Emeryville appears to be the epicenter of the East Bay’s life science decline, with a vacancy rate that reached 37.5% in the first quarter of 2024 and held steady at 37% in the second quarter, according to CBRE data .
The East Bay life science market as a whole, where over 1M SF of new lab space is nearing delivery, posted a vacancy rate of 12.4% in the second quarter.
During the pandemic, East Bay markets including Emeryville, Berkeley and Alameda saw an increase in life science development backed by VC funding, with nearly 2 million SF of shipments between 2022 and 2023.
Emeryville, a two-square-mile city, had more than $650 million in life science building permit applications between 2021 and 2023. The new development boosted the city’s inventory to about 1.5 million SF, the same size as the science sector of life at Berkeley.
Now, with another 285k SF of life science space under construction in Emeryville, demand has dropped significantly and there are signs of concern.
According to a lawsuit filed in Alameda County Superior Court this week, Boston-based life science developer Longfellow Real Estate Partners has not complied with a lease termination notice from its landlord, PSAI Real Estate Partners, for a 128K SF building at 1650 65th Street in Emeryville, part of a life science campus known as Atrium Labs.
The lawsuit alleges that Longfellow, which entered into a four-decade lease on the property in 2021 with plans to build a 750,000 SF life science campus, has fallen behind on rent payments for the downsized campus. San Francisco Business Times reported.
In 2022, Longfellow converted an existing office building at the 65th Street site into laboratory space. The developer also purchased a neighboring property at 6601-6603 Shellmound Street with plans to renovate a 63K SF building into laboratory space and create a life science campus on both properties.
According to city records, the two renovation projects have been completed but remain vacant. Swiss biotech firm Lonza Group signaled interest in leasing 150,000 SF at the campus in late 2022, but dropped those plans last year, the report said.
Longfellow listed the Shellmound property for sale last month and could face eviction from the 65th Street building.
In its lawsuit, PSAI seeks return and possession of the property, forfeiture of rent, $670,833 in back rent, damages of $11,000 per day after the lease ended on August 3, and legal fees. Citizens Bank, which in 2022 took out a $113 million construction loan backed by the property, was also named in the lawsuit, the report said.
In a statement given to Business TimesLongfellow said it is “focusing” on its plan for Atrium Labs and is negotiating with the landlord to modify the terms of the ground lease for the property.
“After careful consideration, we have made the strategic decision to orient our business plan to the Atrium Labs campus,” the statement said. “Longfellow and the lessor of the ground for the 1650 65th Street building are in discussions to modify the terms of the ground lease to ensure the long-term success of the project.”
“Longfellow remains a strong believer in the Bay Area life science and innovation market, particularly at our existing campuses and projects located between Mission Bay and Palo Alto,” the statement said.
Biomed Realty is building a 1.3M SF life sciences campus in Emeryville now called Emery Yards, formerly known as the Biomed Innovation Center. The first 285K SF of the project has been delivered.
Other life sciences developers are backing away from plans for speculative development. Last year, Chicago-based CA Ventures dropped plans to build a 350K SF life sciences project in Emeryville.