According to Colliers International's report on life science real estate, the San Diego life science market, with $1,206,000, ranked fourth in the nation in National Institutes of Health (NIH) funding, ahead of San Francisco (fifth) and Los Angeles (sixth). NIH funding is a key indicator of a particular market's strength in life science research.
Colliers International has released its "Alchemy 2005" report, an in-depth publication on life science real estate, presenting an extensive overview of the nine leading life science markets in the nation.
These nine markets -- Boston, Metropolitan New York, Philadelphia, Washington, D.C./Baltimore Corridor, Raleigh-Durham, Seattle, San Francisco, Los Angeles and San Diego -- were reviewed in terms of key indicators that drive the success of life science real estate, including leasing activity, asking rents, recent transactions/tenant commitments, future project development and an overall market outlook.
The detailed report also discusses pertinent issues affecting today's life science industry and observations regarding the emerging U.S. and international markets like Chicago, Houston, Phoenix, St. Louis, Canada, Japan and Europe.
The Boston market received the greatest funding at $2,260,000, followed by Metropolitan New York ($2,126,000) and the Washington, D.C./Baltimore Corridor ($1,691,000). San Francisco and Boston were the only cluster markets that received more venture capital funding than San Diego, which ranked third at $716 million.
San Diego was second in the number of life science IPO's in 2004. All of these indicators point to both private and public capital's confidence in San Diego's life science industry.
Overall, the San Diego life science real estate market outlook has been fairly consistent since September 2003 with about 595,000 square feet of available direct space for lease. No speculative development is underway at this time, and availability rates remain consistent. While speculative development is rare, more than 1 million square feet of new build-to-suit space is planned.
In a recent landmark build-to-suit transaction, The La Jolla Institute for Allergy & Immunology with partner Gemini Science Inc. became the first tenants slated for UCSD's new 30-acre, 520,000 square foot Science Research Park.
The research park is the first of its kind in San Diego to be based on a merger of university and private industry pursuits, building a bridge between the laboratory research done at the university and technology created by the commercial biotech industry.
Other build-to-suit projects planned for San Diego include the 81,000-square-foot Eastgate Technology project, Alexandria's 46,000-square-foot building, and CarrAmerica's 45,000 square foot project, all located in the UTC/Eastgate submarket.
In the Sorrento Mesa submarket, about 250,000 square feet of build-to-suit development will soon be available at Sorrento Gateway. In Sorrento Valley, Alexandria has a 250,000 square foot project in the works.
San Diego's lab market consists of close to 10 million square feet of highly specialized laboratory space in four primary submarkets: Torrey Pines, UTC/Eastgate/Campus Point, Sorrento Mesa and Sorrento Valley.
With historical availability rates ranging from 5 percent to 20 percent, the San Diego lab market's vacancy rate is hovering at the mid-point of the historical range with about 847,000 square feet of combined direct and sublease space available, or an 8.58 percent vacancy rate. Asking rates average between $28-$34 per square foot.
In comparison, the Los Angeles area consists of a little over 5 million square feet of inventory with an 8.8 percent availability rate and asking rents ranging from $21 to $30 per square feet.
The San Francisco Bay Area market profile includes 17,600,000 square feet of inventory with a 7.9 percent availability rate average and asking rents ranging from $15 to $45 per square feet.
In San Diego, the upward trend in vacancies is primarily attributable to the consolidation of both Pfizer (NYSE: PFE) and Biogen Idec's (Nasdaq: BIIB) multiple sites. In 2004, Pfizer purchased its Torrey Pines campus consisting of approximately 1 million square feet, which it had been leasing. Biogen Idec just sold its newly completed 500,000-square-foot manufacturing plant in Oceanside to Genentech Inc. and recently occupied the $100 million, 250,000-square-foot first phase of a its new corporate headquarters campus in UTC.
In the Torrey Pines submarket, where asking rates are the highest in the region ($32-$36 per square foot), vacancy rates are expected to remain stable and demand is anticipated to increase this year and the first half of 2006. Recent notable transactions include The Scripps Research Institute relocating and expanding for a total of 165,000 square feet; Johnson & Johnson (NYSE: JNJ) occupying a new 125,000-square-foot facility; and The La Jolla Institute for Allergy & Immunology and Gemini Science Inc. signing a ground lease for a 140,000-square-foot facility at the UCSD Science Research Park.
The UTC/Eastgate/Campus Point submarket consists of close to 1.2 million square feet of space with rental rates ranging from $30 to $35 per square foot. Vacancy is approximately 8 percent, which is primarily attributable to two buildings. Other than this, the market is extremely tight. Expansion here is restricted due to the limited supply of developable land. Recent transactions include CovX leasing 45,000 square feet at the University Science Center on Judicial Drive.
The Sorrento Mesa submarket, which totals nearly 2 million square feet, posts asking rental rates of $24 to $36 per square foot. Sorrento Mesa appears poised to lead the region in biotech growth. New build-to-suit construction will outpace retrofitting in the short-term. Demand is down slightly at this time with vacancy at 8.57 percent.
However, Sorrento Mesa remains competitive due to newer product and aggressive rental rates. Medivas recently leased 47,347 square feet at the Carroll Vista project on Nancy Ridge Drive.
The Sorrento Valley submarket is home to many startup operations with rental rates ranging from $21 to $30 per square foot. The 1,441,997-square-foot market consists of a base of older R&D buildings that can be converted to lab space. Sorrento Valley posted the highest vacancy rate in the region - 20 percent. This is primarily due to older product and sluggish demand from the smaller user sector.
Recent transactions include Ambit Biosciences' 27,400-square-foot lease at 4255 Sorrento Valley Road.
For more information, visit www.colliers.com.
Life science real estate news
Over the last 12-months, major life science companies active in securing and/or consolidating space were:
* Pfizer purchased the approximately 1,000,000 square-foot Torrey Pines campus which it had been leasing
* Biogen-Idec completed a 500,000+ square-foot manufacturing facility in Oceanside and occupied the 250,000 square-foot first phase of a new corporate headquarters campus in UTC/Eastgate
* The Scripps Research Institute relocated and expanded in Torrey Pines for 165,000 square feet
* Johnson & Johnson built a new 125,000 square-foot facility in Torrey Pines
* The La Jolla Institute for Allergy & Immunology and Gemini Science Inc. signed a ground lease for a 140,000 square-foot facility and will be the first to occupy UCSD's new 30-acre Science Research Park
New drugs and treatments developed in San Diego: * Biosite -Triage Cardio ProfilER (to aid in the diagnosis of acute Myocardial Infarction)
* Biosite - Triage(r) TOX Drug Screen with Acetaminophen (test for acetaminophen poisoning)
* Biogen-Idec - Zevalin and Rituxan (treatment of b-cell non-Hodgkins Lymphoma)
* Pfizer - Viracept (protease inhibitor/treatment of HIV)
* Ligand Pharmaceutical - Targretin (treatment of skin problems caused by Cutameous T-cell Lymphoma)
Pfizer recently announced plans to acquire IDUN Pharmaceuticals, also based in San Diego. IDUN is a recognized leader in intellectual property on Apoptosis, a process of cell death. Future research could lead to innovation in the treatment of liver disease, inflammation and cancer. In a move common in the pharmaceutical industry, larger pharmaceutical companies buy smaller companies with product in late stage trials, to add to the new parent company pipeline.