Leasing Surge Points to Life Science Rebound in Bay Area
The 44M SF life science market in the Bay Area has ended 2024 with a huge surge in leasing activity led by large deals in the San Francisco Peninsula, which accounted for nearly 86% of the total volume of 1.9M SF across the nine-county region.
The surge in life science leasing, which more than doubled from the Bay Area’s Q3 2024 total of 704K square feet, represented an 89% increase over the 10-year, quarterly average for the region.
Life science occupancy in the Bay Area also rebounded sharply in the fourth quarter, with positive net absorption totaling nearly 351K square feet, up from minus 768K square feet in Q3. The Peninsula led the occupancy surge, with positive net absorption totaling 360K square feet in Q4, swinging up from minus 547K square feet the previous quarter, CBRE reported.
The continuing arrival of a wave of new supply prevented these positive trends from putting a dent in the overall life science vacancy rate in the Bay Area, which ticked up to 28.7% in Q4.
Four projects encompassing nearly 1.1M square feet were delivered in the fourth quarter. The largest ground-up project that arrived in Q4, Beacon Capital’s 540K square foot Berkeley Commons project, was delivered fully vacant. The largest life science conversion project, Kilroy’s 37K square foot Bohannon project in Menlo Park, also was delivered fully vacant.
The onslaught of new supply will continue in 2025. At the end of 2024, 13 life science projects, including ground-up developments and building conversions, were under construction encompassing a total of 2.7M square feet in the Bay Area.
Four of the five largest projects slated for delivery in the first half of 2025 thus far have zero preleasing. IQHQ’s mammoth 628K SF Elco Yards project in Redwood City, slated for delivery in the second quarter, is 36% preleased, CBRE reported.
The 10 largest life science lease deals in Q4 in the Bay Area were all located in the Peninsula, with the three largest leases each encompassing more than 200K square feet. The Peninsula posted the second-highest average direct asking rate of the region at $6.98 per SF NNN.
In November, biotech startup Vaxcyte 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 square feet from the 113K square feet of space it has occupied at 825 Industrial Road.
According to owner and operator Alexandria Real Estate Equities, the 739K square foot 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 square feet at the San Carlos campus, which is in proximity to Highway 101 and within walking distance of Caltrain.
Life science lab tenants shopping the Bay Area for space grew to 41 unique requirements encompassing 2.1M square feet in the fourth quarter.
“Added infusions of venture capital and NIH funding should continue to fuel deal volume into the new year,” CBRE said.
Source: GlobeSt/ALM