The decline in occupancy in the Bay Area’s largest submarket, the San Francisco Peninsula, intensified in the second quarter. The vacancy rate on the Peninsula, which has nearly 21 million square feet of life sciences space inventory, rose to 29.3% in the second quarter, an increase of 710 basis points from the first quarter.
The San Francisco submarket, which encompasses approximately 1.4 million square feet, saw a life sciences vacancy rate of over 56% in the second quarter of 2024, CBRE reported. However, despite having the highest vacancy rate in the Bay Area, the city still saw the highest average direct lease rate of $7.77 per square foot NNN.
San Francisco-based Swift Real Estate Partners acquired the 70,000-square-foot industrial building at 101 Utah Street for $21 million in 2018. In 2022, the company secured a five-year, $47.6 million variable-rate loan to convert the Showplace Square property into Class A laboratory space.
Swift has now returned the keys to 101 Utah Street to the lender and transferred ownership to BMO Bank in a deed-in-lieu transaction. San Francisco Business Times reported.
The report called the transfer a “friendly foreclosure.” Swift, which still owed $31 million, never received a default notice.
A marketing brochure for 101 Utah Street released last year indicated that the property’s laboratory conversion was scheduled to be completed in the first quarter of this year, but building permit documents for the project do not list the work as completed, the report said.
A total of 10 life sciences projects, including new construction and conversions, added nearly 2 million square feet to Bay Area inventory in the second quarter, CBRE reported.
The largest new construction delivery in the second quarter, the 600,000 square foot first phase of the Kilroy Oyster Point life sciences center in South San Francisco, was delivered entirely vacant. The largest redevelopment delivery of the quarter, Alexandria’s 352,000 square foot 651 Gateway project in South San Francisco, was 19% pre-leased.
