San Diego Life Science Rents Up 34% in 2021
Last year was a record year for the San Diego life science market, which recorded 1.1 million square feet of leasing activity in the fourth quarter alone.
The San Diego life science market had a record year. The market sector recorded 34% rent growth and more than 1 million square feet of leasing activity in both the third and fourth quarter, according to the fourth quarter report from JLL. In 2021, there were 139 life science leases completed in the San Diego market, representing a total of four million square feet, a 51% increase in transactions and an 80% increase in square footage from 2020.
In the fourth quarter, life science leasing activity totaled 1.2 million square feet in 33 leases and representing nearly 75,000 square feet of absorption. It was the second consecutive quarter where leasing activity surpasses 1 million square feet. While leasing activity was down a nominal 3% quarter-over-quarter, it was up a staggering 155% year-over-year.
The leasing activity pushed the vacancy rate down to 3.1%, a record low for the market and a 40 basis point decrease from the third quarter and a 240 basis point decline from the same time last year. Direct availability is 2.4% while sublease availability ended the quarter at 0.7%.
Overall in 2021 venture capital funding is fueling the activity. In the fourth quarter, $732 million was pumped into the San Diego life science industry, building on years of momentum. San Diego life sciences sector has now captured over $14 billion of VC investment, with 60% of that funding coming over the last two years.
Torrey Pines and UTC/Campus Point is tightest submarket in San Diego with only 1.3% vacancy and approximately $6.95 NNN per square foot per month, and rents have increased to $7.50 NNN per square foot per month in the first half of January 2022. Sorrento Mesa, Del Mar Heights are reaping the benefits of limited availability in Torrey Pines and UTC, and Downtown and Scripps Ranch have also emerged as popular life science destinations.
The leasing activity also generated a healthy investment market last year with deals like City Office REIT’s sale of its life science holdings in the Sorrento Mesa submarket of San Diego for $576 million and Longfellow Real Estate Partners acquisition of a nine-property office portfolio from PS Business Parks for $315.4 million, which it will convert into a life science campus.
This year, JLL expects demand to remain robust. There is currently estimated 3 million square feet of space requirements and more than 50 companies in the market. By the end of the first quarter, JLL expects the demand to generate 1.5 million square feet of completed transactions.