Life Sciences

JLL Research

Q2 2024

Life Sciences, It Is In Our DNA

As the second largest life sciences cluster market in the nation, the San Francisco Bay Area encompasses around 36.3 million square feet of lab space and is defined by several essential submarkets which contain the majority of the region's lab space. A key ingredient to each cluster is the established institutions and biotechnology research laboratories at their centers. Stanford, the University of California San Francisco, and the University of California Berkeley have made remarkable progress in the human genome, cancer treatments, and advances to combat human pathogens.

The Bay Area's life sciences cluster is the birthplace of the modern biotechnology industry and a continuing pioneer. The map below takes a deeper dive into the locations that propelled and continue to evolve life sciences in the Bay Area.

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Home of the first publicly traded biotech company

Genentech was founded in 1976 by late venture capitalist Robert A. Swanson and Dr. Herbert W. Boyer, a biochemist at the University of California San Francisco .

The company sparked the Bay Area's biotechnology industry by producing the first ever synthetic human insulin at a time when it was produced from cattle and pigs. Before Genentech's synthetic insulin, producing one pound of insulin required 8,000 pounds of animal pancreas glands.

After its success, Genentech went public on 14 October 1980 , offering a million shares with an opening price of $35. It would end that day with a share price of $71.25. Today, Genentech owns over 3.8 million square feet of inventory in South San Francisco and is continuing to grow its presence.

University of California San Francisco - Mission Bay Campus

From abandoned railyard to exemplary life sciences cluster, UCSF created its Mission Bay campus in 2003 with the opening of Genentech Hall. Since then, the campus has expanded with multiple buildings, the most recent being the Weill Neurosciences Building which was delivered in Q3 of 2021.

The UCSF Mission Bay campus was and still is a catalyst for the life sciences industry in San Francisco. The campus attracts various life sciences companies, startups, and venture capital firms, which have all established a physical presence surrounding the campus. UCSF receives the second highest total in NIH funding of any university in the country behind only John Hopkins University.

Stanford University School of Medicine

Life sciences research, especially modern medicine, can be attributed to the enduring need for medical care and the prevention of various viruses and diseases. What was originally the medical department of the University of the Pacific founded in 1858, would later be adopted by Stanford in 1908 as the Stanford University School of Medicine.

Almost a century later, Stanford introduced the Clark Center in 2003, the home of its Bio-X movement, creating a space for interdisciplinary research relating to bioengineering, biomedicine, and bioscience.

Stanford, among other institutions, is a main driver for the Bay Area's life sciences market by sourcing and developing top talent in the life sciences sector.

UC Berkeley

Following the success of the graduate program in Bioengineering established in 1983, UC Berkeley founded the Department of Bioengineering more than a decade later in 1998. Today, UC Berkeley is among the top bioengineering departments in the U.S. and a primary factor for the existence of a life sciences cluster encompassing Berkeley, Emeryville, and Alameda. Recent successes in Genomics and the Crispr has led to a number of biotech spinoffs who establish locations in nearby submarkets.

UC Berkeley opened the Bakar BioEnginuity Hub in May 2022. The space serves as a collaboration hub in addition to an incubator for startups, providing 40,000 square feet of incubator lab/office space.

Due to the abundance of talent in the Bay Area, life sciences companies and institutions have established multiple major campuses in all four markets of the Bay Area: San Francisco, Mid-Peninsula, Silicon Valley, and East Bay. The staggering growth of the region's laboratory inventory highlights the Bay Area's ascendance as a global life sciences hub, with inventory increasing 55.3% from 23.7M s.f. in Q1 2019 to 36.9M SF by Q1 2024; under half of this increase is held in the Mid-Peninsula.

The Mid-Peninsula holds the largest life sciences market in the Bay Area, accounting for 54.5% of the region's lab inventory. Most therapeutic companies are concentrated in the Mid-Peninsula. Within this market, the highest concentration of lab space is in the North County submarket cluster, which alone encompasses around 13.4M s.f. or 36.4% of the Bay Area's inventory. This figure is amplified by South San Francisco, which holds 32.0% of the Bay Area's inventory.

Following Mid-Peninsula, the East Bay emerges as the second largest market with 10.0M s.f. This inventory is concentrated primarily in the inner East Bay, which consists of Berkeley, Emeryville, and Alameda. These three submarkets account for 6.3M s.f., or 62.8% of the East Bay inventory. Major life sciences tenants in the East Bay include genetics and agtech companies. The largest clusters are concentrated directly next to the I-80/I-580.

Approximately another 3.5M s.f. exist in Silicon Valley where one-third of this inventory exists within Sanford Research Park in Palo Alto. San Francisco contains the balance of the 3.3M s.f. with the main portion of this inventory sitting in Mission Bay, anchored by the UCSF Mission Bay campus,

2024 Life Sciences Tenant Map

VC Funding

Venture Capital in the Bay Area gained momentum by the start of 2024. While venture capital levels aren't at heights attained during the pandemic, it's starting to slowly rebound and are on pace with the pre-pandemic average.

Employment

A major factor in life sciences job growth is the continued inflow of venture capital funding in addition to steady government funding which links to an increased demand for more lab space by recently funded companies.

Development Inventory

New ground-up projects under construction will add 17% to Q1 2024's life sciences inventory. Buildings undergoing conversions will contribute an additional 4% inventory increase. The total pipeline would add an estimated 7.9 million square feet of lab inventory by 2025, bolstering the Bay Area's supply to 44.8M s.f. In comparison to Q1 2019's 23.7M inventory, inventory has almost doubled in size within six years.

The Future of Lab

While there's a reduction in investment in life science compared to the boom 2020 and 2021 periods, there remains considerable growth and promise associated with life science as AI helps to speed drug development. The Bay Area will continue to serve as a top tier life science market both for its concentration of talent and its venture capital ecosystems. Taking the long view on life science will be especially important as an infusion of inventory hits the market over the next two years.

However, in the short term, green shoots have begun to pop up. Market sentiment has shifted towards a more optimistic outlook, evidenced by an uptick in touring activity and inquiry.

While the U.S. economy is projected to grow at 21.0% from 2024 to 2029, the national life sciences industry is poised for an expansion with forecast indicating a 10.1% growth over that same period. Though slightly trailing the overall economic projection, this double-digit increase underscores the strength in the life sciences sector. The Bay Area is strategically positioned to capitalize on these national industry tailwinds with its talent and capital investment driving advancements that cement the Bay Area as a leader in this field for years to come.