May 21, 2024 - News

IQHQ enters glut of office, life-sciences space

The line chart shows the office vacancy rate in San Diego from March 2023 to March 2024, with a noticeable increase from 14.4% to 18.2%.
Data: CommercialEdge; Chart: Axios Visuals

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.

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."

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