San Diego is the third-largest biotech cluster in the United States and has become a priority for real estate investors, who hold a substantial share of the market, according to a new report.
Institutional investors are estimated to own 44% of the area’s existing life science labs and offices, and one, IQHQ, a private real estate investment trust in Solana Beach, owns 21 such properties.
Phase 3 RE Partners, a San Diego developer, is also considered a market player. according to a mid-year overview of the national life sciences sector by Newmark, a New York-based commercial real estate firm.
Here’s a breakdown of San Diego’s market hot spots, with a total of nearly 21.3 square feet of research and development and lab space available:
- Sorrento Mesa – nearly 6.9 million square feet of space with a 5.7% vacancy rate.
- Sorrento Valley – 1.5 million square feet of space with a 2.6% vacancy rate.
- Torrey Pines – 5.5 million square feet of space with the lowest vacancy rate in the region, 1.3%.
- UTC – 4 million square feet of space with a 2.6% vacancy rate.
As rental rates continue to rise – the highest, according to the Newmark report, are in Torrey Pines and UTC – nearby submarkets such as Del Mar Heights have begun to emerge as candidates for new poles in the life sciences.
These submarkets collectively offer 3.35 million square feet of space. More than 11 million square feet of additional space is on offer, half of it in Sorrento Mesa.
Growth has been further bolstered as expanding biotech companies seek larger blocks of space outside of the region’s traditional life sciences hubs. Tenants considered to be in expansion mode include Eurofins, Cibus, Debut Bio, LocanoBio, InvivoScribe and SmartLabs.
Overall, Newmark analysts estimated sales volume over the past 12 months for the San Diego lab and R&D space at $3.4 billion.
San Diego follows only Boston and San Francisco as the top life sciences clusters nationwide. The trio continues to be the epicenter of leasing activity and capital markets.
Together, these four markets represent over 93 million square feet of laboratory and related space with a future construction and renovation pipeline of 33.2 million square feet.
To compare, in the last 12 months, sales volume in Boston and the Bay Area exceeded $5 billion.