IQHQ enters glut of office, life-sciences space
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The Research and Development District, or RaDD — one of the country's largest life-sciences projects — is set to open in San Diego the next few months without any biotech tenants, per a new story from commercial real estate outlet Bisnow.
Why it matters: The $1.6 billion project's 1.7 million square feet of commercial space is about to enter a market already battling high vacancy rates for lab and office space.
Catch up quick: San Diego-based IQHQ broke ground on the project in fall 2020, describing it as the largest commercial waterfront opportunity in California.
- Former Mayor Kevin Faulconer boasted then that it would anchor a downtown life-sciences cluster, away from the industry's established footprint on the city's northern edge, near UC San Diego.
- In 2006, the U.S. Navy granted developer Doug Manchester a 99-year lease to develop eight downtown blocks that would include a new headquarters for the military branch.
- Manchester finished the 17-story Navy One Building in fall 2020, then sold most of the remaining project area to IQHQ for $230 million.
Threat level: RaDD — which has not said how its 1.7 million square footage is broken down among office, lab and retail space – is now arriving without any announced tenants.
- The city's overall office vacancy rate reached 18.2% in March, up from 14.4% one year earlier, per CommercialEdge.
- Life sciences vacancies in the industry's core submarkets — Torrey Pines, UTC, Sorrento Mesa and Sorrento Valley —stood at 15.3% in the first quarter, per CBRE.
- The largest life-sciences submarket, Sorrento Mesa, had a 20% vacancy rate.
- The vacancy rate in downtown's relatively small life-sciences submarket was more than 50% during the same period.
Friction point: Life-sciences projects are driving new office space nationwide, and San Diego's 3.6 million square feet under construction represents 16% of the country's pipeline.
- The Horton Plaza redevelopment represents another 615,000 square feet coming online this year.
- Downtown's smaller Genesis San Diego has actually inked some leases.
The bottom line: RaDD officials told the Built Podcast in early 2023 the project aimed to create a new economic engine that would activate downtown.
- But Taylor DeBerry, a Jones Lang Lasalle life-sciences analyst, told Bisnow that downtown will remain an afterthought to the industry's core submarkets to the north.
- "And currently, (RaDD doesn't) have any leasing," he said. "I think that sort of speaks volumes about the leasing environment downtown."