Life Sciences Outlook
San Diego
JLL | San Diego |Life Science Outlook | 2015 2 Torrey Pines
Torrey Pines is home to San Diego’s largest concentration of lab space, with over 5 million square feet. The submarket is adjacent to the UC San Diego campus and acts as the epicenter of San Diego’s life sciences market. It boasts occupancy by a number of acclaimed research institutes, some of the world’s largest pharmaceutical companies, and a number of successful biotech companies that range from startups to mature corporations. University Town Center (UTC)/Eastgate
The UTC/Eastgate submarket, like Torrey Pines, is comprised of mature, publicly traded companies with advanced product development. This submarket has 2.3 million square feet of lab space and is located in San Diego’s “Golden Triangle,” which offers numerous amenities to tenants. Illumina, Eli Lilly, Celgene, Synthetic Genomics, Human Longevity, Genomatica and Senomyx are UTC’s largest users, together occupying just over 1 million square feet, or 44.0 percent, of the submarket’s total wet lab inventory.
Sorrento Mesa
Sorrento Mesa has approximately 4 million square feet of lab space and caters to all tiers of San Diego life sciences. Some of the largest companies include BP Biofuels, AstraZeneca (Ardea), Hologic (Gen-Probe), Vical, Arean Pharmaceuticals, Intertek and NuVasive. Over the years, Sorrento Mesa was formed as developers saw opportunities for greater returns through the conversion of industrial and flex building into wet lab facilities.
Sorrento Valley
Sorrento Valley was developed as an ancillary market to Torrey Pines and today continues to be home to many of San Diego’s startup life sciences companies. With a base of older industrial and flex buildings that have been converted to lab space, this submarket has historically provided a more economical alternative for early and mid-stage companies.
Major lab supply:
Clusters of established lab stock with long-time industry presence San Diego saw $43.8 billion in M&A transactions from 2011 through
2014. Large pharmaceutical companies are purchasing biotech firms to fill their R&D pipelines, rather than conduct R&D internally. San Diego has a strong R&D market due in large part to its significant talent pool.
Leasing activity within the San Diego life sciences cluster hit record levels in 2014. The market is poised for continued expansion—both from companies of all sizes and landlords looking to grow their footprints through new development or repositioning of office to wet lab facilities.
Economic scorecard
Workforce Total life sciences % life sciences to private employment year growth
Year-over-Employment 63,730 5.9% 3.6%
Establishments 1,373 1.4% 2.8%
Funding Total life sciences % to total U.S.
VC funding $665.3M 4.7%
NIH funding $835.8M 3.7%
Innovation Total life sciences % to all patent classes
Patents 1,134 23.6%
Cluster score:
63.1
San Diego’s startup culture in the life sciences market attracts strong funding stream to the market. Sixty-five percent of total VC invested in San Diego went to biotech companies. San Diego is home to a number of successful biotech
entrepreneurs that start multiple companies. These entrepreneurs often find themselves in the position to sell to big pharma; they then start the cycle again.
Life sciences employment composition
9.0%
16.0%
10.0%
12.0%
46.0%
7.0%
Pharma & medicine manufacturingElectromedical instrument manufacturing Medical equipment & supplies manufacturing Testing laboratories
Research & development Medical & diagnostic laboratories Life sciences employment 63,730 non-lab using lab using Life sciences employment
grew at a faster rate than total private employment: 3.6 percent compared to 2.7 percent, respectively over the last year. The notable life sciences cluster is partly attributable to the presence of some of the world’s largest biotech, pharmaceutical and nonprofit research institutes. Moreover the University of California, San Diego has strong science and engineering programs that produce a number of scientists.
Life sciences patents by classification
39.0%
60.0%
0.6%
Medical equipment & instrumentsPharmaceuticals & biotechnology
Crop science Life sciences
patents 1,134
San Diego has seen 6.0 percent year-over-year growth in life sciences patents. With San Diego being home to many medical device companies and UCSD offering a master’s program in medical device
engineering, it is not surprising that medical equipment and instruments patents increased at a faster pace (17.0 percent year-over-year).
San Diego
JLL | San Diego |Life Science Outlook | 2015 4
Torrey Pines
Supply constraints leading to
increased rent growth
• Torrey Pines led all submarkets in terms of leasing activity in
2014, resulting in a 550 basis point drop in direct vacancy.
• Leasing activity was highlighted by some of San Diego’s larger
companies: The Medicines Company signed a new lease and BD Biosciences and Pacira Pharmaceuticals expanded their existing footprints.
• With a low vacancy rate, coupled with minimal available land for
new development, Torrey Pines is positioned to see continued rent growth.
UTC/Eastgate
315,000 square feet of spec lab
under construction as
companies look to expand
• UTC/Eastgate is home to a number of San Diego’s largest
companies—most notably Illumina and Eli Lilly—that have recently signed leases to expand.
• In fact, large user activity accounted for a much bigger share of
completed transactions in San Diego than in years past.
• UTC/Eastgate has the only speculative lab development under
construction in the region. BioMed Realty’s i3 will consist of three buildings totaling 315,000 square feet of flexible lab space.
• UTC is expected to see strong leasing activity in 2015 due to its
ability to deliver high-end Class A space, which is desired by companies of all sizes in order to attract and retain the best talent.
AFFYMETRIX 10240 Science Center Dr. Torrey Pines 82,759 s.f. Term: 7.5 years i3 UTC/Eastgate 315,000 s.f.
Class A spec development
SENOMYX 4767 Nexus Center Dr. UTC/Eastgate 65,280 s.f. Term: 7 years 11099 N TORREY PINES RD. Torrey Pines 93,000 s.f. Class B $43.8M / $473 p.s.f. Activity key:
Facilities scorecard
Supply Torrey Pines Major lab UTC/Eastgate Major lab Rentable lab stock
(% of total stock) 3.1 m.s.f. 59.4% 1.9 m.s.f. 92.3%
Direct vacancy
(Change year-over-year) (5.5) ppts 6.2% (2.2) ppts 3.4%
# of large blocks over 100,000 s.f. 0 3
Under construction (s.f.) 0 315,000 s.f.
Demand # of requirements
Total s.f. requirements 301,000 s.f. 10 304,000 s.f. 6
Pricing
Average asking rent (NNN)
(Change year-over-year) $46.50 p.s.f. 11.5% $44.70 p.s.f. 7.2%
Leasing Sales
Under construction Large blocks of space
San Diego
Sorrento Mesa
Lowest total vacancy rate
among all submarkets
• Total vacancy rate is the lowest among all San Diego life science
submarkets, at 7.5 percent.
• Leasing activity over the past year wasn’t particularly strong,but
there were a few deals in the 20,000 to 50,000 square foot range. Countywide, activity from mid-tier companies (space needs between 17,000 and 35,000 square feet) was very strong in 2014.
• BP Biofuels recently decided to downsize its San Diego facility and
will now only need approximately 15,000 square feet. With their lease expiring in September, this will bring 76,000 square feet of space to the market.
• Headquartered in San Diego with significant lab space in Sorrento
Mesa, CareFusion was acquired by Becton Dickinson for $12.2 billion. The sale is expected to close in the first half of 2015.
• Leasing activity will likely be marginal during the first half of 2015
though rental rates will likely increase slightly as the overall conditions within the San Diego biotech cluster remain strong.
Sorrento Valley
Majority of available lab space
is under 10,000 s.f. drawing in
more startups
• The majority of available space in Sorrento Valley is suited for
companies under 10,000 square feet; those options are currently very limited.
• Availability of small suites under 3,000 square feet will remain tight
as new startup companies continue to pursue Sorrento Valley for space to facilitate their research.
• Parallel Capital Partners continues to try tofind a buyer for their
portfolio, which consists of 500,000 square feet of lab, office and flex space. The Sorrento Valley portfolio fell out of escrow at the end of 2014. DEXCOM 6290 Sequence Dr. Sorrento Mesa 218,815 s.f. Term: 7 years BIOTOX SCIENCES 10665 Sorrento Valley Rd. Sorrento Valley 27,048 s.f. Term: 6.5 years
SORRENTO CANYON TECH CENTER Sorrento Mesa 98,987 s.f. Class B $18.1M / $183 p.s.f. 10505 ROSELLE ST. Sorrento Valley 17,890 s.f. Class B $2.0M / $113 p.s.f. Activity key:
Facilities scorecard
Supply Sorrento Mesa Major lab Sorrento Valley Major lab Rentable lab stock
(% of total stock) 3.3 m.s.f. 76.8% 1.2 m.s.f. 90.0%
Direct vacancy
(Change year-over-year) (2.1) ppts 4.2% (8.4) ppts 12.6%
# of large blocks over 100,000 s.f. 0 0
Under construction (s.f.) 0 0
Demand # of requirements
Total s.f. requirements 63,000 s.f. 3 50,000 s.f. 3
Pricing
Average asking rent (NNN)
(Change year-over-year) $28.20 p.s.f. 0.0% $31.50 p.s.f. 14.1%
Leasing Sales
Under construction Large blocks of space
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For more information, please contact:
Eileen Tumalad
Senior Analyst, Research San Diego
+1 (858) 410-1183 [email protected]
