Peter M. Moglia
Chief Executive Officer and Co-Chief Investment Officer at Alexandria Real Estate Equities
Thank you, Hallie. 2022 was quite a volatile year in the macro markets, a reminder that all businesses are subject to cycles, some more than others. The pruning we see in the tech industry today is not a surprise to anyone who's been around since the turn of the century. However, much like a broken bone, it will come back stronger after it heals.
Unlike tech, developing products and services to address disease is hard and takes a lot of time, much harder and more time consuming than creating the next app to book a reservation or share recipes. Because of that, there is more discipline in life science investment, a discipline Alexandria has mirrored in our real estate strategy, which is why through the dot-com burst to the financial crisis, to whatever you want to label today's conditions, our business remains sound, as you can see in our results this quarter and during those historic down cycles.
Despite the macro headlines, we remain optimistic and excited for our business as we are in the early innings of the Golden Age of Biology. We have only had the blueprint of the human genome for 20 years. And in that time, we've developed more new modalities to attack disease than in the previous 100. It's going to be hard, and it's going to take time, but the industry is going to have options for people with Alzheimer's. It's going to perfect technology to detect pancreatic cancer in time to save lives and much, much more.
So let's all remember, it's hard, it takes time and patience, and then you will understand why life science research and development continues through the proverbial thick and thin of economic cycles, making our business resilient and essential. With that said, I'll briefly touch on our development pipeline progress, update you on construction trends, discuss our leasing and update you on investor demand for life science real estate.
In 2022, our best-in-class development teams continue to deliver high-quality, purpose-built laboratory space to our tenants on time and on budget in a very challenging construction environment, which I'll touch on in a moment. During the fourth quarter, we delivered just shy of 500,000 square feet, with $28 million in annual NOI commencing during the quarter. For the year, we delivered 1.77 million square feet spread over 15 development and redevelopment projects, with annual NOI of $119.2 million commencing during the year. Initial stabilized yields for recent deliveries averaged 6.8% and 6.3% on a cash basis, reflecting the healthy contractual annual increases embedded into our leases.
As of year-end, projects under construction and near-term projects expected to commence construction over the next four quarters totaled 7.6 million square feet and are 72% leased. Approximately 77% of that leasing has come from our approximately 1,000 existing tenant relationships. New projects added this quarter include 1450 Owens, which is approximately 213,000 square feet and will be 100% funded by our joint venture partner; and 10075 Barnes Canyon Road in Sorrento Mesa, which will be 50% funded by our joint venture partner. Both projects are under active leasing negotiations.
Deliveries primarily commencing from the first quarter of '23 through the fourth quarter of '25 are expected to add $655 million in annual incremental NOI, reflecting a strong pipeline driven by consistent demand even in this volatile time.
Transitioning to leasing. The fourth quarter results continue to demonstrate the strength of our unique one-of-a-kind Company, with leasing volume of 2,000,322 square feet leased in the quarter; the fourth highest total in Company history. The 8,405,587 square feet leased for the year is the second highest annual total in Company history. And as you can see in the supplemental, the -- our guidance for strong mark-to-market growth remains unchanged from Investor Day with a range of 27% to 32% on a GAAP basis and 11% to 16% on cash.
These results are certainly reflective of Hallie's commentary on the strength of VC funding and the stellar 2022 performance of large pharma. With $300 billion in cash on hand, we anticipate further investment in growth from this high-credit tenant sector in 2023 and the successful conversion of early innovation to commercialization reflected in the 37 FDA approvals in 2022 will incentivize continued investment in new and existing companies that have sound business models and underlying science; a cohort of companies Alexandria has a unique ability to identify.
The highest quality life science tenants always consider occupancy in the best assets as an imperative. Their facility and campus are not only used for research and development, but is a critical tool for them to recruit and retain the best scientific and management talent in the world, which is by far their greatest asset. Therefore, demand for Alexandria facilities and our unrivaled mega campuses remains healthy as the facilities are A+, and our operational excellence is highly sought after.
Moving to construction cost trends. At a high level, it appears the construction industry is on the cusp of slowing down. One of the leading economic indicators of the industry is the AIA Architectural Billings Index that leads nonresidential construction activity by nine to 12 months. Design work is at the front-end of projects so architects are the first consultants to slow down. Recent numbers show the 3% moving average heading towards no growth in billings and commentary from the AIA was that fewer clients are expressing interest in starting new projects.
For the first time since the post-pandemic restart of construction projects, which was the genesis of significant cost inflation and supply chain problems, we're starting to see some signs of materials pricing flattening out and general contractors and subcontractors looking for work.
That said, there are still items such as aluminum, rebar, copper and glass up 16% to 21% over this time last year, and it's still very difficult to obtain electrical switchgear, emergency generators, building controls and smart air handling units because despite an improvement in availability of chips, there are more products using chips than ever before. So demand for them is still ahead of supply.
Laboratory buildings are heavy consumers of these hard-to-get items. So to keep a laboratory construction project on time and on budget is a difficult task. Alexandria has the intel and experience needed to make quick decisions and relationships with critical vendors to ensure we have access to the materials and labor needed to meet our schedule and budgets.
Despite the continued construction market pressures, as mentioned, we do believe the industry is on the cusp of slowing down, and we do expect cost escalations to reflect that in 2023, reducing from 9% to 10% -- from the range of 9% to 10% experienced in 2022 to 4% to 6% in 2023.
However, the $2.3 trillion infrastructure spend over the next eight years will continue to put pressure on costs and labor so we will continue to conservatively underwrite and manage our value creation projects. As of the end of the year, 81% of our active development and redevelopment projects, aggregating 5.6 million square feet, are under GMP or other fixed contracts, which is consistent with the run rate we have maintained during these volatile times.
Anticipating year-end volatility in the real estate investment markets, we completed our 2022 value harvesting and asset recycling efforts in the third quarter with impeccable execution as we laid out at Investor Day. Overall, we completed $2.2 billion of value harvesting, with the improved properties achieving a weighted average cap rate of 4.4%, realizing a total gain of $1.2 billion and a value creation margin of 107%. This is a tremendous achievement considering the volatile interest rate environment in 2022 with many real estate investors on the sidelines. It speaks to the desirability of our assets, which are in the best markets with high-quality tenants and managed with operational excellence. High quality life science assets are scarce, and that is reflected in the pricing.
We have started working on, and are making good progress on 2023 value harvesting and asset recycling, and we'll update you on that next quarter. But in the meantime, we'd like to report on three notable non-Alexandria sales that illustrate that there is still strong demand for life science real estate product. The first is the sale of 1828 El Camino Real and Burlingame in the Bay Area. Anchored by three non-credit life science tenants, the property is 98% leased, but is extremely low quality with limited window line, no shipping and receiving, no backup power and venting through the windows to get adequate HVAC. Despite this, an investor paid $902 per square foot for this asset at a cap rate of 5.8%.
The second trade was in the Route 128 submarket of Lexington Mass, where a single non-credit tenant occupied 101,310 square foot manufacturing building at 20 McGuire Road sold in October for $878 per square foot and a 6.2% cap rate. The third comp, which closed last week is an R&D campus known as the Gauge and Center Point in the Route 128 submarket of Waltham. It traded for $983 per square foot and a 5% cap rate. It was reported that some of that -- some vacancy existed at that property and that the stabilized return is likely to be in the high-5s.
As the Fed continues to pull levers to battle inflation, we expect we will see cap rates move up, but much less on a relative basis to other product types, and thus, we remain well positioned to fund our value creation pipeline efficiently and at a relatively attractive pricing by harvesting our value creation among other sources.
With that, I'll pass it over to Dean.
