Is San Diego's Life Science Office Sector Overbuilding?
Some 500k SF of spec life science office space could be coming out of the ground this year, according to Alexandria Real Estate Equities EVP Dan Ryan, who'll be speaking at our 2nd Annual San Diego State of the Market on March 12 at the Hilton San Diego Bayfront, starting at 8am. (Register today!) And that could put a damper on rent growth over the next 18 months.
With the recovery came confidence by developers to move forward on spec projects like BioMed Realty Trust's i3 campus, a 316k SF biomed office project in UTC. "We are being thoughtful about the amount of supply that will be in the marketplace,” Dan says. “We have a significant run-up in rental rates over the past year, and we want to be in a position to defend and push rates even higher. There is not a whole lot of new requirements in the life sciences market.” That said, ARE's San Diego life science office portfolio is 97% occupied, and it's also seeing strong demand for its UTC redevelopment project.
ARE already scored a win, bringing Receptos to its Spectrum One redevelopment for its 65,500 SF HQ (which we reported here). And Dan says the firm plans another 100k SF redevelopment of 9625 Towne Centre (here) when Amylin Pharmaceuticals vacates the premises this year. Dan says the market has been good so far with “most of the space in our universe spoken for today.”
Another panelist, Murphy Development's Kaitlin Murphy (with her father Michael Murphy) whose firm has three build-to-suit projects in the pipeline, including Siempre Viva Business Park and Brown Field Technology Park in Otay Mesa (both industrial), and the massive 31-acre, 700k SF Scripps Ranch Technology Park (office).
That said, the firm could go spec on a 120k SF industrial building at Siempre Viva, Kaitlin says. Otay Mesa is a submarket that is seeing a revival of sorts from the recession. Murphy hasn't done a deal there since 2008, but “Otay has been a product of the recession, and it's just now coming back.” Don't expect Murphy to stray too far from Otay in the future, especially on the investment side. “I don't think we'll ever end in Otay. We know Otay really well. We know the players.” To hear more, please join us for our 2nd Annual San Diego State of the Market on March 12 at the Hilton San Diego Bayfront, starting at 8am. Sign up here.