Science Leasing Volume Reaches Historic Highs

PASADENA, CA—Alexandria Real Estate Equities, a public REIT specializing in urban science and technology campuses, leased an aggregate of 1.9 million square feet in 2Q15—the highest leasing volume that the company has had in any one quarter in its 20-year history. The leasing volume illustrates the strong demand for science and technology campuses in urban markets and the continued growth of these types of industries.

“The activity was pretty pronounced in most of our markets, including Cambridge, New York, San Francisco, San Diego and Seattle,” Joel Marcus, CEO of Alexandria Real Estate Equities, tells GlobeSt.com. “I think the very strong demand from the life science industry and from the tech industry is driving the demand for our urban campuses. We have multiple people fighting over the same space, and the demand is outstripping the supply in a pretty dramatic way. This is the first time that we have seen this kind of imbalance so pronounced in a long time.”

The leases include a 300,000-square-foot lease with Stripe at 510 Townsend in San Francisco. The lease is the largest signed so far in the San Francisco market this year, and is valued t $3.5 million. Additionally, Nestle Skin Health signed a 16-year lease for 30,400 square feet at Alexandria's first innovation hub in New York City. The lease brings the West Tower of the property to 97.8% occupancy, along with tenants Roche; Intra-Cellular Therapies Inc.; Cellectis S.A.; Immune Pharmaceuticals Inc.; Warp Drive Bio LLC; Lycera Corp.; and Accelerator Corp.

While demand is at an all-time high, Marcus explains that these science and tech companies are looking for a very specific office experience, so the amenities package becomes extremely important. “The demand in both the life science industry and the tech industry are very buoyant at the moment,” he says. “They are the future industries for this country, and they need to be in urban campus locations to attract talent. The movement to these urban core campuses is important. Other amenities, like farm-to-table food or fresh, grab-and-go food, fitness zones and open green space, are also important. Ten years from now, 75% of the workforce will be millennials, and in that, you can really understand the dramatic change going on in real estate today.”

These leases bring the REIT's properties to near full occupancy, so Marcus doesn't expect to see this high volume of leasing in a single quarter again in the near future. “I don't know that we would hit this kind of a high point again in the year. I think it is an unusual confluence of a variety of factors,” he says. “I do think what is more important is that we will continue to see strong rental rate growth through the rest of the year in our core markets, and that is probably the most important factor for investors.”