A Bay Area biotech startup has inked a deal to more than double its current headquarters at a prominent life science campus on the San Francisco Peninsula, a bright spot for a region that's faced slipping demand on several fronts over the past year.
Vaxcyte, fresh off promising news for a new pneumonia vaccine, is upping its space at the Alexandria Center for Life Science in San Carlos through a lease that brings its footprint to 258,581 square feet from just over 113,000 square feet. The 10-year lease expansion and renewal is for the nearly 300,000-square-foot at 825 Industrial Road, according to the landlord, Alexandria Real Estate Equities.
The campus is more than 97% leased, standing in contrast to the greater San Francisco life science market that counts an availability rate topping 30%, according to reports. Alexandria has been investing in so-called megacampuses, such as the San Carlos property, as a means to attract demand from tenants during a time of weakened demand for the industry.
A slew of biotech firms have taken measures to cut costs as investment in the sector dried up following a pandemic-related boom as firms scrambled to find treatments and vaccines for COVID-19. Vaxcyte's latest lease, however, comes as the industry shows signs of emerging from a prolonged investor downturn, analysts say.
The need for lab, research-and-development and other biotech space is showing signs of increasing, Travis McCready, head of life sciences for the Americas markets at JLL, said during a conference hosted by real estate and land use research organization ULI in late October, according to CoStar News.
“We've scraped the bottom,” McCready said at the gathering. “We're starting to see indications that demand is returning.”
With the recent addition of 3 million square feet of life science space to the sublease market, the sector's overall availability is 30% and rents are down 9% in the United States, according to JLL's recently released 2024 Life Sciences Real Estate Perspective and Cluster Analysis.
Attracting growth
Vaxcyte has expanded several times since signing its original four-year lease on the third floor and part of the second floor of the new life sciences facility when it opened in 2021. In 2023, it subleased an additional around 36,000 square feet from Codexis, a company that engineers enzymes used to make drugs, food and industrial products.
Now, according to filings with the Securities and Exchange Commission, Vaxcyte is taking over much of the rest of the building, including the entire fourth, fifth and sixth floors, plus 16,731 square feet it plans to sublease from Iovance Biotherapeutics, a company that investigates novel cancer therapies. Iovance said it was “opting for a smaller space to reduce costs amid an increase in remote work.”
Another company, Allakos, has been occupying the upper floors of 825 Industrial Road, and recently agreed to pay around $2.3 million to the landlord plus broker fees to end its lease early, according to SEC filings. That firm, which has seen mixed results for its experimental therapies for cell-based diseases, announced in January that it was laying off around half of its staff.
Some of those cuts have translated into expansion opportunities for growing companies.
Vaxcyte shares in September rocketed on the news that the firm’s experimental pneumococcal vaccine had outperformed pharma giant Pfizer’s version in an early-stage trial. Vaxcyte said it would begin a Phase 3 trial in adults by the middle of 2025.
Landlords such as Alexandria are investing in high-tech and large-scale campuses to bring in tenants in growth mode.
Executives said Pasadena-based Alexandria’s nationwide leasing totaled nearly 1.5 million square feet during the third quarter, according to CoStar News, up 48% from the company’s prior four-quarter average of 1 million square feet, as 80% of leasing activity during the last 12 months was generated from its existing tenant base.
The real estate investment trust operates “megacampuses” in regions such as Boston, San Francisco and San Diego, the three biggest U.S. centers for biotech real estate.