San Diego is drawing in firms from the San Francisco Bay Area and elsewhere, but many are choosing to set up shop in San Diego's suburbs, rather than downtown.

Bay Area companies have plenty of incentives to move to the San Diego region, Allen Matkins partner Martin Togni (above) says. He says it makes good sense, especially for early stage and growing companies, as there’s a large pool of highly talented professionals in San Diego and wages and real estate are comparatively less expensive than the Bay Area.

Martin specializes in ground-lease development transactions across the country, including biotech lease development projects. Martin, who represents DNA-sequencing pioneer Illumina in all US-based real estate transactions, is moderating a panel discussion on the future of office development, leasing, construction and design at Bisnow’s 2017 San Diego Outlook.

He says the majority of these companies are settling in suburban markets that house the region’s life sciences and tech clusters—UTC, Torrey Pines and Sorrento Mesa—not Downtown, for a variety of reasons.

Shown above is a rendering of Biomed Realty Trust's i3 campus designed by Perkins+Will. Illumina has pre-leased the entire campus, which is under construction.

“Downtown is a great place to live when you’re single or an empty nester,” he says. “There’s a lot happening in Downtown—great bars, restaurants, the ballpark. That’s a positive for Downtown. But living in Downtown is a challenge for families raising children.” Martin says transportation is also an issue for people commuting from the suburbs. Large life sciences and tech companies also prefer a campus environment that provides large floor plates and professional synergies of a research cluster in terms of collaboration and innovation, he says.

Discussing the drive to bring tech companies Downtown, he says, “There’s the perception in Downtown that ‘if we build it, they will come,’” and cited the number of creative office projects rising in East Village and traditional office buildings throughout Downtown repositioned to attract creative and tech tenants. Martin says one of Downtown’s greatest strengths is the large Millennial population already living there and neighboring communities like North Park, South Park and Hillcrest. “Once we have a presence of notable tenants Downtown," he says, “it will generate momentum that builds on itself.”

Martin advises companies entering the San Diego market that “information is key. Join professional organizations like NAIOP, Urban Land Institute and other groups with members from the real estate sector, including developers, brokers and end users. Attend their events, because they are great places to network and share information.”

Pictured is BLOCK C, a 748k SF creative office targeted at tech tenants in the Makers Quarter. Scheduled for completion in 2020, the project by H2LP also includes 48k SF of retail, 50k SF of open space and 1,098 parking spaces. Ultimately there will be more than 1M SF of creative office space in this East Village neighborhood.

“Predictions for what’s ahead in 2017 depends on who you are talking to,” he says. “Developers tend to be optimistic. I see an active market right now, but we just went through the election of the century, and there’s Brexit. There will be changes that will create uncertainty for some and certainty for others."

One of the biggest issues in San Diego and California in general is housing affordability. Discussing recent ballot measures where local communities voted against new residential development, he says if people vote against building more housing, they can’t complain about what it costs, as more housing is the only solution to housing affordability. Pictured is a rendering of the proposed Lilac Hills Ranch that was rejected by voters Nov. 8. The 608-acre master planned community near Escondido would have had 1,746 residential units, 90k SF of retail space, a country inn and recreational uses.

Martin says the development process isn’t any worse here than in other areas of California. He says barriers and opposition can be overcome when developers work with the community to create desirable projects.

For example, his law firm represented Kilroy’s 1.4M SF, $750M mixed-use One Paseo Carmel Valley in Del Mar Heights, which involved a long, painful entitlement process and overcoming community opposition. One Paseo was approved by the city in July, with the blessing of the Del Mar Heights community. The project as approved was a little different than what was originally proposed, says Martin, “but at the end of the day, we were successful.” Shown above is a rendering of One Paseo's 280k SF office component, which will be near a brewery or café.

Hear more from Martin and other experts at our 2017 San Diego Outlook on Dec. 13, beginning with breakfast and networking at 7:30am at The Westin San Diego, 400 West Broadway in Downtown.