Pharmaceutical giant Eli Lilly's expansion of United States drugmaking real estate is picking up with the completion of a major lab facility near San Diego designed to house up to 15 biotech firms, a move that also marks just the latest major life sciences property investment for the industry across the country.
Indianapolis-based Eli Lilly said its newly opened Lilly Gateway Labs facility spans more than 82,000 square feet at developer Alexandria Real Estate Equities’ growing One Alexandria Square mega campus in the Torrey Pines coastal neighborhood of La Jolla.
Longtime biotech analyst Greg Bisconti said Lilly's latest expansion is emblematic of a nationwide increase in life science property demand, after nearly three years of slowed leasing and development triggered by shifts in research priorities in the post-pandemic era.
“Rather than signaling a brand-new trend, I see it as a continuation of a steady pattern where large pharma companies — Lilly, Novartis, Bristol Myers Squibb, Becton Dickinson, and Pfizer — are all making significant, long-term real estate commitments," Bisconti, executive managing director in the San Diego office of brokerage JLL, told CoStar News.
The move reflects added spending by both developers and drugmakers on biotech real estate. One Alexandria Square is part of Alexandria’s nationwide mega campus approach to attracting new tenants, with enhanced features including on-site restaurants, an event lawn, walking path and high-tech meeting venues.
For Eli Lilly, the labs facility is part of an expanding network of “shared innovation hubs” designed to support early-stage biotech companies by giving them space to collaborate with Lilly scientists. Operated in conjunction with landlord Alexandria, the new San Diego facility is designed to accommodate up to 15 companies and more than 250 employees.
“The future of medicine depends on combining the strengths of academia, biotech and large pharma to solve some of the most difficult diseases facing patients,” Daniel Skovronsky, chief scientific officer and president of Lilly Research Laboratories, said in a statement from the company. “Our expanded presence here enables us to further connect with San Diego’s vibrant startup community, world-leading scientists and research institutions.”
More Lilly spending
The new San Diego labs come as Lilly ramps up its U.S. medicine production after the Trump administration said it would place import tariffs on pharmaceuticals and other goods.
Lilly in the past month said it plans to spend $6.5 billion to build a manufacturing facility in the Houston area that is expected to produce a key component in the drugmaker's new weight-loss medication. The company also announced plans for a $5 billion manufacturing plant in the Richmond, Virginia, area that will make ingredients used in drugs that treat cancer and other illnesses.
Lilly's proposed multibillion-dollar investments in Texas and Virginia are both eligible for millions of dollars in incentives from local and state governments.
The drugmaker plans to unveil two additional U.S. manufacturing sites by year-end. Several global pharmaceutical rivals have also announced significant U.S. manufacturing investments over the past year, in part to head off effects of planned federal import tariffs.
San Diego alone offers a glimpse into the added biotech property investment. Drugmaker Novartis this year unveiled plans for a new $1.1 billion biomedical research hub in the market, while rival Bristol Myers Squibb announced a 2026 opening for a planned new high-tech research and development facility consolidating its regional operations into one location.
Also, Pfizer now has under construction a 230,000-square-foot oncology research center after signing one of San Diego’s largest new leases of 2024. And medical device maker Becton Dickinson last year completed a 220,000-square-foot expansion in San Diego.
San Diego is the nation’s third-largest hub for biotech research and development, after Boston and San Francisco, with a large contingent of lab real estate, trained scientists, research institutions and related funding and support systems.
Bisconti, who isn't involved in the Lilly project, said the Gateway Lab model is particularly important because it strengthens the ecosystem for smaller emerging companies. Those firms have experienced particular financial struggles and space pullbacks in the past few years compared with their larger, global counterparts.
Signs of flowing capital
He said the combination of Lilly’s scientific resources and capital network, along with Alexandria’s development clout as the nation’s largest biotech landlord, should help startups stay in place while scaling their San Diego operations.
“Overall, demand in the market has been slower than in past years, but we’re starting to see encouraging signs of capital flowing again,” Bisconti said. “Boston and the Bay Area are showing early momentum, and we believe San Diego will benefit as that cycle continues.”
While tenants in the new San Diego space have not been formally announced, Lilly officials said the facility has already attracted several early-stage biotech firms. Since initiating the Gateway Labs concept in the San Francisco Bay Area in 2019, startups at the locations have represented a “diverse array of therapeutic approaches and disease areas,” and those companies have so far raised more than $2 billion in capital, Lilly said in the statement.
San Diego is the third location where Lilly developed a Gateway Labs facility with landlord Alexandria Real Estate Equities, after earlier setups in South San Francisco and Boston. Pasadena, California-based Alexandria said in a separate statement from the real estate investment trust that more than 50 therapeutic treatments and platforms are currently in development by early-stage firms collaborating with Lilly at those facilities.
“Our partnership embodies our shared mission to accelerate the trajectory of disruptive early-stage biotech companies and foster critical collaboration between innovative biotechs and large pharma,” Hallie Kuhn, senior vice president and co-lead of life science and capital markets at Alexandria, said in the REIT's statement.