Burlingame, CA
San Francisco Bay Area Life Sciences Market Normalizes in Q2
Vacancy has increased, but Bay Area life sciences employment continues to grow
August 1, 2023
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Senior Corporate Communications Manager
Leasing activity slowed in the second quarter for the San Francisco Bay Area life sciences real estate market, but strong industry fundamentals kept the region well-insulated, according to a new report from CBRE.
The San Francisco Bay Area had the highest demand for space (2.9 million sq. ft.) of the top life sciences markets, up slightly from Q1. While vacancy increased to 11%, up from 8.4% a quarter earlier. Meanwhile, Class A+ average asking rents increased to $90-$99 NNN, up from $67.95-$78 in Q1 – significantly higher than the national average ($66.31).
Meanwhile, the pipeline of new lab space under development remains robust. The Bay Area had the second largest development pipeline of the top life sciences markets with 56 projects under construction, spanning 10 million sq. ft. of new developments and conversions.
“Despite lower tenant demand overall, occupiers still are pursuing the limited supply of new speculative lab space. Recent increases in funding activity present a positive signal that future demand should be well-positioned to absorb the region’s healthy development pipeline,” said Gregg Domanico, Vice Chairman of CBRE’s life sciences practice in the Bay Area.
The Bay Area received $1.2 billion in NIH funding in fiscal year 2023, the third highest of the top life sciences markets. While down from the prior quarter, NIH funding in the region is still in line with pre-pandemic levels.
U.S. life sciences employment growth, while slowing in recent months, still exceeds the rate of overall U.S. job growth. Life sciences firms in the Bay Area added 1,700 jobs in the second quarter, bringing the overall employment level to 152,970.
“Job growth in life sciences continued even amid layoffs, signaling the resilience of the sector. The Bay Area’s leading universities, talent pool and entrepreneurial spirit continue to be a significant catalyst for scientific innovation and growth in the sector,” said James Bennett, Vice Chairman of CBRE’s life sciences practice in the Bay Area.
Top Life Sciences Markets: Select Q2 Stats
| Market | Market Size* | Vacancy | Sq. Ft. Under Construction | Sq. Ft. of Current Tenant Demand |
| Boston/Cambridge | 56 million | 5.1% | 17.1 million | 2.1 million |
| Chicago | 2M | 43.9% | 479,963 | 1.3 million |
| Denver/Boulder | 3 million | 8.3% | 309,226 | 580,000 |
| Houston | 2.8 million | 29% | - | 175,000 |
| Los Angeles | 6.3M | 15.1% | 730,287 | 1.2 million |
| New Jersey | 16.7 million | 9.9% | 582,057 | 440,000 |
| New York City | 3 million | 10.7% | 459,079 | 1.2 million |
| Philadelphia | 10.8M | 12.4% | 2.7 million | 785,500 |
| Raleigh-Durham | 9.3 million | 8.7% | 465,366 | 657,700 |
| San Diego | 24.2 million | 9.7% | 5.1 million | 1.2 million |
| San Francisco Bay Area | 36.3 million | 11% | 10 million | 2.9 million |
| Seattle | 8.5 million | 7.4% | 1.3 million | 349,000 |
| Washington D.C./Baltimore | 12.9 million | 3.5% | 1.6 million | 318,500 |
*In square footage of existing lab space