2Q ‘07 East Bay Office Report - Click here for full version

The Bay Area currently is home to about 20 million square feet of lab space. The

vacancy rate for life science lab space is below 10% leaving very little room for

future growth. New construction is scarcely keeping up with the current

demand. It is predicted that in the next 12 months, 30 start-up biotechnology

companies will spawn from Northern California alone.

Wareham Development’s recent completion of its new state-of-the-art lab

facility immediately addresses part of the demand. Wareham, a local developer

of office and lab space and the largest life sciences landlord in the East Bay, has

timed the delivery of EmeryStation East very well. Wareham has signed term

sheets for 74% of the 245,000 square foot building which was completed in

June on spec.

UC Berkeley along with Keasling Labs, a research lab associated with the

university and focused on clean energy, was recently awarded 2 research grants

totaling $625 million. The grants, from the US Department of Energy and BP,

have spawned several leasing requirements from UC Berkeley and other related

clean energy companies. With these well-funded organizations vying for the

premium new space, there has been a steady flow of smaller tenants being

forced to surrounding areas.

Given the asking rents for Emeryville lab space ($3.50NNN) and supply

constraints, tenant demand in surrounding submarkets has been on the rise. In

submarkets such as Alameda, Hayward, Fremont and Richmond typical asking

rents are closer to $2.00NNN. The trade-off for tenants in these suburban

markets are less public transit alternatives and amenities. Second and third

generation space has become the only economic alternative for smaller companies

and those companies in the early stage of development.