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Tech and Biotech Firms Lead the Office Space Race

Growing biotech and technology companies were among the hungriest users of San Diego County commercial real estate during the past five years, together accounting for nearly 70 percent of the region’s office space absorption, according to recently released data from the brokerage firm Jones Lang LaSalle.

The 34 percent (1.4 million square feet) of overall new space taken up by technology firms, and 35 percent by biotech firms (1.5 million square feet) both far outpaced the share taken up by engineering firms (9 percent), law firms (9 percent) and financial services companies (12 percent) from 2007 to 2011.

Grant Schoneman, a San Diego vice president with JLL, said demand for research and development space is especially being seen in areas such as biopharmaceuticals and biofuels. Growth is being driven by a rise in venture funding, and financial partnerships that have given some small local firms big infusions from major global players.

Recruiting Tool

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“Recruiting is getting more competitive,” Schoneman said. “Some of these companies are looking to get into top-notch facilities to recruit talent.”

Companies recently bolstering their local footprints have included Celgene Corp. (172,000 square feet), Verenium Corp. (59,000 square feet), Biocept (48,000 square feet), Optimer Pharmaceuticals Inc. (46,000 square feet) and Synthetic Genomics Inc. (25,000 square feet). Ambrx Inc., which last fall received $24 million in milestone funding from Bristol Myers-Squibb Co., recently boosted its local presence by 36,000 square feet.

JLL Managing Director Jay Alexander said biotech and other tech-oriented firms, including those involved in areas such as wireless telecom, mobile apps and defense technology, are drawn to Class A facilities with campuslike settings, plenty of parking and open space plans that de-emphasize private offices.

“They’re trying to encourage workers to come into the office and collaborate,” Alexander said, despite technology that increasingly enables people to work from home.

The choice spots — in submarkets such as Torrey Pines, Sorrento Mesa and Rancho Bernardo — are dwindling for those tech-oriented firms seeking more than 50,000 square feet of new space, which is creating some compression in the Class B segment, Alexander said.

At a recent Carmel Valley forum presented by the local chapter of NAIOP, formerly known as the National Association of Industrial and Office Properties, experts said several growing business sectors have recently upped their profiles as local space occupiers.

Thirst for More Space

They range from high-tech firms creating wireless health monitoring systems and unmanned military aircraft, to those involved in clean technologies and the relatively low-tech but increasingly popular world of craft beer brewing.

Northrop Grumman Corp., for instance, currently employs 4,000 people at several buildings in Kearny Mesa and Rancho Bernardo. Jim Zortman, a local senior vice president with the defense contractor, noted that in coming years, demand for workers and space could rise as the technology powering its “intelligent” aerial drones is adapted by other commercial industries.

As issues such as consumer privacy are resolved, those could range from package shippers, to insurance companies surveying damage from natural disasters, Zortman said.

The same demand could result locally as health care continues to meld with high technology, said Tom Watlington, CEO of Sotera Wireless, which currently employs 65 at its Mira Mesa facility.

Sotera’s products include a wrist device that employs wireless technology to monitor medical vital signs remotely. Watlington said access to top local universities and research centers — and prominent tech firms like Qualcomm Inc., an investor in Sotera — should help companies like his with the challenging task of recruiting top engineering talent.

Rent and tenant-improvement incentives from landlords could also help these young and cutting-edge companies expand or find spaces suited to their needs. “We provide good wages, and hopefully we’re good tenants,” Watlington said.

Tomme Arthur, president of Port Brewing Co., said the company is on the verge of outgrowing its space in San Marcos, and scouting the region for places to expand operations. That’s recently been a familiar story for growing rivals, such as Stone Brewing Co. of Escondido.

Arthur said San Diego companies are well poised to capitalize on a national climate in which mass-production beer brewers saw their market share drop 1 percent last year, while the craft beer share rose 15 percent.

“For craft beer the future is very bright,” Arthur said.

Jim Waring, president and CEO of CleanTech San Diego, said the region can expand on efforts to promote the larger San Diego-Imperial-Baja California region, which have already encouraged some energy-related firms to boost their local presence.

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