San Diego’s Life Sciences Real Estate Market Maintains its ‘Red-Hot’ Momentum in Q3

San Diego’s life sciences real estate market showed signs of normalizing in this year’s third quarter after setting records in recent years, according to new national and local reports from CBRE. The metro’s normalization is consistent with the 12 largest U.S. life science hubs.

San Diego’s market-wide vacancy rate for life science space remained steady from the previous quarter at 3.4% in the third quarter. Total demand for laboratory space was 900,000 sq. ft. at the end of the past quarter, still within the quarterly average before the pandemic. The submarket of Sorrento Mesa led in leasing activity with 192,292 sq. ft. of lab space leased in the quarter, resulting in positive net absorption of 79,034 sq. ft.

Construction activity has maintained a steady pace, with an additional 3.97 million sq. ft. under construction in San Diego County. Nationally, developers completed 2.1 million sq. ft. of space last quarter in the 12 markets, outpacing new absorption of 363,047 sq. ft.

After a record year for venture capital in 2021, funding activity in San Diego has slowed, with $435 million in total funding in the third quarter. The region is still on pace to finish the year with 2.4 times the 20-year average in annual funding. Biotechnology and pharmaceutical account for all the venture capital funding this quarter.

“The third quarter saw over 353,000 sq. ft. of leasing activity, with year-to-date approaching 2.1 million. Thirty-six percent of the 2 million sq. ft. of planned life science construction is already pre-leased,” said Ted Jacobs CBRE’s Vice Chairman in San Diego. “The fourth quarter is likely to be slower for leasing demand due to the overall economy and capital markets”

Nationally, venture capital funding declined by 29% in the third quarter from the second, though funding volume remains on course for the third-highest annual total on record after 2021 and 2020.

Total life science employment in the San Diego region increased by 5.9% from a year earlier in the third quarter. Similarly, the national life science employment increased by 5.4% in the third quarter from a year earlier.

Top Life Sciences Markets: Select Q3 Stats

*In square footage of existing lab space.