Two of the largest owners and developers of U.S. real estate will co-develop a massive life science campus at a current office space site.

Boston Properties has entered into a joint venture with Alexandria Real Estate Equities to build a 1.7M SF life science campus in South San Francisco.

Boston Properties confirmed the deal in its Q4 2019 earnings call this week.

The project will involve about 640K SF of ground-up development, and the potential repositioning of about 1M SF of office space into new life science buildings, according to Boston Properties.

"Upon completion of the development plan, the joint venture will comprise a significant critical mass of 1.7M SF of office and life science space, and a premier location in one of the strongest life science markets in the U.S," Boston Properties CEO Owen Thomas said in the company's earnings call on Wednesday.

In the joint venture, Boston Properties, now the sole owner of San Francisco's iconic Salesforce Tower after buying out Hines' 5% interest last year, will contribute its Gateway Commons campus, which consists of three Class-A office properties along Gateway Boulevard.

Alexandria, Boston Properties says, has contributed properties totaling about 313K SF, including lab, office and amenity buildings, as well as developable land, all adjacent to Gateway Commons, which allows both owners to end up "creating value just by putting two sites together."

Alexandria, which has its own earnings call next week, did not immediately respond to a request for comment.

Rebalancing property types in the area also allows both companies to satiate more of the biotech industry's demand for lab space in South San Francisco. Average asking rents for Class-A office space in South San Francisco last quarter were $46.20 per SF, while Class-A R&D space averaged an asking rent of $69 per SF in South City, according to CBRE.

"Gateway is a very well-located office park near transit in South San Francisco, which is a very strong lab market and, frankly, a less strong office market," Thomas said.

Elsewhere in the Bay Area, Boston Properties has big office projects that could soon break ground, including 1.1M SF Platform 16 in San Jose and 4th and Harrison in San Francisco.

In San Jose, though, things could unfold even sooner. The partnership has already agreed to a plan for one of likely three ground-up lab buildings of about 200K SF and is hopeful it can pull permits in the coming months.

"There is a possibility that we could launch one of these buildings this year," Thomas said.