Life Science Leasing in San Diego Surges 88%
High interest rates couldn't stop activity in San Diego's life sciences market. The sector in the city saw 2.4 million square feet of leases in 2024, an 88 percent increase from 2023 and up 37 percent versus the pre-pandemic yearly average.
Pfizer thanks to its relocation in the Del Mar Heights/Carmel Valley submarket for 230,133 square feet of space, recorded the largest lease in the full year. The two other largest deals that lagged behind it were also relocations; Vividion Therapeutics took 127,282 square feet of space, while Avidity Biosciences signed for 105,511 square feet.
Venture capital funding in 2024 reached $3.63 billion — the third-highest annual amount on record. Only $267 million was raised by companies in the fourth quarter.
While the life sciences sector produced strong results in 2024 for the most part, absorption was negative at -545,717 square feet, with the amount at -49,380 square feet in the fourth quarter. The last three months also saw some other troubling trends. New supply of 857,000 square feet led to record vacancy and availability rates, at 23.1 percent and 27.2 percent respectively.
"Leasing has not kept pace with the increase in supply, resulting in lower rental rates and elevated tenant concessions during the year," JLL wrote.
"Q4 was the tenth consecutive quarter of declining asking rents within the core cluster as the figure slipped to $5.95 NNN psf per month, down 1% from Q3 and 4% year-over-year.'
In the short term, JLL is expressing some caution. Because tenants have an "abundance of high-quality leasing options" and many developers in the market working on ground-up projects have yet to sign even a single tenant, the CRE firm expects rents to likely decline over the next nine-12 months.
With uncertainties surrounding the incoming Trump administration, the IPO market, and interest rates, JLL said that all life science companies in San Diego will look to preserve cash.
"In 2025, VC funding is largely expected to continue the trend from 2024, with larger, but fewer, fundraisers," JLL wrote.
"Early-stage companies are expected to continue to struggle raising funds, while more mature companies, that have drugs in the clinical stage of development, will likely capture the bulk of the capital."
But on the other hand, the second half of the year could provide a lifeline for early-stage firms looking to raise capital. That might be the case if interest rates go lower, favorable de-regulatory policies come into play, and promising developments happen.
Source: GlobeSt/ALM