Current Market Overview

South San Francisco, recognized as “the Birthplace of Biotechnology,” is currently facing challenges in its life sciences sector. As developers anticipate a market recovery, approximately 9 million square feet of approved office and lab space remain inactive.

A report from the San Francisco Business Times highlights a substantial increase in vacancy rates within the Bay Area’s life sciences market, which reached 24.6 percent, totaling 41.5 million square feet of available space as of June.

Upcoming Developments

Despite the cautious approach from developers, the region is expected to see the completion of 1.5 million square feet of office and laboratory spaces in the next six to twelve months. Key projects include:

• Kilroy Realty’s 865,000-square-foot second phase at the Kilroy Oyster Point.
• IQHQ’s 330,000-square-foot Spur project.

However, specific lease details for these developments have yet to be disclosed.

Market Trends and Economic Implications

Recent remarks by Nell Selander, director of the Economic and Community Development Department in South San Francisco, suggest that the slowdown in leasing activity is a response to the market’s current state. “It’s a slowdown because everyone is waiting to see if the recently completed products get leased up,” Selander noted.

Despite these challenges, there are emerging signs of renewal in the biopharma sector after a three-year period of contraction, during which many companies reduced their workforce and real estate holdings. Notably, biopharma venture capital investments approached $15 billion in the first half of this year, a significant figure compared to the total of $22 billion for all of last year.

Rental and Investment Outlook

Demand for laboratory and office space has shown a moderate increase over the last few quarters. After experiencing a steep decline, rents have shown some recovery, now averaging around $72 per square foot, up from a low of approximately $80 per square foot a few years back.

Jon Norris, managing director of innovation banking at HSBC, reflected on the shifting dynamics: “What’s interesting is, in 2013, everything was down — insider rounds, not a lot of new financing — but now the amount of dollars invested is up 35 percent, versus the second half of last year.” He noted that while early-stage companies are emerging in greater numbers, the trend does not necessarily indicate a full recovery within the real estate sector.