By Cale Miller
In the Bay Area, the market continues to be tight with record low vacancy rates and high demand for laboratory space. Based on these market conditions, life science companies that need lab space should be thinking 24 months ahead to ensure they can secure the needed real estate for their operations. Due to limited supply, new transactions for wet laboratory space will require a minimum 7-10-year lease and very few smaller spaces under 10,000 square feet exist with pre-built lab or lab opportunities. For early to mid-stage companies, that need more flexible options and do not want to overcommit, second generation space is the preferred option when it becomes available, but it is critical to move fast if space presents itself for occupancy. For early-stage biotech companies, we’re seeing a trend towards shared lab spaces which offer shorter lease terms, such as one year, and no capital expenditure. Smart Labs has added some key vacancy to the market and although it is expensive on a price per square foot basis, the ability to lease shorter term and flex up/down as needed, coupled with the capital expenditure avoidance, creates a ripe deal-making market for shared lab operators.
With the Covid-19 pandemic reducing the need for office space in most urban cores (e.g. San Francisco, Oakland and San Jose respectively) and investors increasing their volume in the life science industry—industry data supports over $9 billion of investment in the first half of 2021 alone—there are many new life science conversion projects underway in the Bay Area that may help to address the issue of supply. While we’re seeing projects along the peninsula, such as Alexandria Real Estate Investors “The District” in San Carlos and Redwood Life in Redwood Shores thriving and nearing 100% lease-up there are also many East Bay redevelopments occurring in Emeryville, Alameda, Newark and the wider East Bay.
In the East Bay, Emeryville has traditionally been a large life science hub and has major projects underway including Emeryville Public Market, Foundry31, Emeryville Bioscience Center and Hollis Business Center. Alloy Properties, known for life science CRE investments and conversions, recently purchased the Campus @ Ardenwood in Fremont. This property has been home traditionally to many tech companies, like Logitech, so Alloy Properties is planning on ventilation and electrical upgrades to support a variety of lab users. We’re also seeing a move towards Hayward, with the Mt. Eden Business Park, currently home to RefleXion Medical and Illumina, planning to increase its footprint of life science space. The property which currently contains 28% life science space, is projected to be 57% life science by 2025 and 100% life science by 2030.
Cale Miller is a senior vice president of Hughes Marino, an award-winning commercial real estate company specializing in tenant representation and building purchases with offices across the nation. Contact Cale at 1-844-662-6635 or firstname.lastname@example.org to learn more.