Tough market for life science

But due to a market slowdown, IQHQ is seeking entitlement extensions for 10 years to give them more time to finance and build out the proposed campus. Typically, entitlements are only valid for two to three years, at which point developers would need to re-apply and undergo the entire review and approval process again.

The situation is not unique to the Dubuque project. Bay Area life science developments, which have more needs and requirements than traditional office buildings, have continued facing difficult lending conditions and too much supply relative to demand.

“Demand is down because there is not a ton of funding,” said Tony Rozzi, deputy director of Economic and Community Development. “That money is not pouring in the way it did.”

Biotech layoffs in San Mateo County are only slightly lower this year than this time in 2024 — about 1,040 industry layoffs have been announced so far in 2025, compared to roughly 1,400 this time last year — and real estate development is also proving slow to bounce back.

In Belmont, three of its five major biotechnology projects have been withdrawn or indefinitely paused as of April. According to a CBRE market report, last quarter saw a 32% vacancy rate in life science buildings across the Bay Area — nearly four-fold the rate from 2022. The amount of lab space under construction in the region as of last quarter has also been significantly less than prior years.

With less funding from the National Institutes of Health and pharmaceutical tariffs, the report added, midsize life science firms are reassessing their real estate needs, which has also contributed to higher sublease activity.

South City also has other developments in the works — including Kilroy Realty’s Oyster Point and Southline — meaning the anticipated supply is only contributing to higher vacancy rates.

“South San Francisco in general really needs some time to absorb all of the life science that is coming online that we’ve developed over the last five years,” Rozzi said.

Even though the issue is particularly acute in South City, which depends largely on biotechnology as an economic driver, Justine Nielsen, senior vice president of development at IQHQ, said the firm is experiencing the challenges in nearly all its large markets.

“The challenges that we’re facing are not unique or particular to this jurisdiction. It really is an unprecedented and extended downcycle for this particular product type,” Nielsen said. “We’re seeing it nationwide.”

While life science firms continue generating revenue in their local areas after they’re built, much of that ongoing revenue, such as property tax, goes to the county. The city itself relies heavily on new construction, as that is when developers pay impact and community benefit fees, which go toward a number of its services and infrastructure, such as child care, affordable housing and parks.

“Preserving those entitlements preserves all of those impact fees,” Rozzi said.

While such fees are often paid by developers closer to the time of permit issuance, the proposed agreement would require the developer’s pre-payment of most of the community benefit fees to the city over five years.

The Planning Commission voted to recommend the 10-year agreement, which also needs to go before the City Council for approval.