San Diego Lab Space Market Reports Q4 2023

Market Highlights

Alexandria Real Estate and Eli Lilly join forces to bring their co-working lab, gateway labs, to San Diego with plans to launch the 62,000 SF facility in the first half of 2024.

ACON Laboratories secures 510(k) clearance for a rapid COVID-19 test that can be sold over the counter and subleases almost 100,000 SF of space from Thermo Fisher to close in 2023.

Drug discovery and biotechnology firms got almost half of the venture capital funding for San Diego life sciences in the last quarter of 2023.

Major Developments Under Construction

Pacific Center

  • SF: 528,000
  • Delivery: Q1 2024
  • Will be developed over four phases
  • Developer: Harrison Street

Aperture Delmar

  • SF: 500,000
  • Purpose-built for Neurocrine Biosciences
  • Delivery: Q4 2024
  • Developer: Breakthrough Properties

RaDD

  • SF: 405,000
  • The campus will total nearly 1.7 million square feet (msf)
  • Delivery: Spring 2024
  • Developer: IQHQ

Bioterra

  • SF: 323,403
  • One of the first ground-up lab projects in Sorrento Mesa
  • Delivery: Q1 2024
  • Developer: Longfellow Real Estate

Life Sciences Related VS Funding


 

CompaniesDeal SizeDeal Type
Rakuten Medical$182.1MLater Stage VC
Iambic$103.2MSeries B
Lassen Therapeutics$85.0MSeries B
MBrace Therapeutics$85.0MSeries B
Adcentrx Therapeutics$51.0MSeries A

San Diego Lab Space Market Reports Q3 2023

San Diego Lab Space Market Reports Q3 2023

Lab Market Struggles to Recover

  • The Central San Diego Laboratory market continued to lose space in Q3, as it recorded 189,000 sf of negative net absorption, bringing the YTD total to over 712,000 sf. This is the first time that the market has experienced four consecutive quarters of negative net absorption.
  • Leasing activity also declined from previous levels, as only 88,000 sf were leased in Q3 (compared to 293,000 sf in YTD). This is a sharp contrast to the last three years, when the market averaged nearly 600,000 sf of leasing activity per quarter.

Rental Rates Stagnate

  • Rental rates in Central San Diego have remained stable over the last few quarters, as the demand for lab space has cooled down from the Covid-19 years. However, the effective rents have been under pressure, as landlords have been offering more concessions to attract tenants. The overall average asking rental rate is $6.59 NNN, unchanged from year-end 2022. This figure is a weighted average, and is influenced by the high rates of new construction projects.

Big Pharma Boosts Demand

  • Demand for lab space was low in 2023, after it dropped below 1M sf in late 2022. However, it has been revived by a few large big pharma requirements that have increased the demand to a healthy level (1.9M sf at the end of Q3). Nevertheless, many requirements are still on hold (due to the uncertain economic/financial environment), as companies are trying to conserve their cash and adopt a more cautious approach in the short term.

Construction Activity Reaches Record High

  • There are 4.77M SF of Laboratory products currently under construction, countywide. Most of them are located in Sorrento Mesa (1.45M sf) and Downtown (1.8M sf). Of the 3M sf under construction in Central San Diego, 39% has been pre-leased (while Downtown has not seen much demand).

VC Funding Increases, But Still Below 2022 Levels

  • Although the funding for Life Science has slowed down since the Covid-19 years, San Diego has received $1.55B from 47 deals in Q3, and is expected to exceed the $2B mark by the end of the year. This is almost 60% higher than the 20-year historical average of $1.24B annually.

Sublease Remains Elevated

  • At the end of Q3, the total sublease space on the market was still over 900,000 sf, mostly concentrated in the core markets, where it accounts for ~37% of all available space. Despite the high supply of sublease space, there have not been many significant sublease transactions, nor many new subleases added to the market.