Life Science M&A activity has hit San Diego real estate hard

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Mergers and acquisitions in the San Diego life sciences sector over the past two years have been positive for the local biotech industy, but have had an adverse effect on the commercial real estate market. The impact from the M&A activity is profiled in Jones Lang LaSalle’s recent San Diego Life Science Outlook.

According to Grant Schoneman, Vice President of Jones Lang LaSalle’s Life Sciences Group, “As San Diego companies grow and mature, acquisition by big pharma is proving to be a more frequent occurrence and often times the need for real estate disappears as the companies are folded into the acquiring company’s portfolio.”

Microsoft PowerPoint - JLL San Diego - 2013 Summer-Fall Life Sci

Recent M&A activity in San Diego life sciences industry has resulted in consolidations and relocations that have increased availability in all of Sam Diego’s biotech submarkets.

 

Since June 2011, 14 companies have been subject of M&A activity (with two pending). Half of the completed M&A deals resulted in companies relocating out of San Diego or combining local facilities, putting significant amounts of available space onto the leasing market. While some of the vacancy created by M&A activity has been absorbed, large blocks of space still remain, as evidenced by the 363,000 square feet of sublease availability within the former Amylin campus. Coupled with that, leasing activity throughout 2013 has been exceptionally slow.

“The lack of real estate activity and growth among the region’s more mature life science companies has been noticeably vacant,” states Chad Urie, Executive Vice President of Jones Lang LaSalle’s Life Sciences Group. “Throughout the first three quarters of 2013 there were only three completed transactions above 20,000 square feet. This lack of large tenant activity has been a large driver behind the total availability rate continuing to hover around 15 percent.”

Looking forward to 2014, large tenant activity is on the rise with seven active deals expected to close by the end of the first quarter. Together, these pending transactions are expected to aggregate around 300,000 square feet of transaction activity.

Read JLL’s 2013 Summer/Fall Life Sciences Outlook.

 

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