Overprescribed: Bay Area Has Too Much Life Sciences Space and Not Enough Demand
Almost a quarter of the market is vacant, according to a CBRE report
By Greg Cornfield July 25, 2024 4:05 pm
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The San Francisco Bay Area life sciences market is battling persistent occupancy losses and “sedated leasing” as lab and office construction far outpaces tenant demand, a new report shows.
The region’s life sciences vacancy rate is almost up to 25 percent, according to a report released this week by CBRE (CBRE). The San Francisco Peninsula, which is the area’s largest submarket, ended the second quarter with vacancy at 29.3 percent, up 710 basis points from the previous quarter.
The region recorded 869,000 square feet of leasing in the second quarter, but still left 380,680 square feet unspoken for as construction and life sciences conversions continue to inflate inventory in an oversaturated market.
Kilroy’s 600,000-square-foot project in South San Francisco was recently delivered fully vacant. The largest conversion completed in the second quarter was Alexandria Real Estate Equities’ 352,000-square-foot 651 Gateway project in South San Francisco, which was delivered 19 percent leased, per CBRE.
Twenty-nine projects with 5 million square feet were still under construction at the end of June. Lane Partners’ 539,000-square-foot Berkeley Commons development is set to be delivered in the third quarter of this year, and is 0 percent leased. Helios’ 504,000-square-foot development in Burlingame is also set to open this year, and it, too, does not have a tenant.
Similarly, IQHQ is building a 592,000-square-foot project in Redwood City as well as a 355,000-square-foot development in South San Francisco: Both are set to open in less than one year, but neither project has secured a lease.
The Bay Area life sciences market stands at 41.6 million square feet with an average asking rate of $6.10 per square foot.
Gregory Cornfield can be reached at gcornfield@commercialobserver.com.
