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What is the market size and growth for biotech laboratory space for new startups in the San Francisco Bay Area?
Hello, and thank you for your question on market sizing and growth of co-working wet lab space over the next decade in the San Francisco Bay Area. In short, the growth rate for employment in the life sciences market in the San Francisco Bay Area is 4.23% per year. There is limited co-use wet lab space available for small and mid-sized companies. Even with the tremendous growth in biotech construction, very little is going to co-use or spaces under 50,000 square foot, aimed for smaller companies. My deep dive is below.
METHODOLOGY
I began researching the existing labspace/ incubators in the Bay Area. I found current market information from a professional organization 2017 published report, and a list of existing resources for entrepreneurs and companies needing lab space. To fully answer your question I looked at industry and business reports, investing trends, articles and websites from the State of California and other organizations which are dedicated to California Life Sciences industry.
To calculate growth in the co-working wet lab market space, I attempted to multiply space available and in use today by the CAGR calculated by the employment increase in the Bay Area. After an exhaustive search, I was unable to separate the existing co-working space from the large lab space being leased by large biotech companies. I looked extensively through the brokers listed in the industry lab space/ incubator list provided by the CLSA. Each Broker listed a total number of square feet managed, but it wasn't broken out by co-space or incubator, versus the large lab space. The information I researched referred to the need for shared space, under 50,000 sq ft. The number of projects in development of that size was not publicly available. I provided the average rental price per square foot for the sector, San Francisco Bay Area rental rates are only available by contacting the broker or the lab space provider.
For this response, the San Francisco Bay Area is defined, from the census, as, "The Bay Area consists of nine counties: Alameda, Contra Costa, Marin, Napa, San Francisco, San Mateo, Santa Clara, Solano and Sonoma." Here is a list of the current biotech companies in northern California, not all are small companies or in incubators. This is list is current as of 2016, according to the website.
A primary source of current market data was found in a compilation report on the industry in the California Life Sciences Association: "CLSA serves biotechnology, pharmaceutical, medical device and diagnostics companies, research universities and institutes, investors and service providers throughout the Golden State. CLSA was founded in 2015 when the Bay Area Bioscience Association (BayBio) and the California Healthcare Institute (CHI) merged."
CURRENT MARKET DATA LAB SPACE/ INCUBATORS BAY AREA
According to the California Life Sciences Institute, there is a list of 24 lab space/ incubators for life sciences in the Bay Area. The website offers a list of five lab space brokers. I found incubators/ lab space was co-mingled in many of the reports, and some of the spaces I found are home to companies until they are bought or merged with a larger company. Several quotes refer to different tiers of incubators, so I included information for clarity. One particular article, detailing one incubator in San Francisco, described leased space for what was described as a "midsized" biotech company.
The recent listings for available lab space include spaces such as, "Biosciences Laboratories" in San Francisco, offering 6000 sq ft. with lab equipment. This is described as an incubator. Price is available by contacting the broker.
One of the other listed lab spaces is QB3@953, which has partners with local universities, but is an off campus independent lab space. It is home to about 50 companies, in different stages of growth. The largest has 20 employees. "The building consists of 24,000 square feet, with no time limits on leases." This offering can be leased, "one bench at a time." The non-profit company, QB3, "receives state money to finance the incubator’s operations. Ninety percent of funding supports research, with ten percent going to companies growing and leaving the incubator."
Ethan Perlstein, of Perlstein Labs, is a current resident in the QB3@953 lab space, "The real estate market is not flush with lab space less than 10,000 to 15,000 square feet. We’re considering a roommate situation. I think that’s going to happen naturally. Companies are just going to force solutions to make these second and third tier incubators. We need to help these adolescent companies graduate,” said Perlstein."
"One recommendation from the same February 2016 articles is, "Growing biotech companies could be encouraged to remain in Southside San Francisco through the development of incubators for midsize businesses and the creation of shared space, dividing a 50,000 square feet or larger laboratory into smaller areas."
BioMed Realty Trust, Inc, one of the listed CLSA lab space brokers provided this data for 2015, "For all of 2015, BioMed Realty generated more than 900,000 square feet of gross leasing throughout the Bay Area." In the press release, BioMed realty is looking at expansion needs for the Life Sciences Industry, "As testimony to the enduring vitality of the Bay Area life science industry, BioMed Realty is currently tracking 42 lab/office requirements, translating to more than three million square feet in demand."
In the case of QB3@593, they reported that space is full, and they are unable to expand. "Existing Production, Distribution, and Repair (PDR) zoning in Dogpatch doesn’t allow another incubator to be built nearby. The Eastern Neighborhoods Plan would have to be altered to allow for such commercial activity." As of the February 2016 article, QB3 was looking to open another incubator, in Berkeley.
In 2015, "The average rental rate of $62.47 per square foot marked a year-over-year increase of 25.7%." This was for the biotech sector nationally. A search through the CLSA website provided brokers and available space in the Bay Area, however, prices can only be received by contacting the space or the broker.
RECENT INDUSTRY INVESTMENT FUNDING DATA
A 2017 Life Sciences Industry Report, by CLSA reported 24% of life sciences employment in the state of California, is in the Bay Area, with 68,313 Life Sciences jobs. Some other key figures from the report:
--"As in past years, California was the top state for life sciences venture capital (VC) investment in 2016* with $4.4 billion: $3.3 billion in biotech and $1.1 billion in medical devices."
--"Across biotech, investment declined in later-stage companies, but increased dramatically for seed stage startups."
--VC Investment in Early Stage Biotech was 1.27B in 2014, 2.06B in 2015 and 1.89B in 2016. (See page 4)
EXPECTED GROWTH 2017-2027
I was able to easily find information on the growth of the industry, and to calculate the employment growth in the Bay area. Finding the number or percentage of co-share lab space growth for the sector was not publicly available.
"Life Science Research market with constant growth around 4.5% CAGR The Life Science Research market grew at a rate of 4.4% from 2010 to 2013 per year and is expected to continue to grow with 4.5% CAGR from 2013 to 2020."
Another is employment in life sciences in the Bay Area.
This was a change of 12.7% in three years, or 4.23% per year, which is very close to the national estimate.
Using 68,313 x 0.0423 for 2017, and repeated through 2027:
2017: 2,890 added jobs, for a total of 71,203
2018: 3,012 added jobs, for a total of 74,215
2019: 3,139 added jobs, for a total of 77,354
2020: 3,272 added jobs, for a total of 80,626
2021: 3,410 added jobs, for a total of 84,036
2020: 3,554 added jobs, for a total of 87,591
2021: 3,705 added jobs, for a total of 91,296
2022: 3,862 added jobs, for a total of 95,158
2023: 4,025 added jobs, for a total of 99,153
2024: 4,194 added jobs, for a total of 103,347
2025: 4,372 added jobs, for a total of 107,719
2026: 4,556 added jobs for a total of 112,275
2027: 4749 added jobs for a total of 117,024
One 2016 article in Investors weekly stated that over 4M of new construction was underway in the Bay Area for Biotech, however, "the new space is coming on slowly, or it may not be carved out for smaller companies wanting less than 50,000 square feet."
Because of this trend, large projects with large Biotech anchors, I was unable to accurately provide you with the growth in square footage for co-sharing lab space you requested.
OTHER INFORMATION
While the request was limited to the Bay Area, the 2017 Industry report from CLSA has an entire page devoted to growth in Los Angeles, as well as a note on a new $3M investment in a biotech incubator in Los Angeles. LA Biomed.
CONCLUSION
There will be an estimated 48,117 jobs added between 2017 and 2027 in the Bay Area for the Life Sciences Market (117,024-68,313). exhaustive research did not provide publicly available wet lab square footage in the San Francisco Bay Area today. Several sources cited recite the need for more co-use wet lab spaces under 10-15k square foot for growing life sciences companies. Thank you so much for using Wonder! Please let us know how we can assist you again in the future!