A clinical-stage drug development company is terminating one lease and signing on for another in a deal expected to roughly triple its headquarters space in the nation's second-largest biotech hub.
Pliant Therapeutics, a developer of treatments for fibrotic diseases, agreed with Healthpeak Properties late last month to relocate its headquarters to a more than 100,900-square-foot space in the landlord's Britannia Oyster Point campus in South San Francisco, California, according to a person familiar with the situation.
The expansion stands out against a backdrop of layoffs and other cutbacks as life sciences companies in the Bay Area and across the country contend with dwindling venture capital funding and a renewed emphasis on profitability.
The deal gives the biotech company the ability to terminate its existing lease for the roughly 33,000-square-foot building at 260 Littlefield Ave., which is also owned by Healthpeak and located in South San Francisco.
Pliant's original agreement was set to expire in late June 2025, according to Securities and Exchange Commission filings, and the company will have 60 days after moving into its new space at 331 Oyster Point Blvd. to officially vacate the soon-to-be-former headquarters space.
Pliant did not respond to requests for comment from CoStar News.
The lease swap also means Pliant will avoid any hefty termination fees, which can often run in the millions or tens of millions of dollars.
The company's seven-year deal with Healthpeak includes an optional eight-year extension, but more important, comes with a right-of-first refusal for any additional space that becomes available at the waterfront campus.
The ability for biotech companies to expand within a particular property or lab complex has become a significant benefit for landlords competing for tenant interest and higher rates. Considering the volatility that comes with drug approvals or new funding rounds, flexibility is a significant benefit within a landlord's portfolio for tenants that are still looking to grow in the market.
Pliant's headcount, for example, has climbed over the past year and is expected to rise even further as it successfully navigates the trial period for a liver fibrosis treatment.
After years of unprecedented leasing and development activity, demand for lab space in the Bay Area and other life sciences markets across the country has softened as rising interest rates, declining company valuations, and widespread layoffs have weighed down the industry's expansion.
Negotiations for new lab space have been shelved, and vacancy rates for research and development space is expected to continue to climb through the rest of the year as a record amount of new construction makes its way through the regional pipeline.
The vacancy rate for biotech space jumped to about 9.5% by the end of the second quarter this year, according to a recent Newmark report and CoStar data, up from the 7.5% reported for the previous three-month period. Demand for new lab space has fallen, dropping to 3.3 million square feet from 5.3 million square feet leased between the second and first quarters of the year.
Even though average deal sizes have shrunk and the region's record rent growth has lost some momentum, developers such as SteelWave, Healthpeak, BioMed Realty, Longfellow Real Estate Partners, among others remain committed to the region and its longstanding reputation as one of the world's strongest biotech markets. South San Francisco in particular has long been home to some of the largest global life sciences companies.
The city, which refers to itself as "the birthplace of biotechnology," is part of the nation's second-largest research and development hub, after the Boston region.