IQHQ’s 1.5M SF Downtown San Diego Lab Hub Opening With No Biotech Tenants, Significant Headwinds
For a company celebrated for audacious bets, it certainly was bold.
When San Diego-based IQHQ announced the Research and Development District, or RaDD, in 2020, the 8-acre, three-city block waterfront biotech hub was the largest proposed project on California’s coast, a huge development set to ride a wave of life sciences leasing and funding.
Fast forward to today and the project appears to be just one of IQHQ’s megaprojects facing a challenging market. IQHQ has three of the country’s five largest lab development projects by square footage, per Colliers' analysis.
They include RaDD in downtown San Diego, the nation’s largest at 1.56M SF, set to open in the next few months; Boston’s Fenway Center, a 1M SF development expected in 2026; and Alewife Park outside of Boston, a 750K SF project coming online at the beginning of next year.
IQHQ declined to comment on this story or their leasing efforts for this significant chunk of space during a relative supply glut in the market. A spokesperson said, “We don't want to comment on our leasing strategies.”
But the company will almost certainly struggle to lease in the near term with decreased demand, large blocks of sublease space on the market and additional supply coming online. San Diego has 5.4M SF under construction as of the start of the year, and Boston has 13M SF in the works.
“What I see across markets is that there was a record year for deliveries last year,” said Colliers Research Director Jeff Myers, based in Boston. “However, in every single one of the major markets we track, we saw vacancies go up, some by a lot and some by little. The big reason for that is demand was down.”
Many proposed projects, especially in Boston, will “sit on the shelf,” Myers said, as developers seek to align openings with upticks in demand. But that’s not possible for projects deep into construction.
The $1.6B RaDD development, an office, lab and retail mixed-use waterfront development, broke ground in fall 2020 and was conceived with a booming biotech market in mind. The hope was that it would serve as a beachhead, creating a new submarket in downtown San Diego. This was potentially a “once-in-a-generation” project, said JLL Senior Associate Taylor DeBerry, an expert on the San Diego life sciences market, on the best land site downtown.
In an interview with the San Diego Union-Tribune shortly after construction started, IQHQ President Tracy Murphy said, “We talk a lot about the behavior of sheep around here. People tend to do what everyone else is doing. To our credit, although it’s also riskier, we’ve done something a little different.”
Now IQHQ faces an uphill climb during a tenant-friendly leasing environment and substantial available space in established core cluster submarkets like Torrey Pines and Sorrento Mesa. There’s 3.1M SF being developed in San Diego’s core markets, and significant vacancy in Torrey Pines with 11%, Sorrento Mesa with 20% and Sorrento Valley with 28%.
“RaDD is substantially bigger than the other two lab projects that are downtown,” DeBerry said. “And currently, they don't have any leasing. I think that sort of speaks volumes about the leasing environment downtown.”
DeBerry expects downtown will “be a sort of secondary afterthought.” Other large projects in the area, like Sterling Bay’s 500K SF Pacific Center in Sorrento Mesa, won’t open until the middle of next year, letting them potentially ride out the current slump, and will be located in a core market.
This is in sharp contrast to IQHQ’s Boston projects, which have plenty of time for the market to turn around before opening and are located in well-established submarkets. The Fenway project, for example, will open in a submarket that’s a hotbed of new research. The area received $1.3B in National Institutes of Health funding in fiscal year 2023, more than 44 individual states.
DeBarry remains ultimately bullish on life sciences in San Diego, but the fate of RaDD is difficult to predict. Perhaps a tech firm or AI company will come in and take a significant chunk of land. On the other hand, downtown San Diego isn’t a high-momentum market from an office leasing perspective, and another massive project, the Horton Plaza redevelopment, will also be competing for tenants in the near future.
