have adequate access to water. "That's of great concern," says Panetta, "because the processes to do fermentation and research require quite a bit of water."
Business leaders are looking ahead and addressing future needs of the area. Under pressure from BIOCOM and business leaders, UCSD and San Diego State University are offering more biomedical degree programs. City leaders are also addressing transportation issues. A feasibility study has been commissioned for a high-tech manufacturing park for cutting-edge biomedical and high-tech products.
High-tech expansions up the I-5 and I-15 corridors continue in the San Diego area. Computer giant, Gateway, announced in April plans to move from three office buildings in San Diego to a single facility in Poway. Company officials say they will save approximately $140 million over a ten-year period by moving to the North County area. More than 500 employees are expected to make the move. "Having Gateway locate here is an affirmation of the efforts of the City Council to make the South Poway Business Park successful," says City Manager Jim Bowersox.
According to Colliers, County vacancy rates for office space were at 5.63 percent at the end of last year. Rental lease rates for high-tech and research and development space have been averaging approximately $1.19 per sq. ft. on a triple net basis per month. Gone are the days of rental concessions such as free rent and extras like T-1s.
The La Jolla Institute for Experimental Medicine announced in December a new 21,000-sq. ft. (2,508-sq. m.) medical research office building. The Scripps Institute will occupy 76,894 sq. ft. (7,143 sq. m.) of space in La Jolla. Encinitas will be the home of the new Paul Ecke Ranch. The company will build a $27 million agricultural research facility. International Specialty Products is building a $2.3 million chemical research and development facility in San Diego.
-- Ginny Deal
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