Bay Area life sciences boom raises rents
Wide array of companies are fueling high demand
Life science companies have launched a robust expansion in the Bay Area, a shopping spree for space that has shoved rents and vacancy levels higher, a new report says.
In 2021, both rents and vacancy rates rose significantly in the Bay Area as developers raced to create life science spaces in brandnew buildings or in existing buildings that are being converted for new uses, according to a study released by Cushman & Wakefield, a commercial real estate firm.
“With over 46 million square feet of lab inventory, the Bay Area continues to experience aggressive industry expansion” in the life sciences sector, Cushman & Wakefield stated in the report, released Monday.
A wide array of companies have helped to fuel the remarkable surge in demand.
“Biotechnology and pharmaceuticals represent most of the life sciences leasing activity in the market, though the medical device and health tech sectors are extremely active as well,” Cushman & Wakefield reported.
Vacancy rates for life science buildings reached 10.9% in 2021, which was 60.3% higher than the 6.8% vacancy rate for such structures in 2020, according to the research Cushman & Wakefield provided to this news organization.
Rents also jumped last year, the Cushman & Wakefield report determined. In 2021, asking rents for life science buildings averaged $5.75 a square foot per month, which was an increase of 24.5% from the $4.62 a square foot average rent reported in 2020.
“Current and planned construction has been dominated by speculative projects, both ground-up and conversions from office,” Cushman & Wakefield reported.
Life science building vacancies have outstripped asking rents for several years, this news organization's analysis of the Cushman & Wakefield study revealed.
During the five-year period that ended in 2021, building vacancies have jumped by 142%, while asking rents hopped higher by 99%.
Among the major Bay Area leasing deals signed by life sciences companies in 2021, according to Cushman & Wakefield:
• Frenome leased 335,400 square feet in Brisbane
• Altos Labs rented
233,000 square feet in Redwood City
• Genentech leased 230,000 square feet in South San Francisco
• Sana Biotechnology leased 164,900 square feet in Fremont
• Impossible Foods leased 165,000 square feet in Redwood City
The major purchases during 2021 included two acquisitions that are aimed at life science conversions:
• KKR paid $1.08 billion for 1800 Owens St. in San Francisco, a big office complex that is being vacated by DropBox, which decided to dramatically scale back its leased space in the property, which totals 750,000 square feet. The building is now being leased to life science companies. In January, Vir Biotechnology leased 133,900 square feet.
• Oxford Properties paid $173 million for the Foundry31 complex, an old factory at 3100 San Pablo Ave. in Berkeley. Oxford is revamping the site for life science uses. The building totals 402,700 square feet.
The current boom appears likely to continue for the life sciences sector since an array of projects and conversions continue in the pipeline.
“Developers delivered 7.9 million square feet (of life science space) over the last six years, with 2.9 million square feet under construction at present and more than 16 million square feet in various stages of planning,” Cushman & Wakefield reported.