By Jon Peterson
The life science sector is maintaining interest from institutional investors late into this cycle. One of the largest, the California Public Employees Retirement System (CalPERS), has just approved a new $673 million commitment to San Francisco-based DivcoWest for the life science investment partnership that the two firms have established, as written by the pension fund in a board meeting document.
The pension fund would not comment beyond what it had provided for the board meeting document, and DivcoWest declined to comment when contacted for this story.
The name of the partnership with CalPERS is DW Life Science Partners. DivcoWest has been active in the marketplace, and the firm has already invested some of the $500 million it was allocated initially for the relationship last year. The pension fund has placed an ending market value on the portfolio held in the partnership at $129.6 million, according to information on the CalPERS’ website. This value is based on the pension fund’s records through the end of June 2022, so there is no data on the total return for the portfolio at this point in time.
It is expected that at least a portion of the capital allocated for DW Life Science Partners would be invested along the West Coast. This could include the main clusters of the San Francisco Bay Area, Seattle and San Diego.
The life science market, while experiencing some of the same challenges as other commercial real estate sectors, has remained resilient and busy, according to a recent panel discussion hosted by The Registry in October of 2022. In addition, the industry has been able to maintain very low vacancies across all the markets where major life science developments have sprung up recently.
“While it’s not entirely immune to what is happening from a macro-economic standpoint and rising interest rates, there is still tremendous demand for the space and depending on where you are, what markets and what type of product for the life cycle of a life science company,” said Fred Knapp, managing partner at Transwestern Ventures. “We do see supply and demand in balance and opportunities for developers and investors to take advantage of that.”
DivcoWest sees a bit of a cooling off in the industry over the short term, however the market should remain busy. Gregg Walker, senior managing director and head of business development at DivcoWest who participated in the panel discussion, said he believes the flexibility of lab space and the collaboration between technology and health care would continue to increase in the markets where both are present.
“Another reason to kind of be bullish on this industry is just the effects and the efficiencies that technology is bringing to research,” Walker said. “So that will continue… and I think we’re going to see some amazing companies come out of this area as well as all of the regions, and technology is going to be a big part of that.”