HomeMy WebLinkAbout2024-09-24; Economic Development Subcommittee; 02; Economic Development Strategic Actions UpdateMeeting Date: Sept. 24, 2024
To: Economic Development Subcommittee
From: Matt Sanford, Economic Development Director
Staff Contact: Matt Sanford, Economic Development Director
matt.sanford@carlsbadca.gov, 442-339-5987
Subject: Economic Development Strategic Actions Update
Recommended Action Receive an informational report on the implementation of current economic development strategic
actions, discuss and provide recommendations.
Executive Summary
The Economic Development Strategic Plan is a roadmap that guides the city’s economic
development activities over a five-year period beginning in 2023. The Economic Development
Strategic Actions Plan is the annual implementation of the tactical steps to achieve the goals and
objectives of the Economic Development Strategic Plan and outlines the tactical actions that are
taken to achieve its goals and objectives. This report provides an update on economic development
activities and the implementation of the approved strategic actions.
Explanation and Analysis
Current Trends
Staff have been closely monitoring an uptick in commercial vacancy rates across retail, industrial,
and office properties. After consulting with several commercial real estate brokers who specialize in
the North County market, there is optimism regarding the long-term forecast. However, most
predict another 12–18 months of instability before the area sees consistent market absorption.
There are several contributing factors to the anticipated bumpy road ahead.
The high cost of borrowing and tight lending conditions are creating challenges for both new
entrants and existing businesses looking to expand. Higher interest rates have made it difficult for
companies to secure the capital needed for expansion, investment in new spaces, or even
maintaining operations in the short term. For landlords, this has led to a slowdown in property
improvements and new developments, further affecting the attractiveness and competitiveness of
commercial real estate in the region. While there is optimism that capital markets will loosen rapidly
as interest rates come down, it is uncertain how long it will take to shift commercial real estate
conditions in Carlsbad.
The shift toward hybrid and remote work arrangements is also having an impact as it has reshaped
the office real estate landscape. Many companies have embraced remote or flexible working
environments, leading to a reduction in demand for large office spaces. This downsizing trend is
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impacting the office segment as businesses seek to consolidate their operations or move to smaller,
more cost-effective locations. While Carlsbad’s office vacancy rates remain relatively low compared
to regional benchmarks, staff continue to watch this shift as it may influence future development
patterns and corporate relocations. Staff will explore strategies to promote existing space as these
trends continue.
Despite the elevated vacancy rates in both the industrial and office sectors, these levels are still
indicative of a healthy economy. Carlsbad continues to attract interest from businesses looking to
relocate or expand in the region. Staff are actively monitoring these trends and are prepared to
engage more aggressively with potential new entrants to fill vacant spaces.
In the retail segment, increases in rental rates are pushing some tenants out of the market. For
several years, Carlsbad’s retail spaces had rents that were below market rate, as many landlords
chose to maintain consistent rates during the pandemic to retain tenants. However, as leases are
now expiring, property owners are rapidly raising rents to at or above market rates, which has
created a financial shock for some tenants. This, coupled with broader economic pressures, has led
to the closure of several small businesses in Carlsbad and may continue to have an impact.
Some retail spaces, especially in the Village area, are located in older buildings that don’t meet the
needs of today's retail tenants. However, the rental rates for these spaces are increasing as if they
were modern, updated properties. Many businesses are now looking for newer, more attractive
spaces that offer the design and functionality to draw in more customers and enhance the shopping
experience.
One potential solution to revitalize these aging retail properties and attract new tenants could be a
Façade Improvement Program. A program of this nature would provide property owners with
financial assistance or incentives to upgrade the exterior appearance of their buildings, enhancing
the curb appeal of retail districts. Improved façades not only create a more attractive environment
for consumers but also help businesses by drawing in more foot traffic, increasing property values,
and enhancing the overall vitality of commercial corridors. Such a program could be crafted to help
reinvigorate Carlsbad’s retail segment by making the city more competitive and supportive of small
businesses that have been impacted by rising rents and shifting consumer behavior.
Stabilizing Core Economic Development Systems
Staff have completed a review of the capabilities and capacity of the Economic Development
Department. Since 2020, the department rapidly expanded programming to support Carlsbad
businesses, particularly in response to the pandemic and subsequent economic uncertainty. During
that period, staff acted swiftly to ensure businesses received the help they needed when they
needed it.
Now, with a staff realignment and clearer direction from the economic development strategic plan,
the focus has shifted to stabilizing and strengthening the programs and systems developed over the
past four years, while maintaining the capacity for the actions called out for the current fiscal year.
This stabilization will improve project tracking, enable more comprehensive reporting, and allow for
more timely data analysis. Additionally, by optimizing technology platforms, staff will be better
equipped to assist businesses in finding the resources they need and executing the actions called out
in the economic development strategic plan.
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Progress on Current Actions
The following are recent highlights from the implementation of the Economic Development Strategic
Plan and reflect progress toward the approved actions.
Cybersecurity Awareness
In conjunction with the San Diego Cyber Center of Excellence and Carlsbad Chamber of
Commerce, the city has continued to support the cybersecurity awareness program for
businesses. Now, more than 115 small businesses have participated in training workshops.
Intern Housing
The first group of North County summer interns to participate in the CSU San Marcos intern
housing program has completed their summer internships. This program allowed Carlsbad
employers to lease underutilized student housing during the summer months for their interns.
Utilization increased by 300% compared to previous years, thanks to extensive outreach efforts
targeting North County businesses. Over the summer, two enrichment events were held for
interns to help them acclimate to the region and gain a better understanding of local living and
career opportunities. Staff continue to collaborate with the San Diego North EDC to improve the
program and expand outreach to more businesses that could benefit from it.
Business Visits
Staff recently coordinated a site visit to Quidel Ortho to gain a better understanding of the
company’s operations in Carlsbad. The company opened its Carlsbad facility in 2021 as it ramped
up manufacturing of COVID-19 test kit products. Now that the demand for those products has
decreased, the company is moving other product manufacturing lines to the facility from other
parts of the country and the world. This means that the Carlsbad site will remain an integral part
of the company’s operations and growth plan. As a result of the meeting, staff connected the
Quidel Ortho team to several resources that could help with their growth plan.
Site visits allow staff, city leadership, and council members to become better acquainted with
the businesses and operations that contribute to Carlsbad’s economy. The next site visit will be
to the Omni La Costa Resort and Spa, to learn about the importance of the tourism economy and
get a behind-the-scenes look at what goes into booking group business.
Industry Discussions
Staff have been actively convening industry stakeholders, rotating through each of Carlsbad’s key
industries to foster collaboration and create a dynamic ecosystem of activity. The convenings
started out small, attracting six to ten participants from the industry. Now, each month, 40-60
leaders from a key industry, ranging from large companies to small startups, gather to network,
discuss trends, challenges, and opportunities. These discussions are designed to build connections,
share insights, and identify collaborative opportunities that can drive growth and innovation
across the city's business landscape. Additionally, these gatherings allow participants to tour the
host business, gaining firsthand insights into their operations.
In July, leaders from Carlsbad’s cleantech industry met at Aptera, the solar-powered electric vehicle
company, providing valuable exposure to cutting-edge sustainable technology. In August, life
sciences leaders gathered at Thermo Fisher, Carlsbad’s largest life sciences company, where they
explored innovations in biotech and medical research. In September, Carlsbad tech leaders met at
ShipCalm, a fulfillment and logistics company, benefiting from insights into streamlined operations
and the latest in tech-driven supply chain solutions.
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Fiscal Analysis
This action has no financial impact.
Next Steps
Staff will continue to implement the Economic Development Strategic Plan actions for fiscal year
2024-25 and will keep the subcommittee informed of progress.
Exhibit
None
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