Biotech Firm Doubles HQ Footprint at Bay Area Life Science Campus
Landlords of Bay Area life science campuses afflicted with high vacancy rates in an oversupplied market are hoping a bright green shoot on the San Francisco Peninsula is the harbinger of a long-awaited rebound in 2025.
Biotech startup Vaxcyte has inked a 10-year deal to more than double the footprint of its headquarters at the Alexandria Center for Life Science in San Carlos. The new lease expands Vaxcyte’s HQ to almost 259K SF from the 113K SF space it has occupied at 825 Industrial Road.
According to a release from owner and operator Alexandria Real Estate Equities, the 739K SF campus in San Carlos now is more than 97% leased. Pasadena-based Alexandria, the largest life science REIT, is planning to develop another 1.4M SF at the San Carlos campus, which is in proximity to Highway 101 and within walking distance of Caltrain.
Alexandria has developed a series of life science mega-campuses in the leading U.S. life science hubs, including Boston, the Bay Area, and San Diego.
Vaxcyte signed its original four-year lease for the third floor and part of the second floor of the 825 Industrial Road when the building opened in 2021. In 2023, the startup subleased an additional 36K SF from Codexis, a company that engineers enzymes used to make drugs.
Vaxcyte’s latest expansion comes on the heels of news in September that the company’s experimental pneumococcal vaccine had outperformed Pfizer’s version in an early-stage trial. Vaxcyte is slated to begin a Phase 3 trial of the vaccine by mid-2025.
According to SEC filings, Vaxcyte will now take over most of the rest of building at 825 Industrial Road, including the entire fourth, fifth and sixth floors, plus about 17K SF it plans to sublease from Iovance Biotherapeutics, which is downsizing to reduce costs.
Vaxcyte will be taking over space that is being vacated by Allakos, a maker of experimental therapies for cell-based diseases. Allakos recently agreed to pay about $2.3M to the landlord plus broker fees to end its lease early after announcing in January it was laying off nearly half its staff, CoStar reported.
The vacancy rate surged in the Bay Area's 43M SF life science market in the third quarter as the market continued to battle occupancy losses amid a flood of new supply.
The San Francisco Peninsula, the largest submarket with nearly 22M square feet of life science inventory, ended Q3 with a total vacancy rate of 34%, a 470 bps increase from the previous quarter. Negative net absorption on the Peninsula was 547K square feet.
On the brighter side, CBRE reported that access to capital by Bay Area life science companies has improved steadily throughout 2024. "This trend should continue into the new year as companies further drive innovation," the report said.
CBRE projects that "further injections of venture capital and NIH funding should support greater deal volume throughout the rest of 2024 and into the beginning of the new year" in the Bay Area's life science market.
In a Q3 2024 call with investors, Hallie Kuhn, senior VP of Life Science and Capital Markets at Alexandria, said venture capital deployment to private biotech tenants is on track to eclipse 2023, with 2024 poised to be the third highest year on record.
“Investors are highly disciplined, focused on rational valuations, de-risk technologies and near-term milestones. The translation to demand on the ground is steady and conservative, transitioning to a just-in-time model for space,” Kuhn said.
Source: GlobeSt/ALM