Chicago-based real estate investment firms Harrison Street and Sterling Bay will pay $ 576 million to buy 1.4 million square feet in Sorrento Mesa and build a massive life sciences campus.
The companies announced in late August that they had signed an agreement with the current owner, the City Office real estate investment trust, with the agreement due on December 2. The purchase includes five existing buildings between 10,390 and 10,445 Pacific Center Court and nearly 13 other acres that buyers will use to build 1.1 million square feet of new offices and laboratories, with construction scheduled to begin by the end of 2022. .
This is the second major life sciences development project announced in the past year, as real estate company IQHQ acquired 1.3 million square feet along the San Diego Bay in September 2020 to create a life sciences mega-campus. But while the center of gravity of the biotech industry could eventually shift south, Sorrento Mesa remains a prime real estate area.
“San Diego is clearly one of the top three markets for life science clusters,” said Mark Burkemper, senior managing director of Harrison Street. “We want to place a very big flag in the ground for Sterling Bay and Harrison Street in Sorrento Mesa, which have excellent fundamentals both now and in the future for solid growth.”
Of the five existing buildings included in the purchase, four are currently leased by Qualcomm, Tanvex BioPharma and German chemicals company Wacker, which occupies two buildings. A 60,000 square foot property is currently available, according to Rodney Richerson, senior manager of Sterling Bay.
The companies received two offers on the vacant building from potential tenants, and although Richerson did not provide names, he said the plan was to rent the building at around $ 5.25 per square foot. The average asking rate for Sorrento Mesa’s biotech transactions during the second quarter of 2021 was $ 4.77 per square foot, according to a report by Jones Lang LaSalle, a commercial real estate company.
The land remaining from the purchase includes open plots along Pacific Mesa Court and near the intersection of Mira Mesa and Pacific Center Boulevard. This is where buyers will build high-end labs and offices, with indoor and outdoor lounges, fitness centers, and other amenities. Richardson says they’re just starting to interview architects for the project, which could start by the end of next year, and it’s still too early in the process for any company to express serious interest. .
This will certainly change in the coming months. The demand for office and laboratory space within the region’s burgeoning biotech industry easily exceeds supply. This is because these companies, brimming with record amounts of venture capital, are constantly hiring new workers and looking for a space to put them in.
Space is more and more difficult to find. In the second quarter of this year, the total availability in Torrey Pines and the University Downtown area was 1.4% and 0.5%, respectively, according to JLL. The average in San Diego was 4.3 percent.
The situation is slightly better in Sorrento Mesa, where the total availability was around 8%. This is partly why the region has garnered so much interest from growing life science companies.
Another reason: the location. Sorrento Mesa is a 10-minute drive from institutes that produce biotech brains, including UC San Diego, Scripps Research, Salk Institute, and Sanford Burnham Prebys.
“Sorrento Mesa, in particular, has been one of the most invested markets in San Diego among national and international companies, and many office buildings and campuses have been targeted for redevelopment into laboratory spaces,” Joshua wrote. Ohl, real estate market analyst. tracker Costar, in an article aptly titled “The San Diego Life Sciences Market Is Hot.”
In April, Sterling Bay and Harrison Street announced they had purchased properties along Oberlin Drive, Roselle Street and Dunhill Street, all located in the Sorrento Valley, for a combined $ 32 million. Harrison Street also has other life science properties in the area, including the head office of local drug maker TriLink Biotechnologies.
UT reporter Phillip Molnar contributed to this story.