He’s the go-to guy on all things economic in San Diego and the source that we call when we need a “shot of Gin” for our real estate and economy stories. But what does Alan Gin, a professor of economics at the University of San Diego’s Burnham-Moores Center for Real Estate, really think about how the economy of his adopted hometown of San Diego is faring?
We sat down with Gin for a quick chat about jobs, housing, imports, exports, manufacturing and tourism, airports and border crossings and all other things economic.
San Diego’s economy is strong, but who is benefiting?
There are a couple of areas that are particularly strong. If you look since 1997, people who have owned real estate in San Diego have done pretty well. Things are cooling off a little bit in the last year or two as interest rates have risen, but if you’ve been here for a little while, you’ve done pretty well, your assets are much higher than they were a few years ago.
The tourism industry has done particularly well. We’ve had a lot of visitors coming to San Diego both for recreation and for business purposes – conventions, things along those lines, so that industry has been strong. Unfortunately, some people think that’s a negative, because those jobs aren’t the greatest paying.
Going back to real estate, people working in construction have done really well – we’ve had strong growth in terms of construction employment.
And, a trend that we’ve seen in the last year is we’re finally getting some pick-up in terms of white-collar jobs. The job category called business and professional services has shown pretty good job growth.
What do you think is driving that?
It’s hard to say. Some of it is real estate related, in terms of architects, engineers, things along those lines. It’s just the strong diversification of San Diego’s economy that has led to that.
What kind of jobs are we adding to the economy and what does that mean in the long-run?
We’ve got a mixture of jobs. For a while there, the jobs created were the low-paying jobs, retailing, hotel, restaurant work, that sort of thing, and that would be a worry, if we had a large concentration in those areas, given the high housing costs that we have here in San Diego, and the high cost of living in those areas as well.
But, again, since the end of 2004, we’ve seen a pick up in these business and professional jobs. Those are the legal service, your lawyers, your architects, engineering professions, that’s good, that’s good news. As far as San Diego’s concerned, the big question is can we sustain those?
What aspect of San Diego’s infrastructure is most vital to a healthy local economy:
b. Public transportation and roads; or
c. Ports of entry (the border, ocean ports, the airport).
I’d say it’s the latter, the ports of entry.
San Diego’s never been a great manufacturing center and one of the reasons is that the ports of entry have always been weak. We haven’t had a good port facility – a lot of the waterfront has been dominated by the Navy. And with the airport, everyone knows the problems we have with the short, single runway at Lindbergh Field. Because of those two developments, there’s not been a lot of shipping out of San Diego, and as a result, manufacturers have not located here
What’s your theory on the housing bubble in San Diego? Are we headed for a bubble burst or a soft landing?
I’m in the soft-landing camp. I think without a major recession which involves a lot of job loss here, then you’re not going to get a popping of the real estate bubble. You’re going to need people to be desperate and to engage in a lot of distressed selling for prices to come down significantly.
We’ll see an easing. We won’t see rapid growth. There might be a slight decline, but you’re talking (if the bubble bursts) in the 10-20 percent range, and that’s going to take more than we have now.
How does downtown San Diego attract the “bright young things” it needs to attract a diverse range of companies to downtown?
It’s tough, it’s tough. The economic forces are working against that. The downtown, the concept of the downtown, was created in the days when communication and transportation technology was relatively primitive and people had to locate near to each other to have face-to-face contact and to pass off documents and things like that. These days, with e-mails and faxes, with video conferencing, things along those lines, the proximity is just not as necessary any more.
So businesses are wanting cheaper locations, in the suburbs, more pleasant environments where you don’t have the hassle of a commute downtown. So that makes it tough.
Do you think San Diego does enough to form alliances with companies and academic institutions across the border in Mexico?
As an academic, probably not enough is being done on the academic side. I think the public officials in San Diego have made good efforts to make contact, make connections with their counterparts across the border, but probably more could be done.
How important is cross-border trade and cooperation to the future of San Diego’s economy?
It has some importance. A lot of Mexican customers cross the border to shop in San Diego’s stores, so that gives a boost to the local economy, particularly at the retail level. But, given our location, particularly in this cul-de-sac here above Baja California, we’re sort of out of the way of the main trade from Mexico, which is located further inland, north of the industrial locus of activity in Mexico.
Is the drain of companies to cheaper states like Nevada and Arizona a long-term crisis in the making for San Diego, and how do we keep companies in San Diego?
It’s a little bit of a worry. San Diego’s at a competitive disadvantage for companies that are looking for low-cost areas to do business. Land costs are high, housing costs are high, it’s difficult to attract employees. If you attract employees, you have to pay them higher wages, and that makes firms not as competitive.
What we have to do is we have to focus in on those areas where cost considerations are less of a concern and lifestyle choices are more permanent. For example, bio-technology and technology areas. The entrepreneurs in those areas tend to have an orientation to places with a lot of amenities, and we definitely have that. We can offer them a lifestyle that they are interested in.
While they’re in the research and development phase, that’s not a big problem. The problem is that once you go to manufacturing and building stuff, you probably want to do it at the lowest cost possible, and it’s a tough situation here.
How important is a sustained military presence in town for San Diego’s economy?
It’s not as important as it was, but it helps in that it provides a buffer for San Diego in hard times. When the business cycle is down, the military is still going to be spending money on personnel. It’s still going to be spending money on defense manufacturing, it’s still going to be spending money on retirement – there’s a huge retirement community.
That’s a flow of money into San Diego, even when the rest of the economy is not doing so well that provides some counter-cyclical support to our economy.
– Interview by WILL CARLESS