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October 4, 2023
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Vacancy Rate for San Diego’s Life Sciences Space Up as Companies Consolidate Their Real Estate


This report provided by Cushman & Wakefield


Between May 2022 and May 2023, San Diego saw an increase in nonfarm employment by 42,500 jobs, representing a growth rate of 2.8% year-over-year (YOY). The private education and health services sector accounted for the most significant job gains, adding 13,800 jobs (+6.1% YOY). The leisure and hospitality sector followed closely with the addition of 12,300 jobs (+6.3% YOY). The professional and business sector also experienced growth, adding 3,400 jobs (+1.2% YOY). During the same time, the monthly unemployment rate increased from 2.9% last year to 3.5%, in line with the Q2 2023 quarterly average of 3.5%.1

San Diego has fully recovered the 249,300 nonfarm jobs lost during the onset of the pandemic (March to April 2020), reaching pre-pandemic employment levels as of May 2023. Since May 2020, the region has added a total of 311,300 jobs. Projections indicate that all employment sectors in San Diego are expected to continue growing, with a combined growth rate of 2.5% in 2023 and 0.8% in 2024 compared to the five-year historical average of 1.2%.2

The life sciences industry sector accounts for 77,770 direct employment in San Diego County at 2,080 establishments, an increase of 8% YOY. The largest employment sectors are in biotechnology and research & training, which employ 34,161 and 13,789 workers, respectively. These were also the sectors with the highest annual employment growth at 11%, followed closely by medical equipment & devices (+6% YOY).

San Diego hosts a vibrant research and development (R&D) environment supported by a deep network of educational institutions. The average wage of a life sciences worker in San Diego County is $144k.

In 2022, the National Institutes of Health awarded over $1.2 bil to San Diego organizations, with another $117 mil from the National Science Foundation. Considering allripple and multiplier effects, life sciences in San Diego County directly generate $36.6 bil in GRP and $57.4 bil in total output.3


At the end of Q2 2023, San Diego’s overall life sciences vacancy was 8.2%, up 220 basis points (bps) from the previous quarter and up 230 bps from a year ago. Direct vacancy also increased by the previous quarter to 6.1%, with lease terminations from Surgalign and Sorrento Therapeutics as the main contributors, with 250k sf vacant conversions also causing vacancy to rise. Though there was a significant decrease in occupancy in core submarkets, secondary markets recorded significant positive absorption primarily due to the delivery of a 144k sf build-to-suit (BTS) for Arrowhead Pharmaceuticals in Scripps.


Direct space availability in traditional life sciences submarkets increased significantly in Q2 2023, with UTC availability rising by 230 bps to 7.7% and by 140 bps to 7.2% in Torrey Pines. Countywide, the direct availability rate was 7.6% at the end of Q2 2023. Sublease availability decreased slightly in Q2 2023 to 3.0%, peaking at 7.4% in Sorrento Valley. Life sciences layoffs during the quarter included Cue Health and Thermo Fisher Scientific and may contribute to future negative absorption as companies consolidate their real estate and slow from rapid growth induced by the pandemic.4

Countywide, overall asking rent across all classes increased by 9.7% QOQ and 13.0% YOY to $5.77 per square foot (psf) on a monthly triple net basis in Q2 2023. An abundance of sublease space is threatening to put downward pressure on rents as tenants seeking ready-to-occupy space at a discount can find viable solutions with more flexibility. New speculative developments under construction have continued to hold market-high rents in the interim.


Of the 23 properties, totaling nearly 5.1 msf currently under construction countywide, 26% are pre-leased, with eight buildings, totaling nearly 1.9 msf, expected to be delivered by the end of 2023. The majority or 67% of inventory is speculative, with the remaining 33% BTS. Downtown has 34% of new development followed by Sorrento Mesa and Del Mar Heights / 56 Corridor. Additionally, there is 755k sf of life sciences conversions of existing buildings underway, spread across the Sorrento Mesa, I-15 Corridor, UTC and Sorrento Valley markets.

Landlords who acquired sites over the past few years at peak land pricing for life sciences development are still eager to get their projects underway. However, the significant decline in venture capital investment, layoffs from large life sciences users, and the absence of banks willing to fund development loans will temper development. The bankruptcy of Sorrento Therapeutics has brought more space back to the market, including their 163k sf BTS due to deliver this year along with 55k sf of existing space in Eastgate. Bristol Myers Squibb’s acquisition of Turning Point Therapeutics resulted in advertising their BTS on the market for sublease. Though future speculative development may be limited in the near term, multiple tenants are hoping to break ground on BTS projects, including Ionis Pharmaceuticals, Bystol Myers Squibb, and Eurofins.


• Life sciences venture capital activity increased in Q2 2023, totaling nearly $641 mil, an 82% increase from last quarter but a 37% decrease YOY.

• An abundance of sublease space will put downward pressure on asking rents and limit the need for developers to build new space for the market.

• Expansion into non-traditional life sciences submarkets will be inevitable with landlords in Del Mar Heights, Carlsbad, Scripps and Downtown already seeking to convert or construct new lab buildings.

• Demand for chemistry space is on the rise, as well as tenants looking for fully-built, spec spaces for occupancy.

Sources: 1 2 Moody’s Analytics Forecast for San Diego-Carlsbad, CA last updated on 5/22/23 3 Biocom California’s 2023 California Economic Impact Report. Data as of 2022. 4 CA WARN Act Report 5Pitchbook.

This report was prepared by:

Justin Balagtas, Senior Research Analyst, Cushman & Wakefield
Jolanta Campion, Senior Research Director, Cushman & Wakefield

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