Bay Area Life Science Construction Boom To Continue
With over 2M SF in demand for life science space, real estate companies are leasing up space as fast as they build it in the San Francisco Bay Area. South San Francisco continues to be a magnet for life science companies, and the top three life science real estate companies are all building major campuses.
What makes South San Francisco most receptive to life science development is its 40-year history of having life science within its city limits, according to BioMed Realty VP and San Francisco market lead Scott Altick, above.
“[City officials] know what they are doing … They are open to working with the life science community developers and open to those users,” Altick told Bisnow.
He said vacancy remains in the low single digits and tenants are actively looking for space. Established life science tenants are competing for top talent in the Bay Area and looking for locations to help attract and retain that top talent.
Altick has seen companies consolidating multi-location offices into one large space in one location. BioMed Realty is developing a space in Foster City for Illumina as part of the company’s Bay Area consolidation. That 360k SF development is expected to be completed this year. It will include a 40k SF amenity center.
Demand Driving Construction
So far, demand has led to significant pre-lease activity. Altick expects BioMed Realty’s new 1.3M SF development Gateway of Pacific (site pictured above) in South San Francisco to break ground this year, and he’s already in discussions with several tenants while they prepare the site.
Before construction had even begun on Alexandria Real Estate Equities’ latest project in South San Francisco, it secured a long-term, full-building lease from Merck for 213 East Grand Ave (rendering above). Alexandria will begin construction on the 294k SF building early this year and the firm expects the building to be completed early 2019. The building will target LEED Platinum certification.
“We’re seeing a real renaissance in scientific discoveries and new medicines and a genomic revolution,” Alexandria Real Estate Equities COO and regional market director of San Francisco Steve Richardson told Bisnow.
Richardson said there’s also been an awakening within the philanthropic community, which has led to more funding toward developing new medical breakthroughs.
Four key drivers have helped create a life science hub in the Bay Area, according to Richardson (above). There’s quality scientific research coming out of UCSF, Stanford and UC Berkeley. Plenty of talented entrepreneurs are flocking to the Bay Area and there is an abundance of talent with advanced degrees in chemistry, biology and genomics.
The venture capital community has been backing life science, raising record amounts last year with deepening capital heading into this year, Richardson said.
The location also contributes to the area’s success. South San Francisco is home to major companies such as Genentech. San Francisco's Mission Bay, another burgeoning life science and tech hub, is the site of UCSF's research campus and medical center.
Richardson said Cambridge, MA, is the most similar to the Bay Area in terms of meeting these key qualities. Cambridge and the Bay Area make up Alexandria’s largest regions. The company also has properties in New York, which is fast becoming a burgeoning sector, as well as San Diego and Seattle.
“What we see in urban clusters is an intersection of science and tech,” Richardson said. He’s seen this in both the Bay Area and Cambridge.
The real estate developer operates about 3.7M SF in the San Francisco Bay Area. This includes three build-to-suit projects under development in Mission Bay/SoMa. Its properties in Mission Bay/SOMA, South San Francisco and Palo Alto/Stanford Research Park are nearly 100% leased to a diverse group of tenants. It is also working with various tech firms such as Uber, Stripe and Pinterest for space in its Mission Bay/SoMa properties.
HCP plans to begin Phase 3 of its huge campus product The Cove at Oyster Point early this year, adding two Class-A buildings totaling 336k SF. Delivery is expected during the second half of 2018. A fourth phase will add the seventh and final 165k SF building.
Occupancy of the second phase (under construction above) of The Cove, two buildings totaling 230k SF, a parking structure and retail, is expected to begin during the fourth quarter of this year and already includes a lease for AstraZeneca. Once finished, the entire complex will have 1M SF pre-certified LEED Silver buildings and a business-class hotel expected to open this year.
South San Francisco isn’t the only area to benefit from a boom in life science. Wareham Development broke ground last November on a 200k SF office/life science transit center development in Emeryville. It is expected to be completed by the end of the year.
Much like any other office space, life science real estate companies continue to try to outdo each other on amenities. Employers can use these extras to help attract and retain talent.
Tenants ultimately become more efficient with their space and can leverage 50k SF of campus amenities they don’t have to include within their office plans, Altick said. They can also use multiple conference rooms as well as fitness and café amenities within a campus amenity center.
BioMed Realty’s Gateway of Pacific complex will offer 50k SF of amenities (model above) including food and dining options, a fitness center, a park, a multi-room conference center and a green roof.
HCP’s The Cove offers amenities through its Foundry & Lux building (above), designed by Stephen Francis Jones. The multi-story 30k SF amenities complex opened last year and offers a café, a large market hall, an evening lounge, bowling lanes, a pool table, an outdoor fireplace and a fitness center. Outdoor sports courts also are available to tenants.
Alexandria’s new building will feature open green space and an outdoor event area. There will be a 300-seat auditorium, a fitness center, a café and a terrace with waterfront views.
With so many buildings and campuses now offering standard amenities, Altick said there will be a preference toward newer developments.
“Older buildings may have a café in the lobby, but amenities aren’t really thought out,” Altick said. “New developments have a focus on amenities.”
Altick said tenants are demanding amenities such as conference facilities, and gym, and health and well-being services on-site.
“People want the ability to take a break, but still be on campus,” Altick said.
A small startup now can be just as competitive in attracting employees because it can offer the same amenities as a large employer at sites such as BioMed Realty’s Pacific Research Center in Newark. The multi-tenant 1.4M SF campus offers 45k SF of amenities and has both large and small tenants.
The former Sun Microsystems campus was an ideal buy for BioMed Realty several years ago. The site had significant infrastructure perfect for lab space and large floor loads, great HVAC and power systems, and large shipping areas. The company renovated the site from a single tenant office/R&D campus to a multi-tenant life science and technology campus.