Key companies, business issues and trends to watch in San Diego County in 2019.
1. Mission Valley stadium site
In January, San Diego State University will begin negotiations with the mayor’s office to buy 132 acres of land in Mission Valley with plans to build a new stadium, river park and western campus. The land sale is the only part of the university’s redevelopment process where the city can dictate the terms, and, as such, will be heavily scrutinized. SDSU is only required to pay a sum deemed “fair and equitable and in the public interest,” per the terms of the ballot measure approved by voters in November. What that amounts to is anyone’s guess since the city can discount the property based on factors such as stadium demolition costs or site contamination. The site, currently home to SDCCU stadium, is thought to be one of the city’s most valuable assets, meaning taxpayers, council members and armchair quarterbacks will likely butt heads over whether the city should maximize its return or give the public institution a deal.
2. Qualcomm’s legal battles
For the better part of two years Qualcomm has been mired in bitter legal battles with Apple and antitrust regulators. These conflicts are expected to come to head in 2019, and there a lot riding on the outcomes. The U.S. Federal Trade Commission’s anti-monopoly case against Qualcomm is slated to go to trial on Jan. 4 in a San Jose federal court. It will be followed on April 15 with a legal showdown with Apple and contract manufacturers that build iPhones in San Diego federal court, where literally billions of dollars are at stake.
3. Jack in the Box
It is no secret that fast-food is a cutthroat industry. Jack in the Box has been under pressure recently from a group of franchisees who want a change in management and a larger spending commitment for marketing. The San Diego company also has a couple activist investors taking stakes in the company, and it reportedly is examining strategic alternatives that could include a sale. Will the restaurant chain find a buyer and go private next year, or will it figure out a way to make peace with franchisees and activist shareholders? Next year promises to be a pivotal year for Jack.
4. The Campus at Horton
Real estate investment firm Stockdale Capital Partners purchased downtown’s 33-year-old retail hub Horton Plaza in August for $175 million with grand plans to transform it into an office campus for premier technology firms — and do so in around two years. That timeline will be put to the test in early 2019 as the developer must first convince the city to change a land agreement that currently requires a minimum of 600,000 square feet of retail at the site. Stockdale may also have to face off against historical preservationists who want to keep some aspects of the postmodern building in tact.
5. San Diego convention center
For at least the last decade, civic and tourism leaders have been trying to find a way to finance a costly expansion of the city’s convention center. The big question mark for 2019 is whether a citizens’ initiative, which would fund the project with a hotel tax hike, will be considered by voters in a special election next year or in a November general election in 2020. Meanwhile, waiting in the wings is a developer, Fifth Avenue Landing, which has the right to build a large hotel project on the same bayfront site. The city of San Diego is hoping to regain control of the developer’s leasehold, but it remains unclear how long the developer is willing to delay its plans and how big a price it will seek to relinquish control of the site.
6. Rent prices
Rent growth has seen amazing gains for landlords over the last three years, fueling the construction of numerous apartment towers and putting pressure on the region’s workers. With wage growth not keeping pace, and rents stabilizing by the end of 2018, it would not be surprising to start seeing a reduction. If everything stays the same, at least expect to see rent increases start to slow in comparison to previous years.
7. San Diego’s short-term vacation rentals
More than three years after launching hearings to regulate short-term rentals popularized by home sharing platform Airbnb, the City Council is no closer to a resolution than when it first broached the issue. Although tough new rules were adopted this year, a successful referendum effort launched by home sharing supporters forced the city to withdraw its new regulations. A good part of 2019 will likely be spent trying to hammer out — and approve — a new proposal substantially different from the original regulations, which barred the rental of second homes for short-term stays.
8. San Diego airport expansion
A $3 billion plan to redevelop the San Diego International Airport, including an 11-gate expansion of the aging Terminal 1, may face delays next year as regional agencies figure out how to connect transit lines to Lindbergh Field. The Airport Authority planned to break ground in 2020, but pressure by multiple government entities for a mass transit connection to the airport could push back a groundbreaking. Work on an airport transit plan is expected to begin in earnest next year, with ideas ranging from an elevated shuttle to a pedestrian bridge.
9. Declining home sales
For six months in a row, as of November, home sales had decreased on a year-over-year basis. Unthinkable at the start of the year, the available homes for sale each month keeps growing and it is creeping toward a buyer’s market. Home prices have been very slowly going down, but not enough for most buyers. If the trend of declining sales continues, expect the median home price to drop or, at least, not increase by much.
10. Interest rates
Rising interest rates can affect everything from home loans to construction projects. The Federal Reserve raised its benchmark interest rate in mid-December and signaled it may do so again in 2019. President Donald Trump has said he hopes interest rates stay low to avoid slowing the economy. A few percentage increases for mortgages make a significant impact on home markets with high prices, like San Diego.
When the year began, several top executives were on their way out, most notably former CEO Joel Manby, and theme park attendance was lagging. SeaWorld, though, is starting 2019 with strong gains in visitation and revenue, a much improved stock price and plans for plenty of new attractions, including a “dueling” roller coaster in San Diego. Analysts and shareholders will be watching closely to see if the gains hold and whether a rumored sale of the company comes to pass.
12. San Onofre Nuclear Generating Station
The operator of the nuclear power plant, Southern California Edison, plans to resume transferring canisters of spent fuel in January. The transfers will be watched closely after a 50-ton canister was accidentally left suspended about 18 feet from the floor of an enclosure last August, which prompted a team from the Nuclear Regulatory Commission to conduct a week-long inspection at the plant. Fines may be coming. Edison officials vow better training and oversight will prevent any further problems.
13. Community Choice Aggregation
In January, a formal plan is expected to be sent from San Diego Mayor Kevin Faulconer to the City Council that will likely pave the way to establish Community Choice Aggregation, or CCA. Under the CCA model, the type of power purchased (solar, wind, natural gas, etc.) would be determined by the city — not San Diego Gas & Electric.
While it may take beyond 2019 for a CCA to get up and running in greater San Diego, the implications will be huge. CCAs in other parts of the state have delivered clean power at costs equal to or lower than legacy utilities but a recent decision by the California Public Utilities Commission to increase “exit fees” that CCA customers pay eacaha month could undermine the fiscal incentives of community choice. A battle by backers of CCAs to reduce the exit fees figures to extend well into 2019.
The San Diego-based parent company of SDG&E has invested billions in liquified natural gas, or LNG, and its first major development is scheduled to launch in 2019. Sempra’s Cameron project on the Louisiana Gulf Coast is expected to generate earnings of between $365 million and $425 million a year by exporting LNG to customers around the world. The Fortune 500 energy giant also plans to build another facility in Texas and adding an export component to an already existing LNG facililty near Ensenada, Mexico. The Ensenada project is particularly attractive because exports could go directly to customers in Asia, where LNG is in great demand.
When WeWork first arrived to San Diego in 2016, there were only 20 coworking spaces in the county. Today, that number has ballooned to at least 51 coworking brands, several with more than one location throughout the county totaling nearly 90 offices. The shared office trend has spread beyond startup and technology hubs in North County and downtown to many neighborhoods in between. Is there a saturation point for coworking? As giants like WeWork expand in the city, it will be interesting to watch if smaller players are run out or are raised up by the exposure.
16. Building costs
Developers always bemoan building costs, such as labor and permits, but this year saw the rise of something that was harder to ignore. The price of steel shot up after the Trump administration announced tariffs in March on nations importing to the United States. The price of steel was up as much as 30 percent from the start of the year and developers found themselves publicly questioning if they should hold off on projects. While steel prices affect many industries, such as automobiles, it could also mean fewer new high-rise towers in downtown San Diego.
17. What about 5G?
Ultra-fast 5G wireless networks are expected to begin rolling out next year – delivering fiber-optic like speeds with unnoticeable transmission delays for mobile devices. These networks will add capacity for unlimited data plans, and are forecast to help power all kinds of improved services such as 4K mobile video, autonomous cars, smart infrastructure, more realistic virtual reality -- the list goes on. But are they ready to deliver? That question should be answered in 2019.
18. Huntington’s disease drug
A drug that could stop Huntington’s disease, an incurable and fatal genetic ailment, is due to enter advanced clinical testing in 2019. It was developed by Carlsbad’s Ionis Pharmaceuticals, and is being tested by partner Roche. UC San Diego is one of the global test sites for the drug, RG6042. It showed strong evidence of reducing a toxic brain protein that causes Huntington’s. The late-stage testing will determine if it relieves symptoms. Ionis successfully developed another drug for an incurable genetic disease called spinal muscular atrophy.
19. Cancer drug from partly synthetic life
The first drug produced by a partly artificial life form is headed for clinical testing. La Jolla’s Synthorx is preparing to test the drug, a cancer medication derived from interleukin-2. The addition of an unnatural component reduces toxicity and increases effectiveness, according to preclincal studies. Synthorx makes the drug from its genetically modified bacterium, which contains two synthetic DNA letters, in addition to the four natural ones. The company was founded on technology from Scripps Research produced by scientists led by Floyd Romesberg.
U-T business reporters Jennifer Van Grove, Lori Weisberg, Rob Nikolewski, Brittany Meiling, Phillip Molnar, Mike Freeman and Bradley J. Fikes contributed to this report.