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Tuesday, Feb 7, 2023
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Zone Expansion Brings Business Opportunities

Economic development leaders are counting on the newly expanded San Diego Regional Enterprise Zone to bring more job-creating manufacturing firms to the area, following in the footsteps of companies such as Soitec, Alliant Techsystems Inc., Kyocera and Shire Regenerative Medicine.

The regional zone, one of 42 in California, lets companies claim state tax credits for wages paid to new workers and for purchases of certain manufacturing, communications and data processing equipment.

Local experts say the state’s recent move to add hundreds of acres to the existing zone, first established in 2006, will help attract new firms and also give current businesses incentives to add workers in eligible areas within San Diego, Chula Vista and National City.

In San Diego, that now includes major industrial submarkets north of Interstate 8 that weren’t previously in the zone, including portions of Rancho Bernardo, Kearny Mesa, Sorrento Mesa and Mira Mesa.

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Brendan Foote, senior vice president of tax credit services at brokerage firm Hughes Marino in San Diego, said the zone expansion could help bring new tenants, and expansions by existing tenants, at older industrial properties that otherwise have struggled to compete.

A Competitive Edge

It also gives the local region another tool to vie with other counties and other states for employers. “It’s an extremely competitive process,” Foote said. “All of these other communities are beefing up their incentive packages.”

Foote said the bulk of companies taking advantage of California’s enterprise zone program have historically been Fortune 500 and Fortune 1,000 companies looking to expand.

However, more recently the hiring credits — which can exceed $34,000 per employee over a five-year period — and other equipment-related incentives have helped smaller companies locate in places like downtown San Diego. For instance, Foote said the credits can be used to offset certain additional overhead costs that a company encounters when locating downtown, for items like parking and rent.

Nelson Ackerly, senior leasing director in the San Diego office of Irvine Co., the region’s largest office landlord, said the company in recent months has gained at least three new downtown tenants based largely on the enterprise zone tax credits — a software company, a law firm and an accounting firm.

While the prior version of the local zone had been in place for five years, Ackerly said its profile among small and medium-sized businesses has just perked up within the last six months. “For a long time, many people were just unaware that office high-rises downtown were in the existing San Diego enterprise zone,” he said.

Lydia Moreno, business incentives program manager with the City of San Diego, said the city in recent months has stepped up efforts to raise awareness, making group presentations on the enterprise zone to landlords, commercial brokers and others who deal regularly with tenants and property buyers.

The zone’s profile has risen with recent industrial expansions in San Diego, which city officials attribute to local commitments to expand the areas eligible for tax credits.

Russ Gibbon, a business development manager with the city, said the future availability of tax credits were crucial in location decisions by Kyocera in Kearny Mesa, Alliant Techsystems in Mira Mesa, Shire in Sorrento Mesa and Soitec in Rancho Bernardo.

San Diego city officials said the enterprise zone played a role in all four companies’ decisions to choose the local region for new locations or expansions, beating out Utah, Arizona and Massachusetts. The city said the four firms’ total investment in the region is approximately $312 million, with 866 mostly middle-income manufacturing jobs either already added or set to be created.

The state Housing and Community Development Department also approved zone expansions in National City and Chula Vista.

Craig Ruiz, principal economic development specialist with the City of Chula Vista, said 600 acres were added in that city. That included portions of Otay Ranch Town Center, Eastlake Business Park, and properties on the eastern side of Interstate 805, including the auto park.

“It adds 950 existing businesses that can take advantage of this moving forward,” Ruiz said.

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