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What Led to SD's VC Funding Pullback?

SAN DIEGO—Market uncertainty as well as a natural “breather” before the election were largely responsible for the 27% decrease in overall VC funding in Q3 as compared to the 10-year average in the San Diego market, JLL's Chad Urie tells GlobeSt.com.

By Carrie Rossenfeld | Updated on December 20, 2016
Chad Urie Urie: “I think VC investors like to think they are discovering the next unicorn, and some do, but for many in this climate over the past year it has been a herd mentality where investors make larger, safer and fewer bets.”

SAN DIEGO—Market uncertainty as well as a natural “breather” before the election were largely responsible for San Diego’s 27% decrease in overall venture-capital funding in Q3 as compared to the 10-year average in the San Diego market, JLL managing director Chad Urie tells GlobeSt.com. According to the firm’s Q3 Life Sciences Outlook, San Diego biotech companies secured $149 million in VC funding among 11 deals, a 24% decrease from the prior quarter but a 172% increase from Q4 2014. San Diego trailed only San Francisco and Boston/Cambridge in terms of VC invested into biotech during Q4 2015.

In addition, the report showed that after a strong 2014 that saw record leasing activity and healthy rent growth in life-sciences real estate, 2015 continued to build on the momentum from the prior year with 1.7 million square feet of gross leasing activity, a 31% increase from the five-year annual average. Transactions for new build-to-suit facilities have reached rents in the mid-$4-per-square-foot NNN range, a 10% to 15% increase from the end of 2014. Likewise, rates for second-generation class-A lab space have increased. Starting rents for deals signed at the end of 2015 ranged from the mid-$3 to low-$4-per-square-foot NNN, an increase of approximately 10% during the year.

Also, over the past 12 months, more than 800,000 square feet of office buildings has been acquired by life-science landlords, who are actively repositioning these assets into new class-A wet-lab facilities. To date, approximately half of this new inventory has already been leased.

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