Life Sciences Industry Fueling Construction Project Growth in Bay Area

Life Sciences Industry Fueling Construction Project Growth in Bay Area

By Scott Anderson

December 13, 2021


A recent report by Colliers shows that the San Francisco Peninsula will continue to see some significant growth over the coming years. Currently, there is over 28.7 million square feet of potential office space projects planned for future development, as well as close to 11,000 future units of multifamily sector housing.

Currently on the San Francisco Peninsula there are 5,181,652 square feet under construction, 7,137,169 square feet entitled, and 16,349,345 square feet planned for development of office/R&D projects. Also on the Peninsula are 1,948 units currently under construction and 8,727 units planned for multifamily housing.

According to Nicole So, senior research analyst at Colliers, this is due in large part to an ever-growing increase and interest in the life sciences industry in the area. “Once the pandemic hit, [investors] saw the value in the users and the tenants still working in the labs, those who could not work from home. Also, the proximity to Stanford and University of California San Francisco, the talent from those campuses is unmatched. The area, for tenants and investors, is a smart move.”

Jere Hench, executive vice president at Colliers, agrees with So. “The life sciences market in San Francisco and the Peninsula has been becoming a big thing here in the last several years. It was only accelerated as a result of the pandemic as developers and the investors quickly realized that as the big office companies, such as Google and Facebook, were working from home, it was clear that the life science companies were not.”

And while the life science companies continued to go to the office for work, their work load only increased.

“Not only did life science companies continue to go to the office, they got busier and busier and busier,” said Hench. “These life science developers, such as Alexandria, HCP and Kilroy, looked at the market and realized that this market is not only stable, this market is growing. New therapeutics are being developed to save lives.”

Even with the strong development push seen in the area recently, construction pipelines and projects are expected to remain secure for the foreseeable future.

“As rents go up, and life science rents are high anyways, we know that developers are going to continue to take advantage of this opportunity,” said Hench. “Developers are always extremely bullish about markets…They see an opportunity like this, and they want to get in and leverage this opportunity. It’s such an important sector…It will continue to grow development-wise, and I just think we are seeing the tip of the iceberg.”

Market trends in the San Francisco Peninsula show that, indeed, availability and vacancy rates have been steadily decreasing from the second quarter and into the third quarter this year. Availability rates have decreased from about 12.5 percent in the second quarter to about 11.5 percent in the third quarter, while vacancy rates have decreased from about 9.8 percent in the second quarter to about 8.8 percent in the third quarter this year.

Another contributing factor to the fast development growth in the San Francisco Peninsula are fast lease agreements with new tenants. Many development companies have been anticipating a post-pandemic return to the workplace, and are quickly planning to meet the forthcoming demand.

“What you’re finding is them [developers] doing big deals leasing and even pre-leasing lots of these buildings,” said Hench. “What happens when a building is pre-leased? You build another one….it’s just a supply and demand issue.”

The largest projects coming soon in the area includes the Southline by Lane Partners in South San Francisco at 3 million square feet, the Kilroy Oyster Point by Kilroy Realty Corporation in South San Francisco at 900,000 square feet, the Gateway of the Pacific by BioMed Realty in South San Francisco at 789,998 square feet, and the Genesis Marina by Phase 3 Real Estate Partners in Brisbane at 570,000 square feet. There is also a proposed 3.2 million square foot project in Redwood Shores by Longfellow Real Estate Partners.

And as tech and life science companies continue to lease space in the San Francisco Peninsula, new construction projects are not expected to slow down anytime soon.

“We have a lot of construction that is going to be complete in the next three years,” said So. “I think [the construction market] is really going to explode.”

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