'We Don't Care About San Francisco': LA Life Sciences Has A Supply Crunch
The life sciences market nationally has fallen from the heights it reached shortly after the pandemic hit, but experts in the field caution against painting all markets with the same brush.
Los Angeles, for instance, hasn’t suffered from the same oversupply the property type's big three markets have.
Potential investors “always, always, always point to San Francisco and say there’s a 56% vacancy rate in San Francisco,” Noblespace CEO Howard Kozloff told the audience at Bisnow’s Los Angeles Life Sciences Commercial Real Estate Summit at 10 West Pasadena on Tuesday.
“My response is always — everyone’s response should be — ‘We don’t care about San Francisco,” Kozloff said.
“Our vacancy rate is around 3%,” Kozloff said. “We have a severe supply shortage.”
Demand has slumped for life sciences space in top markets such as San Francisco, Boston and San Diego, in large part because of the elevated interest rate environment, macroeconomic uncertainty and a slowdown in funding from venture capital. Space once geared toward highly desirable life sciences tenants is now being marketed as high-end offices.
The Los Angeles and Orange County markets had a combined 8.4M SF in life sciences inventory as of June, according to a Cushman & Wakefield report. By that metric, the city is No. 9 out of the 16 markets with the most square footage for life sciences.
Other panelists agreed that much of the concern about a glut of life sciences space, warranted though it is in some markets, wasn't an issue in Los Angeles.
“Everyone's saying oversupply, oversupply, and that's correct in San Francisco, that's correct in Boston,” Trammell Crow Co. principal Nancy Moses said. “Los Angeles is a totally different story.”
It isn't as simple as just building more space, Moses said. It's about building the right type of space.
One type of property Los Angeles needs to support this sector is graduated lab space, or what a company might need after it has outgrown an incubator. These companies need private suite spaces, often between 2,500 SF and 7,500 SF, and many companies are looking to move in within six to nine months. There isn't much like that on the market, speakers said.
“If I found a deal that I could buy at the right basis, as close to one of the major research institutions or universities as possible and that I could convert to grad lab, I would do that in a heartbeat,” Luminous Capital Management principal Tom Lam said.
Those conversions and new life sciences properties will require the cooperation of local governments to help them get approved. Pasadena was held up as an example of a city that has worked well with partners in the sector to figure out how to facilitate growth in life sciences.
Panelists also leaned into a frequent complaint about Los Angeles, its sprawl, as a way to build up independent hubs that have unique focuses.
“I see a lot of hubs, a lot of interest in a lot of different regions” within Los Angeles County, BioscienceLA interim CEO Stephanie Hsieh said.
Examples include well-known hubs such as Thousand Oaks, the Conejo Valley, the Irvine Spectrum area around UC Irvine, and Boyle Heights around USC-sponsored health facilities.
Hsieh’s work and the work of her organization has been focused on “building up these subregions, these microregions, and then connecting them and really thinking of ourselves as one economy, one region with different nodes that have different identities,” Hsieh said.
