San Diego’s Innovation Economy, and What it Takes to Recruit “The Young and Restless”
As the chief operating officer of the San Diego Regional Economic Development Corp. (EDC), Lauree Sahba says, “Our region’s future as a technology center of excellence depends on our ability to attract and retain the next generation of innovators and young talent.”
Yet Sahba frets that the renowned research institutions and balmy weather that drew the last generation of entrepreneurs to San Diego in the 1970s and ’80s may no longer be enough. The demographics are changing for a highly prized segment of the exponential economy—the well-educated, hard-working, and entrepreneurial adults who are 25 to 34 years old.
Portland economist Joe Cortright calls them “the young and the restless.” With their college and graduate degrees mostly behind them, the young and the restless are in their prime years of mobility. They have the greatest freedom to relocate. But Cortright says the suburban amenities that once made San Diego a kind of idyllic destination a few decades ago are not what the newest crop of the best and brightest are looking for nowadays. And a dream job offer isn’t necessarily enough to make them move either.
As an advisor to CEOs for Cities and president of Portland-based Impresa Consulting, Cortright has studied the issue extensively, including a 2005 study looking at the cities where young and talented people are working and why. He sees many correlations between cities that attract young talent and a region’s overall economic prosperity, which he calls “Qwertynomics” because such economies are linked to the young knowledge workers who type on Qwerty keyboards.
“Young adults are under no illusions that they’re going to work at one company for their entire career,” Cortright told me during a recent visit to San Diego, where he met with more than 100 local business and community leaders to discuss his work, and what it takes to recruit young talent these days. His visit was arranged by the EDC and the Equinox Center, a nonprofit group in Encinitas, CA, that is focused on balancing the environment and the economy, and on improving the quality of life in San Diego. (Personal disclosure: I’ve been volunteering occasionaly at the Equinox Center.)
Today, settling into the right kind of place is at the top of their list of priorities, Cortright says. Then they look for work. “This age group tends to be really interested in quality of life, and what I call the new urbanist bullet points,” Cortright says. They realize that they won’t hold one job for the rest of their lives, so these young workers want to live where they can rely on their network of peers to find another job—and where technology clusters provide an abundance of jobs requiring similar knowledge and skills.
That means San Diego’s life sciences sector, with close to 600 biotech and medical device companies (not to mention scores of biomedical research centers), should continue to serve as a magnet for young biologists, chemists, and other life sciences workers. But San Diego’s struggling software sector, with its paucity of capital and disconnected islands of expertise, could be a different story.
“It’s fairly difficult to get something started when you don’t have the critical mass,” says Cortright. And unlike the lumber or steel industries, Cortright says, IT and communications workers can live just about anywhere.
Compounding the challenges for the software sector in San Diego are what Cortright calls his urbanist bullet points—the community characteristics and amenities that talented young and restless workers are looking for in a city these days. For example:
—Young, educated workers are increasingly shunning the suburbs to live closer to downtown, particularly in urban neighborhoods within a 3-mile radius of the urban core. They like neighborhoods that feature a mix of different types of housing and an interesting mix of local shops, restaurants, and bars.
—They are driving less and tend to view automobile ownership as costly and impractical. They increasingly prefer “walkable” and “bikable” neighborhoods with convenient mass transit options. (Housing affordability has become a key factor in this trend, Cortright says.)
—They look for neighborhoods with income, ethnic, and social diversity. They view diversity as a characteristic that makes a place more interesting.
Cortright says these emerging themes are supported by evidence from the census and other sources. For example:
—In 1980, young adults were about 10 percent more likely to live in an urban center than a suburban area. That preference increased to 12 percent in 1990, 29 percent in 2000, and was 42 percent in 2010.
—In 2000, 44 percent of the residents in neighborhoods within three miles of the urban core had four-year college degrees, compared with 31 percent of the residents in the overall metropolitan area. By 2009, 53 percent of the residents in close-in urban neighborhoods had four-year degrees, while 34 percent of the metro population had college degrees. “It used to be the case that the suburbs were the better-educated,” Cortright says.
—The Detroit metropolitan area has been losing its population since 2000, but the population of the city’s urban core has been growing.
One of the key challenges for many cities has been housing affordability. Last month, the median price for all types of homes in San Diego was $320,000, according to DataQuick, which tracks residential real estate trends. That’s down substantially from San Diego’s peak median home price of $517,500 in November, 2005. Even so, only about 64 percent of San Diego households can afford to buy an entry-level home in San Diego, according to the California Association of Realtors housing affordability index.
“Metro areas with the highest housing affordability [ratings] are just hemorrhaging young adults,” Cortright says. So the challenge turns on the question of whether communities can build the kind of housing that young adults will find affordable. Building multi-family housing near the urban core in neighborhoods that are walkable, bikable, and with nearby public transit makes it possible for young adults to give up their cars—and apply the income that would have gone to car payments instead to their monthly mortgage payments.
“San Diego is never going to have cheap housing,” Cortright says, “and I think the way you compensate for that is to have this package of amenities that attract young people.”
Still, it takes time to apply these lessons to urban planning and development. In the meantime, Cortright says San Diego’s economic development is being drive by the ability of human resources departments at big companies to attract young, talented workers—“and it’s not by who has the cheapest tilt-up concrete buildings in an industrial park.”
It reminds me of a conversation I had recently with Active Network CEO Dave Alberga, who says it has been a challenge for the Web-based media and events company to recruit talented executives, because they tend to view a job offer in San Diego as a “two-step” move.
A two-step move?
The first move, Alberga explained, occurs when an executive has to uproot his or her family to move to San Diego for a new job. If the job doesn’t work out, however, the scarcity of other Internet companies in San Diego would make it harder to find another job in the same locale. So the second step comes when the executive has to uproot the family a second time to move out of San Diego for a job in another city.
In this respect, Cortright says San Diego has plenty of competition.