Peter Moglia
Chief Executive Officer & Co-Chief Investment Officer at Alexandria Real Estate Equities
Thanks, Jenna. A few days ago when reading a capital markets report, I came upon the line, uncertainty is arguably the harshest enemy of investing. It was a very concise way of describing what we have all been seeing in the broad economy over the past couple years. It has even hit the somewhat insulated life science industry over the past few quarters, manifested by slower decision making and the tightening of budgets by executive teams and boards. Nonetheless, progress continues in the labs, milestones are being achieved, and success is being rewarded. The golden age of biology will not be stopped. The flywheel is starting to turn again, and we're excited to see the life-changing innovations this inertia will bring, and Alexandria is perfectly positioned to capitalize on it.
I'm going to briefly touch on our development pipeline, leasing, supply, and asset sales, and then hand it over to Dean. In the first quarter, we delivered 387,076 square feet and four projects into our high barrier to entry submarkets, bringing total deliveries year to date to 840,587 square feet covering seven projects. Annual NOI for this quarter's deliveries totaled $58 million, bringing the year to date total incremental additions to NOI to $81 million. The initial weighted average stabilized yield is 6.4%, influenced by a build-to-core project in East Cambridge housing the next generation of companies from the investors who brought the world Moderna. Development and redevelopment projects saw an uptick in activity for the quarter with approximately 142,000 square feet of leases signed covering six multitenant projects. As of quarter end, we have another 42,000 square feet under negotiation.
During the quarter, we placed a lab conversion opportunity at 401 Park Drive and the ground up development of neighboring 421 Park Drive, both located in the Greater Boston submarket of the Fenway into near-term projects expected to commence construction in the next three quarters stabilizing in 2025 and beyond. A portion of the 421 Park Drive Project is in process of being presold to a research institute, which will be a highly complementary -- which will be highly complementary to the development of the mega campus, and the proceeds will help fund the remaining 392,000 square feet of the development. This transaction, along with the joint venture that will fund the remainder of 15 Necco, which closed in April, are great examples of the optionality Alexandria has to fund its value creation pipeline. At quarter end, our pipeline of current and near-term projects is 70% leased and is expected to generate greater than $605 million of annual incremental NOI, primarily through the second quarter of 2026. The decline from 72% leased last quarter was due to the addition of the new Fenway projects. Excluding those additions, the pipeline would have been 74% leased.
Transitioning to leasing and supply, once again our strong brand loyalty, mega campus offerings, and operational excellence continue to drive strong leasing numbers in a challenging market. We are pleased to report leasing volume of 1.3 million square feet achieved in the second quarter, which again exceeded our five-year pre-2021 average and is the 13th consecutive quarter where we've achieved a leasing volume above 1 million square feet. Rental rate increases were 16.6% and 8.3% on a cash basis, reflective of leasing volume heavily weighted towards Seattle, Research Triangle, and Maryland. Despite spreads coming down from the COVID rocket ship numbers, net effective rents remained strong in our operating assets due to their generic buildout, which enables renewals and the re-leasing of vacant space with minimum capex.
Another positive realized this quarter was a notable increase in demand ranging from 15% to 20% in our top three markets, a sign that perhaps investors are seeing the light at the end of the tunnel when it comes to economic uncertainty, but also likely driven by significant dry powder they need to put to work. There have also been an increase in 100,000 square foot plus requirements in a few regions driven by large pharma and biotech anticipated venture creation investments. Alexandria is well positioned to capture this demand because many of these opportunities are coming from existing relationships, which typically account for a significant amount of our leasing. In the first half of the year, we have leased 2.55 million square feet, of which 82% was generated from existing tenants.
In addition, our mega campus offerings providing the ability to scale and a wide variety of amenities are the clear choice of high-quality companies. We spent considerable time during our June Nareit meetings discussing supply and recently covered it in our White Paper. The data presented in those meetings and the White Paper was from the first quarter of '23 and we'll update it for you here. As a reminder, we perform robust, on-the-ground, building-by-building analysis to identify and track new supply from high-quality projects we believe are competitive to ours and our high-barrier-to-entry submarkets. We focus primarily on high-barrier-to-entry markets and our brand mega campus offerings in AAA locations and operational excellence enables us to continually mine our vast, deep, and loyal tenant base to drive our leasing activity, which will likely lessen the impact of generic supply.
In Greater Boston, unleased competitive supply remaining to be delivered in 2023 is estimated to be 1.6% of market inventory, a slight increase of 0.01% over last quarter. In 2024, the unleased competitive supply will increase market inventory by 5%, a 0.3% reduction due to the lease up of that inventory during the quarter. In San Francisco, unleased competitive supply remaining to be delivered in 2023 is estimated to be 6.6% of market inventory, which is unchanged. In 2024, the unleased competitive supply will increase market inventory by 8.8%, a 0.3% reduction due to a downward revision of estimated square footage to be delivered during the year.
In San Diego, unleased competitive supply remaining to be delivered in 2023 is estimated to be 3.5% of market inventory, which is a decrease of.8%, due mainly to projects being delivered with unleased space now reflected in direct vacancy. In 2024, the unleased competitive supply will increase market inventory by 4.9%, a 0.4% reduction due in part to a paused conversion project and a decrease in scope of another one.
Direct and sublease market vacancy for our core submarkets is updated as follows: Greater Boston direct vacancy stayed stable at 2.8%, but sublease vacancy increased by 1.5% to 5.4% for a net increase in available space in operation of 1.5%. San Francisco direct vacancy stayed stable at 2.3%, but sublease vacancy increased by 2.7% to a total of 6.2% for a net increase in available space in operation of 2.7%.
San Diego direct vacancy increased from 4.1% to 4.8%, largely due to delivered unleased new supply and sublease vacancy increased by 1.8% for a net increase in available space in operation of 2.5%. We are tracking new supply to be delivered in 2025, and we'll update you on those statistics next quarter, but our current read is that volume will be below 2024 deliveries likely due to high construction costs, higher cost of capital, a lack of available debt financing, and adequate supply currently under construction.
I'll conclude with an update on our value harvesting asset recycling program. We are quite proud of and fortunate to own assets in a scarce asset class. As you all know, the past few months have had little transactional activity in the broad markets. But because of the attractiveness of our product type, Alexandria has been able to make great progress towards reaching our value harvesting goals. At quarter end, we had closed $701 million of sales, including the 15 Necco sale announced last quarter, and have another $175 million pending for a total of $876 million, which is a little over halfway to our midpoint guidance.
We have a number of other efforts in progress or soon to be launched that would exceed our guidance if we choose to execute on all of the opportunities. The vast majority of those identified assets are noncore, non-campus assets we plan to fully dispose of and reinvest the proceeds into our value-add pipeline. Notable sales closed in the first quarter include the sale of 100% interest in 11119 North Torrey Pines Road for $86 million, or $1,186 per square foot, at a strong 4.6% cap rate. There is a significant mark to market on the asset when the lease expires in approximately 4.5 years, but a fair amount of capital will be needed to execute on that opportunity. This asset was a one-off for us, and there was no opportunity for us to aggregate a campus around it.
We sold 20.1% of our joint venture interest in 9625 Towne Centre Drive, an asset jointly owned with an institutional partner who wanted to exit their position and initiated the sales process for their interest only. Given the strong demand for this university town center asset, we decided to participate in the sale, which captured $32 million in proceeds at a strong 4.5% cap rate, reflective of a high-quality building, tenant credit, and the future mark-to-market opportunity we will participate in with our continued ownership.
A portfolio of noncore assets, inclusive of our Second Avenue assets in Waltham and our legacy non-mega campus affiliated 780 and 790 Memorial Drive asset located in Mid-Cambridge, sold for $365.2 million, or $852 per square foot, at a combined cash cap rate of 5.2%, reflective of a mix of credit quality, some vacancy, and term. We also completed the sale of pure office asset 275 Grove Street in Newton, MA. Originally planned for conversion to lab as part of an assemblage of adjacent assets into a mega campus with Green Line access, the opportunity did not come to fruition. So we made the prudent decision to sell this non-core office asset. The $214 per square foot price reflects its 70% occupancy, the negative sentiment of office buildings outside of cluster locations, and a significant amount of capital needed to reposition the asset. Overall, we are very pleased with the results achieved thus far in our value harvesting asset recycling program. As mentioned, we have identified more than enough noncore opportunities to achieve our goals to fund our 2023 growth primarily through dispositions.
With that, I'll pass it over to Dean.
