How is the debt market for life science offices?
Looks like life scinece offices are the newest to join the "under stress" category, which is no surpise to anyone.
Just curious if anyone here knows the availability and cost for construction/bridge/fully-stabilized debt for life science project. Are there still many lenders in the market for this asset class?
Many office developments need pre-leasing for lenders to feel comfortable to a degree and i'm assuming life sciences is no different in the current environment. Leasing from what I have heard is very slow especially in SF which is a major life sciences market (30% overall office vacancy).
I expect more pain coming forward and difficulty financing all types of office.
Are you talking stabilized or conversion / development deals?
Conversion / development market is very thin. We’re working on a deal with a tier 1 sponsor and basically no one wants to do it.
If you are under 50K SF then you may be able to find a tenant and then a lender. if you are significantly over 50k SF, then it's basically dead. Lenders were hesitant to do construction loans on spec when we were not headed for a recession and interest rates were 4%. They are definitely not doing spec lending now. We did almost have one interested lender and IIRC it was SOFR + 500-600bps Source: was staffed on a life science development looking for a tenant and construction financing. Every week our call with JLL/CBRE/Colliers' capital markets and leasing team went like this:
Development Team: Morning guys, any updates?
JLL/CBRE/Colliers: No
Development Team: Okay, thanks. Good talk. Talk to you next week.
I’m at an institutional shop and we just executed a term sheet at SOFR + high 3s. Well over 50,000 SF and under 30% pre leased.
The moneys out there, just need to have the credit to get it.
Wow that’s really interesting—what ltc were you looking at there? Was there a mezz on top?
How did you get comfortable with the amount pre-leased? Would be really curious to hear any info you can share
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