Here’s what the U-T business reporters think are the key San Diego business stories to watch in 2022.
These are the key companies, business issues and trends to watch in San Diego County in 2022 as selected by the U-T business reporters.
The housing market supply: Will more homes go up for sale?
The number of homes for sale in San Diego County hit one of its lowest points in decades this year, around 3,500 in September. A few factors are at play:
- Many potential sellers decided not to put homes on the market because a pandemic is a stressful time to move;
- Some sellers delayed selling because they think they can make more money on a sale by timing the market;
- Others decided to hang onto their homes out of concern there wouldn’t be anything to buy and nowhere to move if they sold.
A larger factor — that precedes the pandemic — is a lack of home construction in the region for nearly 20 years.
But without any signs that construction will increase new home supply beyond levels seen in the last few years, the for-sale supply will continue to be dictated by what homeowners do with their properties in 2022.
Rising mortgage rates: Key to slowing housing prices?
Loan rates for a 30-year, fixed-rate mortgage have steadily risen throughout the year to 3.07 percent in October. That’s up from December 2019’s average of 2.68 percent, which was the lowest in records going back to 1971. But rates are still low.
Meanwhile, San Diego County’s median home price continued to rise to unprecedented levels in the past year — to a median of $740,000 in October/
But housing experts say it may be mortgage rates that finally slow things down. So far, the uptick in rates has not affected determined homebuyers who continue to pay over asking price. If rates continue to rise, it might finally be the factor that cools the housing market.
Your electricity bill: A big rollout for a big CCA
If you live in San Diego, Chula Vista, La Mesa, Encinitas or Imperial Beach, be prepared to receive multiple messages that you have been automatically enrolled in San Diego Community Power, the new community choice aggregation, or CCA, program that will replace San Diego Gas & Electric when it comes to purchasing energy contracts in those five cities.
SDCP, as it is known for short, launched in March 2021 but the roughly 600,000 residential customers who make up the majority of SDCP’s base won’t be folded into the program until 2022. SDCP has launched a multimedia marketing and public relations campaign that includes direct mail notices explaining the changes. If customers want to stick with SDG&E, they can opt out of SDCP for free.
The short-term vacation rental lottery
The city of San Diego’s first-ever regulations governing the operation of short-term vacation rentals are expected to go into effect July 1, but there are a couple of hurdles to overcome before that happens.
First, the California Coastal Commission needs to weigh in on the new short-term rental legislation as it affects neighborhoods in the coastal zone.
The second hurdle is finalizing how the lottery that will be used to issue short-term rental licenses will operate.
The new regulations cap the number of whole-home rentals that operate more than 20 days in a year at 1 percent of San Diego’s more than 540,000 housing units, or about 5,400. A separate, more generous allocation was made for Mission Beach, where whole-home rentals will be limited to 30 percent of the community’s total dwelling units, or about 1,100. Before the issuance of short-term rental licenses gets underway, council members want to make sure that the random drawing prioritizes what they call responsible, existing operators.
They are awaiting an update from Mayor Todd Gloria’s office on the specifics of how the city will prioritize the awarding of the licenses.
Will the city, Padres make a deal for Tailgate Park?
A development team led by the San Diego Padres is negotiating to buy the city’s Tailgate Park parcels near Petco Park. The 5.25-acre site is currently leased to the Padres through 2043 for use as a parking lot and special event space.
In September 2020, the organization and its partners, Tishman Speyer and Ascendant Capital Partners, won a competitive bidding process to replace the existing asphalt parking lots with 1.35 million square feet of office space, 612 apartments and 50,000 square feet of shops.
But a deal finalizing land uses, community benefits and sale terms is behind schedule — and busted deadlines are no longer an option in 2022.
The city of San Diego and the Padres have until Jan. 31 to agree to terms for the four-block site, per a recently amended negotiation agreement. Otherwise the entire transaction could be toast. That’s because the city and the team ultimately need to close escrow by Dec. 31, 2022, to remain exempt from the recently amended Surplus Land Act. So far, the contemplated deal has been able to skirt new requirements designed to free up more land for affordable housing because the parties entered a negotiation agreement before Dec. 31, 2020.
Potential changes in net metering for rooftop solar
The California Public Utilities Commission is poised to make a decision that will affect the 1.3 million owners of rooftop solar systems in the state. NEM 3.0 will be the latest iteration of the Net Energy Metering program that determines how much customers can save on their electricity bills and what kind of incentives they receive.
The solar industry says the existing framework has made California the nation’s solar leader, helps the state meet its greenhouse gas reduction goals and alleviates strain on the power grid.
Utilities for years have been calling for changes, saying the current rules leave customers who don’t have rooftop solar systems paying a disproportionate amount of the fixed costs that come with running the electrical system — things like wires, substations and transformers. And some academics and consumer groups agree that NEM 3.0 should address what’s called this “cost shift.”
A proposed decision was issued in December but the final say is in the hands of the CPUC’s five commissioners.
Some clarity on the future of San Diego’s sports arena site
The future of the 48 acres the city owns around Pechanga Arena San Diego hangs in the balance as San Diego leaders simultaneously work to evaluate redevelopment proposals and keep from unraveling the prospect of higher buildings in the broader Midway District. The situation may feel like Groundhog Day — both actions constitute do-overs of processes gone wrong.
In 2021, San Diego was forced to abort a handshake deal with Brookfield Properties to redo its real estate at 3500, 3250, 3220 and 3240 Sports Arena Blvd. in the Midway District after a state housing agency said the original bidding process violated the Surplus Land Act. A new, state-approved process is now under way with five development teams vying for a long-term ground lease.
But a new twist, which comes in the form of an unfavorable court ruling, is clouding the prospects for deal.
That’s because a San Diego Superior Court Judge recently invalidated the ballot measure that lifted the 30-foot building height restriction in the Midway District. And would-be developers are pitching dense projects with an arena and lots of apartment towers, all too high under the court-preserved coastal height limit.
Undeterred, San Diego officials will charge ahead on both fronts in 2022. They will advance negotiations with sports arena site bidders, and are likely to select a winner in the second half of 2022. The mayor is also committed to getting a second initiative lifting the Midway District height limit in front of voters before the end of the year.
Will the labor force return to pre-pandemic levels?
San Diego County saw the number of people participating in the workforce drop as The Great Resignation hit the region. Experts said a variety of reasons have kept workers from returning to jobs: Concerns about COVID-19 infection, child care needs, shifting priorities and rising wages that led them to search for work outside the area. San Diego County’s workforce shrank by nearly 32,000 people, or 2 percent, since before the pandemic. While the unemployment rate was at the lowest level of the pandemic in October, 5.3 percent, economists say recovery will not be complete until employers are able to fill thousands of open positions.
Convention center expansion and the courts
It’s been nearly two years since voters were asked to approve a hike in the city of San Diego’s hotel tax to finance a long-planned expansion of the bayfront convention center, along with increased homeless services and road repairs. The vote was tantalizingly close to the requirement of a two-thirds majority but it still fell short of a 66.7 percent approval. That’s not the end of the story, though,
City leaders hope to learn in 2022 whether a judge agrees with their position that the ballot initiative actually did prevail. The City Council voted earlier this year to declare that Measure C was approved by voters, and City Attorney Mara Elliott’s office filed a lawsuit asking the court to determine that the initiative was lawfully enacted in March 2020. A hearing in Superior Court to consider the matter is scheduled for March 11.
The two-thirds majority requirement, the city argues, is no longer valid in light of three appellate court decisions that have since come down, concluding that simple majority approval is adequate when a tax hike is placed on the ballot by citizens, which was the case with Measure C.
San Diego cruise industry and rise of COVID variants
Cruising, which was shut down locally for 17 months due to the prolonged pandemic, is back and definitely on the rebound, but the latest COVID-19 variant — Omicron — and the still very infectious Delta variant could potentially impact future cruises and how they’re regulated. For now, cruise lines, including those coming into San Diego, are requiring passengers and crew members to be fully vaccinated, and most are also are requiring negative COVID-19 tests within a couple of days of embarkation.
But with the rise of Omicron and a continued surge driven by the Delta variant, there are increasing breakout cases, even among the vaccinated. For now, the cruise lines — and everyone else — are defining fully vaccinated as having two shots of the Pfizer and Moderna vaccines and one of the Johnson & Johnson vaccine.
But that may not be enough. Various cruise ships are seeing positive COVID cases among passengers. Anthony Fauci, the nation’s top infectious diseases expert, has said that it’s a question of “if, not when” the definition of fully vaccinated will change to include a booster shot.
The Centers for Disease Control and Prevention currently has in place a conditional sail order that is due to transition to a voluntary program of health and safety protocols on Jan. 15. The cruise lines, travel advisers and affiliated tourism businesses will be closely watching to see if sailing requirements and procedures will tighten, depending on the trajectory of the pandemic.
Will Illumina’s $7.1 billion acquisition of Grail hold up in court?
Illumina and the Federal Trade Commission are locked in a legal feud over whether the gene-sequencing giant’s acquisition of Grail, a Bay Area startup that specializes in early cancer detection, violates antitrust laws. Meanwhile, European regulators are challenging the acquisition on essentially the same grounds. If the deal survives these challenges, it will go down as one of the biggest acquisitions in San Diego biotech history. Both cases could be resolved by the first quarter of 2022, according to Illumina, though the company’s leaders have indicated that they will appeal any decision to reverse the acquisition and that it could take until 2025 or beyond to exhaust all legal options. If the acquisition is nixed, observers say that won’t change much for Grail, which will likely go public. But losing Grail could have a more lasting effect on Illumina, which has been working for years to move beyond selling sequencing equipment and into using DNA sequencing to directly impact human health.
A make or break moment for Seaport San Diego
There was little talk in 2021 of 1HWY1’s ambitious, $2.5 billion proposal to redevelop downtown’s Central Embarcadero region, which includes Seaport Village. That’s because the developer was been working behind the scenes to refine the project, known as Seaport San Diego.
Backed in part by the Jacobs family, Seaport San Diego is a total reimagining of the 70 acres of land and water that snake along San Diego Bay from Embarcadero Marina Park North to the G Street Mole, just south of the USS Midway Museum. The development team envisions a mix of hotels, shops, water and land attractions, an education hub,a large conference and concert venue, and office space reserved for ocean research-related enterprises.
An important deadline on the immediate horizon will thrust the yet-to-be-approved plan back into the spotlight in a big way. The developer has until Dec. 31 to submit its final project description to the Port of San Diego, which is the local agency that controls the land and has been negotiating a lease and development agreement with the developer for more than four years.
The project-description deadline is the most significant milestone since the board of port commissioners selected the developer in November 2016 to redevelop the site. The submission must include project specifics, such as a site plan and representative illustrations, as well as a phasing plan and a full financial analysis. It will trigger public review and potential approval by the board at some date in 2022. And, should commissioners could give their stamp of approval, Seaport San Diego will take on new life as the agency works to contemplate its actual existence, starting with a full environmental review of the potential development impacts.
Alternatively, a busted deadline or commissioner ambivalence could throw everything into jeopardy.
The satellite race into space
Carlsbad-based Viasat is scheduled to launch the first of three terabit-class Internet satellites by the middle of 2022 — highlighting the company’s huge bet on the increasingly competitive space communications market.
When all three satellites in the constellation — called ViaSat-3 — are in service, the company will have global coverage with massive bandwidth that enables better than 100-megabit-per-second download speeds, video streaming on commercial airlines and business jets, and reliable connectivity from anywhere for high-value government customers.
The first ViaSat-3, which weighs 6.4 tons, covers the Americas. About six months after its launch, the second satellite in the constellation is expected to enter orbit, providing service across Europe, the Middle East and Africa. Timing for the third satellite covering Greater Asia has not been pinned down.
As Viasat’s constellation comes online, a slew of competitors are launching thousands of small, low-orbit Internet satellites that can deliver fast speeds without the transmission delays, or latency, inherent from higher orbit satellites like Viasat-3.
Viasat and others have raised concerns about crowding in low orbits, where potential collisions could create dangerous debris fields circling the earth at thousands of miles per hour. In the end, however, the Internet space race may boil down to which technology delivers the most reliable bandwidth at the lowest cost.
The tremendous growth of Otay Mesa’s industrial market
The industrial center of San Diego County — situated next to the U.S.-Mexico border — saw major growth in the last year as a result of trade law changes and ecommerce expansion. Changes in tax laws to make trade among North American countries more favorable were included in the United States-Mexico-Canada Agreement, nicknamed “NAFTA 2.0,” signed by the Trump administration. The process of outsourcing closer is called “nearshoring” and has taken on new importance with supply shortages and back-ups at many of the nation’s seaports. Otay Mesa saw a construction boom as a result of the changes, and online retailer Amazon took advantage of cheap land to grow its presence. Continued improvement to roads and other infrastructure upgrades in Otay Mesa could see it built out even more.
U-T business reporters Phillip Molnar, Rob Nikolewski, Lori Weisberg, Jonathan Wosen, Jennifer Van Grove and Mike Freeman contributed to this report.
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