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The Puget Sound region's once high-flying life science sector has slowed down, and brokers don't expect things to pick back up in 2024.
At the root of the matter is a slowdown in venture capital distributions, says a report CBRE issued Wednesday. In 2023, $534 million was invested in the region, or 36% less than the previous year and 46% below 2021's $983 million.
Meanwhile, most new buildings aren't landing users. Four Seattle projects — Northlake Commons, the Chapter II Building, 222 Fifth and 1916 Boren — are expected to be done this year. They total around 709,000 square feet, and only about 130,000 has been pre-leased, according to the report.
All of the pre-leased space is at Trammell Crow Co.'s 1916 Boren project. Seattle Children's Research Institute is the tenant.
Last year, 665,000 square feet of space was leased. The year before, users snapped up over 1.1 million square feet.
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CBRE reports 1.2 million square feet is under construction across the region with 75% in the close-in Seattle market. The pace of construction is expected to continue this year. This, plus languid leasing activity, equals rising vacancy rates.
At close-in, investor-owned buildings, the total vacancy climbed to over 27% in the fourth quarter compared with nearly 15% the year before, according to the report, which adds leasing activity this year is expected to be subdued.
It's been a wild market since the pandemic-induced boom of 2020-2022. Throughout 2020, the close-in vacancy rate was less than 1%, according to CBRE.
The close-in market's total vacancy, including user-owned buildings, is just over 14%. In the other main submarket, Bothell, the total vacancy is 5.5%. Across the region, total vacancy rate is 11%.
This is not what CBRE brokers had been expecting a year ago when they foresaw slow leasing activity perhaps through the end of 2023 before demand bounced back.
Not all new buildings are struggling, however.
At the end of last year, the largest of the crop — Alexandria Real Estate Equities Inc.'s (NYSE: ARE) Eleven50 Eastlake in South Lake Union — opened fully leased.
On the waterfront, Unison has two renovated buildings, 401 and 501 Elliott Ave. W., where Sonoma Biotherapeutics leased 44% of the space.
Local employment
| Rank | Prior Rank | Business name (prior rank) |
|---|---|---|
1 | 1 | Seagen Inc. |
2 | 2 | Bristol Myers Squibb |
3 | 3 | AGC Biologics |
