Focus
Life sciences sector asking rents and occupancy surge amid sky-high demand
GlobeSt.com – March 25
As growth in the life sciences sector hits historic levels, demand for lab space across major U.S. cities has exploded, driving up rental and occupancy rates in key markets, as the construction pipeline struggles to keep pace. “Coupled with strong capital flows, life sciences companies have increased their footprint in most markets, driving up rents and increasing occupancies,” says a new report from Cushman & Wakefield looking back at the sector’s performance during the first quarter. Boston has the largest labor pool and inventory and is set to grow the most of the markets that Cushman tracks, with over 9.6 million square feet (msf) of lab space currently under construction, followed by the San Francisco Bay Area (2.9 msf) and San Diego (2.3 msf).
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News
CRE lenders shift focus to alternative assets
Commercial Property Executive – March 30
Traditional lenders no longer view data centers, medical office, and life sciences assets as risky. Life sciences opportunities are being financed by a subset of healthcare real estate lenders, but also by commercial real estate groups of national and regional banks and some non-bank lenders, according to Lawrence Brin, managing director and head of healthcare real estate, for MidCap Financial. Geoff Smith, managing director and group head of commercial property finance, with Walker & Dunlop, sees the change in the finance sector’s appetite for life sciences product coming from the growing size of traditional lenders’ balance sheets.
As companies invest in San Diego, rents in local life sciences sector nearly double in 5 years
Times of San Diego – March 25
Job gains among biotech researchers and lab workers often coincide with increased demand for life sciences real estate, according to a new report from CBRE. The latest Bureau of Labor Statistics figures show brisk hiring in the life sciences sector. Employment in San Diego’s life sciences sector grew to 68,698 in 2020, up 11.6 percent from 2016. Meanwhile, the area’s average asking rent for lab space nearly doubled to $74.88 per square foot last year, up from $41.52 in 2016.
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Deals
CalSTRS places $500M into new life science fund with Longfellow
The Registry – March 11
The life science commercial real estate sector has been on a tear over the last few years, and institutional investors across the globe are looking to increase their allocations into the space. One of the largest U.S. pension funds, California State Teachers Retirement System (CalSTRS), has issued a $500 million commitment into the Longfellow SV Fund II, according to the pension fund’s real estate commitment activity report for the final six months of 2021. Longfellow, a Boston-based life science investment and development firm, has been growing rapidly across major markets in the United States.
East Coast developer expands into Bay Area, buys prime Peninsula site
Silicon Valley Voice – March 23
King Street Properties, a Boston developer specializing in life science and biotech projects, has acquired a prime property in Burlingame amid a West Coast expansion. The Burlingame site is occupied by a half-century-old office building and is located a few blocks from a large biotech and life sciences campus that King Street has proposed. King Street plans to develop approximately 300,000 square feet of office space that would cater to life sciences and biotech companies at the new property, according to a post on the developer’s website.
Life sciences JV pays $47M for biotech facility
Commercial Observer – March 14
A venture that includes HATCHspaces, NexCore Group, and Nuveen Real Estate has purchased a 56,300-square-foot life sciences building at 5005 McConnell Avenue in Marina del Rey from Montana Avenue Capital Partners. The campus, which is fully leased to a biotechnology company, will be redeveloped as a biomanufacturing facility.
Bristol Myers Squibb expanding San Diego footprint with mega lease in the UTC area of San Diego
The San Diego Union-Tribune – March 4
New York-based drugmaker Bristol Myers Squibb will grow its San Diego presence with the long-term lease of a 427,000- square-foot, yet-to-be-constructed building in the UTC area of San Diego. Alexandria Real Estate Equities and the pharmaceutical giant announced the mega lease in early March. With the deal, Bristol Myers Squibb will consolidate its local workforce under one roof and has the potential to grow its overall headcount by 30 percent at the developer’s sprawling Alexandria Point grounds along Campus Point Drive.
DivcoWest to buy former Old Navy HQ in SF’s Mission Bay from Gap
The Real Deal – March 31
DivcoWest is under contract to buy the former Old Navy headquarters building at 550 Terry Francois Boulevard, the San Francisco Business Times reported. The purchase price has not been disclosed for the building that Gap purchased for $342.5 million in 2019. DivcoWest, which bought a vacant waterfront office and research building on Shoreline Court to convert into labs, has similar plans for its latest purchase, planning to convert the six-story structure into space for life science and biotech companies. Mission Bay’s lab vacancy rate stood at just 0.1 percent last year.
Bay Area adding to healthy California life sciences market activity
ConnectCRE – March 7
Two recent life sciences deals have closed in Redwood City. In the most recent deal, Center Capital Partners is paying $82.8 million for a three-building office park at the prime Redwood City Lagoons. Before this, life science-focused REIT, IQHQ paid $164 million for a vacant office building and an adjacent parking lot on Twin Dolphin Drive.
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