Life science companies are increasingly looking at UTC, Sorrento Mesa and Sorrento Valley as go-to places for laboratory and office space.
Torrey Pines with its proximity to the University of California-San Diego is still their top choice, but as space there gets even tighter, other nearby submarkets are becoming more appealing, according to a report by commercial brokerage JLL.
“For some time, Torrey Pines has been home to the largest life science companies wanting to be located near UCSD and other renowned research institutions, but over the last few years, demand for lab space has accelerated, spurring ground-up construction and office-to-lab conversions in the surrounding submarkets such as Sorrento and UTC,” Patrick Ashton, a senior research analyst at JLL wrote.
In Sorrento Mesa, life science space has grown from 3.9 million square feet in 2016 to 4.5 million square feet this year, according to Ashton.
Over the same period, life science space in UTC has gone from 3.5 million square feet to 3.9 million square feet.
There just isn’t that much space available in Torrey Pines to meet the demand, and not much coming in the immediate future.
“There’s some redevelopment projects in Torrey Pines but the timing of them is not soon enough for the near term demand in that market right now,” said Grant Schoneman, managing director of the Life Science Group of JLL.
Making Moves
Among some of the bigger moves outside of Torrey Pines was Boston-based Longfellow Real Estate Partners’ November acquisition of 12 light industrial buildings in Sorrento Valley followed by the company’s January purchase of two more industrial buildings in the same neighborhood.
Longfellow is converting the property into lab space and company officials said more acquisitions are in the offing.
The rapid growth is changing market dynamics.
As life science companies take up more space, traditional office users are left to scramble for space and rents are climbing.
Sorrento Valley was previously known as the low-rent district for life science lab and office space, Schoneman said, but driven in part by Longfellow Real Estate’s move into the submarket, rents are on the rise there too.
“Tenants can’t go anywhere and get really cheap space,” Schoneman said. “There’s just minimal vacancy for tenants to go to. Longfellow and the other landlords are capitalizing on that.”
Another change is that life science companies are taking bigger chunks of space.
“What we’re seeing this year is an increase in activity among larger users that have space needs of 35,000 square feet to 65,000 square feet,” Schoneman said.
$3.2B VC Raised
Countywide, the biotech lab market is 19.2% of the total office inventory of 80.3 million square feet in San Diego, but JLL projected that it will grow to account 21% to 22% of the office market by 2022.
Spurring much of the growth has been an influx of venture capital.
“There’s been good venture capital raised so far this year, venture capital raised from private companies,” Schoneman said. “That’s what’s been driving the larger demand from the larger tenants.”
According to JLL, $3.2 billion in venture capital has been invested in county life science companies since the beginning of last year.
