San Diego Life Sciences: A Perspective from the Real Estate, Design and Construction Industry

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The San Diego chapter of ISPE recently held a meeting on the subject of “San Diego Life Sciences: Who’s Coming and Going: A Perspective from the Lease, Landlord and Construction Industry.” This has been a hot subject this year with numerous life science companies being purchased and several new companies moving into the area. Availability in premium lab and office space is dwindling as life science real estate developers work hard to develop more space.

Kathy McGee of CnA Consulting Group opened with an overview of the local market and trends for 2014. Mergers and Acquisitions M&A activity in early-stage companies with drugs in pre-clinical or the phase I/II stages.

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JLL’s Grant Schoneman, vice president of the Life Science Group, provided useful data on local stats for life science job growth and lease rates. The 5.2% job growth in life science was significantly higher than the 3.2% job growth for the private sector in 2014. This economic trend has pushed real estate vacancy within the San Diego life sciences cluster to under 10%. With a lower vacancy rate, some Real Estate Investment Trusts (REITs) are looking to expand their portfolios. BioMed Realty is planning a 316,000 sq. ft. spec building in UTC. Alexandria Real Estate Equities is re-entitling properties for additional square footage as well as looking at acquisition opportunities.

According to Mike Barbera, executive director for Construction & Development at Alexandria Real Estate Equities, the San Diego market is adapting to changes in the life science industry. He noted there has been a shift in the percentage of lab to office space. Historically, 60% of the space in a life science facility was lab and 40% office. Today, lab space is getting smaller and current projects are split 50/50 lab-to-office.

On the architectural front, trends in San Diego include the increase in the number of smaller to mid-size projects. A variety of delivery methods are being used, from turnkey by landlord to design-assist, design-build, design-build best value competition. Clients are requiring speed, flexibility, density and amenities, noted Andy Darragh, vice president of Ferguson Pape Baldwin Architect . Some facilities are utilizing “space split” concepts with more flex space and user sharing. In the biotech arena we see the lab staff sharing desks and computers. A notable interior trend is the increase in use of mobile bench systems. Previously very costly, the systems are more affordable and now more popular because of the flexibility they provide.

Zach Pannier, project executive for DPR Construction, discussed the trends and changes in property and facility choices and costs for the San Diego market. Additionally, he stated that Title 24 mandates, enacted in 2013 for energy efficiency, has added more cost to the development of California properties.

A portion of this article was reprinted from ISPE San Diego Chapter News.

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