Klinge Realty
More Links

Are you looking for an experienced agent to help you buy or sell a home? Contact Jim the Realtor!

Jim Klinge
Cell/Text: (858) 997-3801
701 Palomar Airport Road, Suite 300
Carlsbad, CA 92011

Posted by on Mar 18, 2011 in Local Flavor | 4 comments | Print Print

San Diego Biotech

Not our usual fare, but if you wonder about local employment….

From the

While there has been a softening in the demand for for-lease biotechnology space in San Diego, you wouldn’t know it by the huge appetite publicly-traded real estate investment trusts have had for life science buildings here lately.

The status of the biotech industry, the life science leasing situation and the redevelopment of existing space were among the topics at a Commercial Real Estate Women (CREW)-sponsored session at the Sheraton La Jolla Thursday.

Bret Gossett, Pasadena-based Alexandria Real Estate Equities vice president, said while there were only $24 million in biotech property acquisitions in the San Diego region in 2009 and $43 million in 2008, investors (primarily REITs) had enough confidence in the biotech buildings here to purchase $586 million worth of them last year.

That figure was even better than 2007 when the total reached a high-water mark of $564 million.

Alexandria paid $128 million late last year for the 360,000-square-foot Nobel Research Center. Then Illumina (Nasdaq: ILMN) paid $335 million to lease the space.

“And the general consolidation (of companies) has been nothing short of phenomenal,” Gossett said.

These transactions have included Novartis’ acquisition of Genoptix for $470 million in January, Aventis’ purchase of Targegen for $560 million last June and San Diego-based Illumina’s $105 million acquisition of Helixis in April 2010.

Recent major leases in the San Diego area from 2010 to the present have included Illumina (which has taken a total of 470,000 square feet), Advanced BioHealing for 110,000 square feet and a renewal for Althea Technologies of 105,000 square feet.

Gossett said the total life science ownership of properties in the central San Diego area has grown from about 10.13 million square feet as of the end of 2005 to 13.07 million as of the end of 2010.

He said the biotech vacancy is running at about 15 percent, but that much of this space could be absorbed fairly quickly once the economy improves.

Greg Bisconti, Cushman & Wakefield Global Life Sciences Group senior director, said by his account there is about 1.8 million square feet of available space out of a 13.97 million-square-foot market for a 13 percent vacancy rate.

The University Towne Centre market, with a 21 percent rate, has the highest vacancy figure in the central biotech markets that include Torrey Pines, Sorrento Valley and Sorrento Mesa.

Gossett’s own company, Alexandria leads the way with 2.46 million square feet of biotech ownership here. That represents a 19 percent share of the central San Diego biotech market.

BioMed Realty Trust is second with 1.78 million square feet and a 13 percent market share, and HCP Life Sciences Estates with 1.41 million square feet and an 11 percent market share.

The total of those three large REITs of 43 percent of the market.

Not all has been good.

Bisconti and Gossett were quick to point out that a lot of companies large and small have continued to downsize or have closed down while waiting for additional financing to take themselves to the next level.

Gossett said he knew of one company that anticipated that the funding they received would last five years. It was spent in six months.

“It’s amazing how quickly companies can burn through cash,” Gossett said.

Jim Ferguson, principal at Ferguson Pape Baldwin Architects, suggested that given that the time of conception to marketing of a drug may be a decade, it often becomes a matter of survival of the fittest.

“A lot of companies struggle because they don’t know the costs of clinical trials,” Ferguson said.

Being big and well known also offers no guarantees.

“Big Pharma (large pharmaceutical companies) has had some massive layoffs,” Bisconti said.

Expectations may have had to be downsized as well.

Hope Spadora, Life Technologies Global Facilities and Real Estate vice president, said when the Obama stimulus package was made public, it appeared her firm might obtain as much as $100 million. It was $7 million by the time she saw the money.

Life Technologies doesn’t appear to have been hurt much.  The firm, which now has its own general contracting division, has been acquiring life science companies at the rate of 13 during the past 18 months.

Once the market does turn around, the consensus was there won’t be a lot of land for new development. That means biotech buildings will need to be renovated to remain current.

“There’s going to be much more emphasis on flexibility of space,” said Bisconti, “and that will take a lot of innovation.”


  1. JTR – these stories are right up my alley.

    The key quote is “Once the market does turn around, the consensus was there won’t be a lot of land for new development. That means biotech buildings will need to be renovated to remain current.”

    The cost of these facilities is extremely high. Thus, in the down market if these real estate firms can pick up the facilities well below replacement value then waiting a couple years to lease them is no big deal given the high barriers to new construction (no land, high cost) in the bio-tech hubs.


  2. Jim,

    Message to Earth: Biotech is imploding in the greater SD area. Farr too many plays are speculative and hinge on discrete molecular work spawned by the universities. We are seeing a sea-change away from private equity support and more toward government/grant-vetted research. Notwithstanding San Diego’s brain trust, California has made it all but impossible to actually build a business here. Look for continued growth in maturing biotech regions such as Austin, Dallas Metroplex, Oklahoma City, Albuquerque and Reno(!). I think most of are sobering-up and realizing that investors won’t support sunshine and green fairways over economic returns.


  3. Biotech is the latest in a long line of technologies that demonstrate the falsehold of the oft-expressed view that the private sector and the free market do the best job of fostering innovation. The reality is that virtually every technological innovation you can name, from aviation to computers to telecommunication, was the result of a deep government pocket either funding research directly or dangling the promise of lucrative contracts to whoever solved a technical problem first and best. Cut back government spending and the private sector tightens its purse strings and lets forward-looking long term R&D die a slow death.

    For those areas where activity continues, CA’s biggest biotech hotspot continues to be the San Francisco Bay Area. One big reason for this is that San Francisco is the state’s VC center and home to its least risk-averse investors. Another is the region’s more liberal politics, which tends to be more attractive to biotech’s ethnically diverse talent pool. When I was working in biotech up north, it was always easy to lure headcount away from universities and companies in this area.


  4. Looks like Illumina is switching gears a bit. They were going to build out the end of Towne Centre Dr with another 190K sqft of space in 3 buildings called the Summit Pointe Plaza but it looks like they are going to take over the partially built Idec Biogen campus over off Nobel. Biogen Idec development was initially going to be 16 buildings for about 775K sqft but currently sits at 2 buildings for 346K sqft with a 3rd building at 123K being built.

    The Illumina news is good for Illumina, they get a nicer/newer facility and room to expand (Illumina is probably one of the best San Diego based growth stories out there), but Idec Biogen is closing out operations in San Diego completely, so it’s probably a wash for the sector in general. Not sure what will happen to Illumina’s current facilities, they aren’t up for lease yet so hopefully they’ll keep them and this will be a pure expansion.



Leave a comment

Your email address will not be published.