Why San Diego Life Science Will Rebound First

The life science market is a pillar of the San Diego economy. The city is the third largest life science hub in the country, and has fueled growth and investment in recent years. Now, the life science industry is also helping to buffer San Diego from the impact of the coronavirus pandemic. Life science companies are essential businesses and remained relatively operational through the worst of the pandemic, many of the companies are bullish on their future. As a result, leasing activity and investment has already started up again.

“Life science is going to get through this relatively unscathed, especially in San Diego,” Chris Duncan from Voit Real Estate Services tells GlobeSt.com. “We are the third largest life science community in the country, and we have seen a huge influx of private capital and institutional capital chasing life science properties in San Diego. I think these owners are certainly bullish on the market, and there continues to be a lack of product in the market.”

Like ecommerce, which is another industry benefiting as a result of the pandemic, life science companies were not only operational but in some cases necessary to handle the demand for increased testing capacity, research and device manufacturing that came with the pandemic. “The life science was considered an essential business, and while they weren’t operating at full capacity, they were still operating,” says Duncan. “The deals that closed first have been groups that are bullish on their industry and were able to operate throughout the pandemic. They are taking a long-term view of their business.”

This isn’t to say that life science companies operated as usual. During the first two months of the pandemic, all real estate activity essentially froze as businesses waited to see how the pandemic would play out. “It was shutdown from March 15 to May 1. There was a good 60 days where nothing happened from a leasing perspective,” says Duncan. “Tenants were taking a wait-and-see approach. In mid-May, we started to see some life and in the last 30 days, we have started to sign leases again. So, there is some light at the end of the tunnel. The market was performing well before COVID, so even though tenants put on the breaks, there was still pent-up demand for space.”

And, while some aspects of life science are booming, others remain uncertain about future growth. As a result, tenants have asked for shorter lease terms on new lease deals. “Some tenants are struggling with lease terms some tenants have asked for shorter lease terms because there is so much uncertainty in the market,” says Duncan.

Overall, Duncan continues to have a bullish outlook on market activity, and is encouraged by the fast rebound. “I think we are going to see a positive trend with life science moving forward,” says Duncan. “This is a testament to the industry, and I think long-term it will be one of the bright spots of the pandemic in San Diego.”