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San Diego Remains Among Nation’s Top Life Sciences Clusters as Metro Attracts Record VC Funding and Demand Surges

Race for Life Sciences Lab Space Heats Up in First Half of 2021, Boosted By Demand for the Development and Manufacturing of New Medicines and Vaccines

New CBRE Report Examines Tight Vacancies, Rising Rents and Ramped Up Construction San Diego Remains Among Nation’s Top Life Sciences Clusters as Metro Attracts Record VC Funding and Demand Surges

San Diego CA— Life-science lab space has emerged as a coveted sector of commercial real estate as hefty increases in funding and employment have fueled both demand for lab space and construction of it in leading U.S. life-science markets, according to a new report from CBRE. These factors have contributed to growth in life sciences hubs like San Diego, which is the fourth largest life sciences market in the U.S. in terms of square footage of lab space.

Record setting venture capital funding continues to drive demand in San Diego, which has led to increasing levels of leasing activity. San Diego life sciences companies attracted more than $4.6 billion in venture capital investment during the year ending Q1 2021. Acquisitions of office and industrial assets for conversion to life science space are increasing to keep up with demand. Availability and vacancy (4.3%) are decreasing while rental rates rise to all-time highs.

San Diego has 3.3 million sq. ft. currently under construction, including 1.8 million sq. ft. being converted from other uses. There are five new ground up spec developments totaling 1.6 million sq. ft. currently under construction—24.7% of that space is preleased. There are 40 life sciences companies searching for a cumulative 2.8 million sq. ft. of lab space in the metro, up 55.6% in the past nine months.

“The record-breaking venture capital funding has helped fuel an all-time high for life science demand while the current available supply stands at an all-time low,” said Ryan Egli, Senior Vice President at CBRE. “This imbalance is fueling new development and conversions in the core San Diego submarkets as recently funded tenants are in a race for move in ready laboratory space to advance their science.”

National Market Growing

Companies actively seeking life-science real estate in the first quarter targeted a cumulative 19.3 million sq. ft. of lab space in the top 12 U.S. life-science markets, according to CBRE’s Midyear U.S. Life Sciences report. This represents more than 12 percent of the total existing life sciences space across these markets—a rate of demand that is fueling ongoing construction of lab space.

U.S. lab space under construction totaled 18.9 million sq. ft. at the end of this year’s first quarter. Meanwhile, tight vacancy—averaging just 5.6 percent across those markets —is causing lab rents to rise to record levels in the leading life-science hubs of Boston, the San Francisco Bay Area and San Diego.

“Several factors have boosted the life-science industry in recent years—and even more so in the last 18 months—including keen interest from governments and capital sources in developing and manufacturing new medicines to address pandemics like COVID-19 and demographic shifts such as the aging population,” said Ian Anderson, CBRE’s Americas Head of Office Research. “That, in turn, has resulted in a race for more lab space. Construction of new labs, including conversions of regular offices to lab space, has ramped up significantly. But demand has grown even faster.”

The $10 billion in venture capital awarded to U.S. life sciences companies in the first quarter marked a record, exceeding the previous high in last year’s fourth quarter by roughly 60 percent, according to the PwC Moneytree Explorer survey. U.S. life-sciences employment has risen by 15.6 percent since April 2017, outpacing the growth of the larger tech industry.

Market Demand (sq. ft.) In-Progress Construction Venture Capital Awards*
Boston 4.75M 5.8M $9.6B
SF Bay Area 2.9M 2.8M $6.3B
San Diego 2.8M 3.3M $4.6B
Denver-Boulder 1.6M 635,319 $276M
Philadelphia 1.5M 1.5M $761M
New Jersey 1.2M 147,000 $98M
New York City 1.1M 1.9M $1.9B (metro area)
Wash D.C. 1.1M 472,500 $698M
Raleigh-Durham 839,000 380,000 $469M
Chicago 597,500 704,454 $492M
Seattle 500,000 913,000 $1.1B
Los Angeles 417,000 229,398 $283M**
  • For 12 months ending in March 2021

** Includes Orange County

CBRE’s report highlights a rapidly growing subsector of life sciences: biomanufacturing. These facilities mass produce the medicines discovered by the industry. In four key, East Coast markets – Boston, Philadelphia, Washington, D.C., and Raleigh – vacancies for biomanufacturing space measure 2.8 percent or tighter. Roughly 1.4 million sq. ft. of biomanufacturing space is under construction across those markets.

To download the report, click here.

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