REAL ESTATE NEWS

The San Francisco Peninsula and East Bay/Oakland, which are the two primary life science clusters making up the Bay Area market, showed softness with a one-percent rise in the vacancy rate (28% to 29%). At the same time, rents dropped an average of 10 cents ($71.97 to $71.81), according to Cushman & Wakefield's Q2 Life Science Report.

However, several indications show that the Bay Area is improving.

The region has the world's largest concentration of life sciences venture capital and private equity, Cushman Wakefield’s San Francisco Bay Area September report stated and it is playing a critical role in funding companies at all stages.

However, such funding slipped nationally by 21% year-over-year, with one-third fewer deals.

Reduced capital availability will continue to strain tenant balance sheets, potentially slowing space expansion decisions.

Nor Cal leasing leads Cushman list

But that doesn't take away from the region’s strong base of elite research from UC San Francisco, Stanford University, UC Berkeley, and the highly educated workforce continues to expand.

The report also noted the Bay Area’s 667,000 square feet in life science leasing in the quarter was the highest volume of all 12 markets that Cushman & Wakefield tracks. Also, the region's 540,000 square feet of space under construction was the lowest of the five top U.S. markets, indicating a trend toward equilibrium.

In fact, the 540,000 square feet under construction is half that of each of the four other top markets, and is about one-sixth that of Boston, which led Cushman & Wakefield's analysis with over 3 million square feet under construction. Boston and the Bay Area have about the same total inventory, approximately 50 million square feet of life science space.

Among the recent deliveries in the Bay Area is one by King Street Properties, which completed the first phase of its purpose-built life science project, The Landing in Burlingame. The second phase of the building is expected to finish later this year.

Cushman also cited that Guardant Health is leasing 162,700 square feet at MetLife’s Seaport Centre and Dren Bio is taking 99,577 square feet at Alexandria Real Estate Equities’ 835 Industrial Rd project.

Hiring Efforts Crucial

In the San Francisco Bay Area – home to biotech giants such as Genentech and Gilead –and emerging unicorns in South San Francisco's biotech corridor, as well as world-class research institutions like UCSF and Stanford, life science hiring and recruitment activity is particularly pronounced.

Industry players are stepping up, according to Pam Paddock, managing director of life sciences work dynamics at JLL.

“Life science companies will, as always, want to focus on the core of their businesses,” she told GlobeSt.com.

“Northern California's competitive landscape, from Mission Bay's sprawling research campuses to Silicon Valley's innovation hubs, demands that companies maximize their operational efficiency to stay ahead.”

Life Science companies require various and flexible real estate asset types, infrastructure and workspaces to accommodate the full life cycle of product development, marketing and manufacturing.

When considering specialized wet labs in Redwood City, manufacturing facilities in the East Bay, or hybrid office-lab spaces in San Francisco's Mission Bay district, they need to place talent in those spaces who will fulfill, from vision to reality, and the products will follow with delivery, she said.

“With the Bay Area's notoriously high cost of living and fierce competition for top scientific talent, a life sciences company does not need to self-perform the care of the space itself or manage the amenities that attract the talent,” Paddock said.

“An effective partner will be scalable, agile, and knowledgeable about industry trends. In a region where development timelines are often compressed and regulatory requirements are complex, they will be skilled in various aspects of service delivery to provide comprehensive support for the daily operations of the workforce and facilities.”

They must also provide efficient delivery with attention to the safety and quality of people and assets — essential considerations in Northern California's seismically active environment and evolving regulatory landscape, she added.

Source: GlobeSt/ALM