The amount of quality lab space remains limited, as the average countywide vacancy for life science buildings stood at 10.1 percent countywide at the second quarter's end.
Cushman & Wakefield's Global Life Sciences Practice Group reported while there was 1.3 million square feet of available space at mid-year, 2014 is shaping up to be the strongest year for the leasing of life science space since 2011.
The first quarter of 2014 saw 289,000 gross square feet of leases executed, and the second quarter recorded 389,000 gross square feet.
"The options are kind of dwindling," said Greg Bisconti, a Cushman & Wakefield life science specialist who compiled the report along with Brent Jacobs and his son Ted Jacobs.
Bisconti said he attended a recent life science conference, where the big three life science real estate investment trusts -- BioMed Realty Trust, Alexandria Real Estate Equities and HCP --stated that their local portfolios are more than 90 percent leased.
The C&W report said Torrey Pines -- San Diego's largest life sciences submarket, with about 5.36 million square feet of inventory -- posted a 10.5 percent vacancy rate during the second quarter
C&W said the Torrey Pines' vacancy would have been less were it not for the addition of Alexandria Real Estate Equities' (NYSE: ARE) 165,000-square-foot Spectrum Lab development along Science Park Road.
Receptos, which develops drugs for autoimmune disorders, has taken about 42,000 square feet of that space.
The University Towne Centre submarket has, which has about 2 million square feet of life science space inventory, reported an overall 15.9 percent vacancy rate -- making it a tougher sell than Torrey Pines.
C&W reported that the largest and most notable transaction involving the UTC market so far this year was a 147,000 square-foot transaction between Biomed Realty Trust (NYSE: BMR) and J. Craig Venter Institute’s two companies: Synthetic Genomics (SGI) and Human Longevity, Inc. (HLI), the latter of which is a new genomics start-up.
Biomed relieved the Venter institute of a lease obligation in Maryland, in exchange for a large lease commitment in the University Towne Centre (UTC) market.
SGI/HLI signed a new 125,000 square foot, 10-year lease at 4570 Executive Drive, allowing AstraZeneca (NYSE: AZN), which acquired Amylin’s business, to terminate out of a more than $15 million outstanding lease obligation.
The lease transaction contemplates a “gut and redo” of the building, and SGI and HLI will share space.
At a separate location, but part of the same transaction, HLI expanded into 22,000 square feet at 10835 Road to the Cure in Torrey Pines.
Sorrento Mesa -- which at 4.57 million square feet has the second largest life science inventory here -- saw 110,000 square feet of new signed leases and finished with a very strong vacancy of just 7.5 percent. None of those leases were more than 25,000 square feet
"Sorrento Mesa is regarded as the submarket where developing life sciences market mature," the C&W report stated. "As they attract further funding, they may or may not relocate to higher-profile markets such as UTC or Torrey Pines."
Sorrento Valley is dominated by low-end space that may be deemed inappropriate for more established firms. However, this submarket is where small firms can stretch their research dollars, C&W noted.
Sorrento Valley has about 1.56 million square feet of inventory.
The North County submarket -- home to firms like Isis Phamaceuticals (Nasdaq: ISIS) and Novartis AG (NYSE: NVS) subsidiary Genoptix-- had no major second-quarter leases.
The last big lease in North County occured in late 2013, when Genoptix renewed its 149,000 lease at its Carlsbad campus. The submarket ended the quarter with a 6.6 percent vacancy, despite a lack of large leases.