ORANGE, Calif. — When people think of Orange County, most first think of Disneyland, and then the beaches, and maybe the television shows The Real Housewives of Orange County or The O.C.
Not many relate Orange County to being a major tech and innovation hub. But Palmer Lucky founded the virtual reality company Oculus in Irvine, semiconductor company Broadcom got its footing here, and so did Blizzard Entertainment and Edwards Lifesciences, and more.
Despite the number of well-known tech and innovation companies, Orange County is falling behind other tech hubs across the nation, according to a recent study by UC Irvine and Chapman University unveiled during Chapman University's 2021 Economic Forecast.
According to the Chapman-UC Irvine innovation index, which measures the county's progress in job creation in the tech and innovation industry, Orange County fell from 13th in 2018 to 18th in 2020. The San Francisco, Oakland, Hayward metropolitan area was No. 1 in 2020.
If Orange County wants to fully recover from the coronavirus-catalyzed downturn and move forward and expand its economy, then business leaders and city officials need to focus on attracting innovation and tech jobs here, said Chapman officials and business leaders.
"To make our county thrive into the future, we need to focus on attracting and growing innovation jobs," Edwards Lifesciences CEO Michael Mussallem said during the Chapman Economic Forecast. "The current projection of Orange County is too dependent on tourism and retirement dollars, and that results in too many low-paying service jobs. Then we end up with a two-tier economy, rich and poor, and frankly, uninspiring prosperity."
"Instead, we need to start and grow companies in Orange County that require high-level talent," Mussallem said.
The Chapman-UCI Innovation Index comes as Orange County faces a crossroad. Orange County has been hit hard by the economic downturn caused by the pandemic. As many as 200,000 Orange County jobs were lost when the pandemic hit, and tourism dropped because of the closure of Disneyland, Knott's Berry Farm, and several hotels. Orange County's unemployment rate fell to 6.4% in December. It was 2.6% the previous year, according to the Voice of OC.
While service jobs tanked, tech, biotech, and innovation jobs across the county fared better, and in some cases, prospered despite workers having to work remotely from home.
Marshall Toplansky, a clinical associate professor of management service at Chapman University, said Orange County needs to veer away from service jobs and bring in more high-paying tech and innovation jobs. Toplansky is one of the researchers heading up the innovation index.
"This has a very serious impact on our economic future," Toplansky said. "The high-paying jobs for Orange County are going to come from the advanced innovation industries."
The Chapman-UC Irvine innovation index is a first-of-its-kind indicator of whether the region is moving toward becoming a hub for the technology and innovation economy, Toplansky said.
The study uses the Brookings Institution's definition of Innovation Industries such as pharmaceutical and medicine manufacturing, aerospace, software publishers, satellite telecommunications, data processing, scientific research and development services, and semiconductor and other electronic component manufacturing, among many others.
The report uses data from the Bureau of Labor Statistics and tracks 22 MSAs across the country.
The indicator is part of an effort to know where Orange County stands among its peers regarding tech and innovation jobs. According to the index, Orange County fell five spots in the past two years. Simultaneously, other areas such as Los Angeles fell from sixth to ninth; Phoenix rose 16 spots from 19th to third, and Salt Lake City went from 22 to fifth.
"We're in a competitive fight across the United States to attract high-paying jobs into the area," Toplansky said, adding that Orange County's dropoff is a result of not adding as many tech and innovation jobs in the past couple of years.
Orange County's most significant issue with attracting these types of jobs is the high cost of living. Austin, Phoenix, and Salt Lake City have lower housing prices, making it easier for workers to find an affordable home. The average price of a home in Orange County is nearly $800,000, an 8% increase from the previous year. The Austin metro area's median home price is $365,000. Meanwhile, the Phoenix metro and Salt Lake City area have a median home price of $412,000 and $425,000, respectively.
California, which has seen an exodus of tech companies leaving the state, also has the highest state income tax rate in the country at 13.3%, and one of the highest energy costs.
"We're not having the same problem as Silicon Valley with big [company] names leaving, but there's not a lot coming in," Toplansky said. "There's a little drip, but the bucket is not being refilled."
While there are negatives to living and working in Orange County, you can't beat the lifestyle and high quality of life, he said. The nice year-round weather, sprawling beaches, and amenities such as Disneyland, the mountains, and world-class entertainment within a 30-minute to hour drive are attractive amenities.
Orange County is also centrally located. Companies can draw prospective employees across Southern California from many world-class institutions such as UC Irvine, Chapman, USC, UCLA, and the California State University system, Toplansky said.
"The base of educated talent is here," he said. "And the lifestyle is incredibly attractive for people."
Scott Wetzel, executive vice president at commercial real estate firm JLL, said that Orange County has always been a great place to set up headquarters. Aside from tech companies, Orange County has a strong life science base, he said. Wetzel saw several tech companies lease offices in Orange County in 2020 despite the pandemic.
Panasonic Avionics, a Panasonic subsidiary brand specializing in making and selling in-flight entertainment products to airlines, is moving to a 258,000-square-foot office building in Irvine.
Tech firm Ultimate Kronos Group (UKG) signed a deal to occupy a 93,000-square-foot office building in Santa Ana, and gaming company, Mobilityware, moved into a 50,000-square-foot office in Irvine.
"Even though we've allegedly slipped (according to the Chapman-UCI index), investments in tech and innovation companies continue to be strong," said Wetzel, who specializes in the Orange County office market. "In 2020, we had 55 companies with an Orange County presence that raised nearly $1 billion. Last year, it was a little more than $1 billion, but we're pretty much on par with the previous year."
Wetzel said Orange County checks a lot of boxes for tech and innovation companies. He mentioned the county's strong education base and office infrastructure.
The biggest issue the county faces, Wetzel said, is a public relations issue. Orange County has a solid tech, innovation, and life science base.
"We just need to get the word out," he said.