As many sectors saw less activity throughout the COVID-19 pandemic, activity among life science and biotechnology companies continues to increase, according to recent reports. As one of the leading markets for the life sciences industry, San Diego continues to see demand in the sector increase while companies struggle to find vacant space to develop.
According to Good and Roberts, a general contractor and developer in San Diego’s life sciences market, San Diego has been a hot spot for lab construction, accounting for 72 percent of all lab construction throughout Southern California. In general, Southern California has seen a lot of activity in the sector, with Los Angeles, Orange County and San Diego employing more than 300,000 people across 34,000 companies, research facilities and universities.
“It’s a very hot industry in our town,” Joe Grosshart, president of Good and Roberts, said. “As I see it, there’s probably obvious reasons for that. It’s a beautiful area…There’s a lot of highly skilled workers, great universities, great infrastructure, transportation systems, things of that nature.”
However, as many look to move into the market, the vacancy rate continues to decrease. According to a recent report from Colliers International, the vacancy rate in San Diego’s life science market hit seven percent in 2020, a three percent drop from the year prior.
Grosshart said this has caused many companies to turn to redevelop vacant or unused commercial space into life science properties. According to Grosshart, another cause could be cost savings, with approximately 52 percent of life science clients choosing to convert existing space as opposed to building from the ground up.
“It seems to me that a lot of these biotech companies, especially the startups, are needing space and need it quickly. San Diego’s not flush with vacant space…Most things are occupied, so there’s not a lot of room for new buildings,” he said. “The trend here lately is the conversion of existing buildings. Some of that is recently facilitated here with the pandemic. There’s a lot of vacant office buildings that are providing opportunities.”
According to a recent report from Kidder Mathews, approximately 2.4 million square feet of commercial office space was available in the first quarter of 2021. At the same time, the report showed sublet space in San Diego’s office market hit its highest rate in more than 15 years, with an increase of approximately 44 percent.
Grosshart said many of Good and Roberts clients also have taken advantage of the available commercial space on the market. The company recently completed a $4 million renovation project for biomedical company Nuvasive to convert a three-story commercial building into a showroom and surgery suite. Additionally, the company completed a $2 million renovation to an existing 15,000-square-foot commercial building for Cell Applications, Inc., a company that provides cell cultures for medical research distribution.
“Certainly those come with their own challenges. The life sciences are very unique, a lot of high-end electrical/mechanical systems, and so buildings have to be able to support those changes. Some buildings can, some buildings not so easy. We’re involved with a number of those projects, and the good news is that a lot of developers are now building spaces that are easier for some of the smaller guys to move into and getting rolling on their products much quicker,” Grosshart said.
Despite the lack of space, Grosshart said he does not see activity in the life sciences sector stopping in the near future. With the COVID-19 pandemic shining a light on the importance of the sector, industry experts believe it will remain active for some time.
“The architects and other designers that I talk to on a regular basis, they don’t see a slow down any time soon…this sector is going to be active for the foreseeable future,” Grosshart said.
