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Life science market ripe with opportunity

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A just released report by Cushman & Wakefield speaks to the trends and opportunity offered by San Diego's laboratory market. While there is growing consensus that the worst of the downturn may be nearly behind us, the market will likely remain favorable for San Diego's life science companies for the foreseeable future. "The collapse of the capital markets played a key role in limiting life science expansions and relocations," said Brent Jacobs, senior director with Cushman & Wakefield's Life Science Group. "As a result, 2009 saw the slowest leasing market since 2004. Vacancy of 10.1 percent on 13.7 million square feet of inventory compares to 7.4 percent a year ago and is anticipated to climb slightly higher in 2010 amidst weak leasing activity." Although the rate of vacancy increase is slowing, aided by a gentle up-tick in funding activity, demand still trails supply, leaving a growing supply of picked-over laboratory opportunities. Landlords are growing increasingly creative and aggressive in structuring attractive lease arrangements, which will help the life sciences community during this recovery. According to Greg Bisconti, also a senior director with the group, transactions over 10,000 square feet will be few and far between in the coming year, and tenants will be wise to lock in on quality space if they can. "Where larger blocks of space are concerned, only premium options will find interested suitors and the rest will need to be demised or significantly enhanced prior to seeing activity in the near-term," he said. The Cushman & Wakefield Life Science 2010 Outlook: -- Big Pharma acquisitions and joint ventures, venture capital deals, federal funding and licensing deals appear to be on the rise. Even a few initial public offerings (IPOs) are lining up. Cushman & Wakefield, like many in the life sciences industry, is adopting a wait-and-see approach before claiming that the market is in the beginning of a full recovery. -- Life science companies that are successful in spite of the downturn will be highly selective about their facilities and their landlord partners. The final selection process could very well feel like a beauty contest. -- San Diego's major laboratory landlords -- HCP, Alexandria, Biomed and Veralliance Properties -- are all in strong financial condition. They cite interest in acquiring top-tier assets but have little interest in lower quality or largely vacant properties. "Overall we are cautiously optimistic that the funding environment is improving for the life sciences community," Jacobs said. "The current market remains ripe with opportunity, and proactive tenants will find very attractive on- and off-market options over the coming year." For more information, visit the team online at sdlifesciences.com. Submitted by Cushman & Wakefield

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