X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.

Until the late 1990s, life sciences was in the early stage of its industry life cycle. Due to lengthy product development cycles, companies burned through large amounts of cash, recorded low profitability and faced a general uncertainty about the marriage of science and business.

Today, the industry has matured and has become a major contributor to US and global economies while generating substantial cash flows for investors. Funding for R&D has increased, and while the cost of product development has not decreased, many companies are now stable enough to cover their financial burdens.

The Bay Area is also home to the venture capital industry–which helps provide many start-up firms much needed seed money. The region has three primary biotech submarkets: San Francisco, South San Francisco and East Bay/Oakland.

The San Francisco life sciences market has roughly 30 million sf of inventory with a sub 7% vacancy rate. It is clearly one of the largest clusters of life sciences real estate in the US. The vacancy rate is low, and developers have new construction projects underway to cater to large space needs. The existing vacant spaces are typically small, to house the hundreds of start-up companies in the area. Existing large users will typically take advantage of build-to-suit opportunities for new requirements; an example of this is Gilead’s recent expansion in Foster City, CA. Absorption activity in the market has been robust, and continued strong tenant demand is anticipated in the short term.

There is currently over three million sf of life sciences product under construction in the San Francisco bay area with the majority taking place in San Francisco and South San Francisco. Shorenstein, a San Francisco-based developer, recently closed escrow on land on Illinois Street, in Mission Bay, expecting to deliver 450,000 sf of new projects by the fourth quarter of 2008.

Other active markets in 2007 include Seattle where BioMed Realty and Alexandria have new projects scheduled. BioMed has two projects totaling 236,000 sf and Alexandria also has two totaling 203,000 sf. New York City is also active on the development front with the announcement of two projects: Eastside Science Park and Columbia University Neuroscience Center. In the Boston area, quality space is scarce in Cambridge and tenants have expanded their search to include Lexington and Waltham. Development continues a good clip with 417,000 sf in Cambridge scheduled to deliver in fourth quarter 2007 and another 117,000 sf under construction.

Competitive life sciences firms, which need to attract the best scientific talent and resources, insist on locating in established geographic clusters in order to synergize with other firms and institutions and take advantage of concentrated talent pools. Cluster markets are all located near prestigious medical institutions, teaching hospitals and research institutes. Life sciences inventory as a percentage of total office inventory is low and, as such, the number of assets available for purchase is limited. The limited supply of these properties has positively affected asset value and is leading to increased and even speculative development across many of these markets.

Maria Sicola is the senior managing director, research at Cushman & Wakefield. The views expressed in this article are the author’s own.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 3 free articles* across the ALM subscription network every 30 days
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?

GlobeSt

Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.