San Diego’s Economy on Solid Footing

June 30, 2022

Per Virtual Economic Forum Hosted by Torrey Pines Bank in Spring 2022

California’s economy is bouncing back from the pandemic — a fact that’s evident in San Diego. 

Even though inflation is reaching levels not seen since the 1980s, it’s consumer spending that’s driving costs up. 

“People are out, they’re enjoying their lives again (as the pandemic recedes), and San Diego’s economy is on fire,” economist Christopher Thornberg said at a virtual economic forum hosted by Torrey Pines Bank and reported in The San Diego Union-Tribune. “The only major issue in San Diego is the issue — also that California is facing — of the lack of workers, driven by the lack of housing.”

But the problems are not insurmountable, Thornberg noted. Federal Reserve rate hikes and unsnarling the supply chain are expected to reduce the rate of price increases, which means California’s economy will be more robust than ever.

“Based on our long-term understanding of the Southern California business landscape and our wide variety of expertise, we pride ourselves on being able to support our clients and help them achieve their business goals in any economic landscape,” Torrey Pines Bank Division CEO John Maguire said.

Job Growth

Employment growth in Southern California was better in 2021 than originally estimated, and San Diego has seen a quicker recovery than other areas. 

As of February, unemployment was 1.7% below its pre-recession peak, compared to Los Angeles and Orange counties where it was down 3.1% and 3.5%, respectively.

The dearth of workers is expected to slow the pace of job growth, but the unemployment rate is closer to its 2019 average when it was drawing from a limited labor pool. The unemployment rate in San Diego is just one percentage point above its 2019 average.

Housing

The housing market in all parts of the country was on fire during the pandemic largely because of declining interest rates and homebuyers’ demand for larger living space as they shifted to working from home.

Sales of all property types in San Diego County increased 23.5% year-over-year in 2021 — the fastest rate of increase in nearly 25 years. 

But housing supply isn’t keeping up with demand, which is causing excessive price appreciation. Home prices were up 14.6% in San Diego. As interest rates rise, real estate prices should level off and sales will slow. 

While rising interest rates should keep housing prices from rising too much and slow the pace of sales, limited inventory will keep prices from dropping.

Commercial Real Estate

San Diego’s commercial real estate market is faring better than other parts of Southern California. Non-residential permits issued were up 21.3% because of an uptick in office and industrial projects. 

The trend toward remote work will continue to impact San Diego’s office market, and the construction industry is likely to see more of its work come from renovations and additions to its clients’ spaces. 

While warehousing and delivery services were already robust before COVID-19 swept across the globe, the pandemic created even more demand for e-commerce, fueling growth of 217.8% in San Diego’s industrial market in 2021.

For more great insights about the Southern California market and how we can help your business find advantage in every economic climate, reach out to your relationship manager at Torrey Pines Bank.

If you are interested in viewing the slides from the presentation, click here.

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