Building Boom Meets Maturing Biotechs' Needs in the San Francisco Bay Area
The reason, say developers, brokers and biotech leaders, is simple: There’s still a need for space to match a maturing Bay Area biotech community. Still, developers are moving cautiously, building mostly to suit tenants and not getting too far in front of an industry known for stunning successes and equally brilliant burnouts.
“There’s always opportunity out there,” said Jennifer Von der Ahe, a project manager for Chamberlain Associates, which is developing more than 185,000 square feet in South San Francisco for neurological drugs maker Elan Corp. “Biotech is not going away.”
On top of the R&D space under construction by specialized biotech landlords like Alexandria Real Estate Equities Inc., Health Care Property Investors and Chamberlain, there is another 1.6 million square feet already approved or proposed by the likes of BioMed Realty Trust Inc.
But the space isn’t built cheaply — in the range of $200 to $250 per square foot, compared to roughly $70 per square foot for open office space — developers aren’t so much betting but guaranteeing that Bay Area biotechs will bloom locally.
“The worst thing is to have someone who wants space and you don’t have it,” said Randy Scott, a partner with Cornish & Carey Commercial who has worked on some 270 life sciences lease deals.
Vacancy rates for existing Peninsula sites of 50,000-plus square feet with ready-to-go lab space is about 5 percent, Scott said. “There’s a lot of shell space, but then that’s another nine months to build out,” he said.
Meanwhile, the world’s largest and second-largest biotech companies — Genentech Inc. and Gilead Sciences Inc. — have proposed horizontal and vertical expansions of their campuses in South San Francisco and Foster City.
Elan’s new 102,000-square-foot facility at 180 Oyster Point Blvd. will be completed by November. It is built by J.M. O’Neill Inc. of Pleasanton, designed by Dowler-Gruman Architects of Mountain View, financed by Bank of the West of San Francisco and leased to Ireland-based Elan. Elan also has signed on for 83,420 square feet at Chamberlain-developed 200 Oyster Point, the shell for which will be completed in October 2009.
The new buildings at 180 and 200 Oyster Point offer an upgrade and an opportunity for Elan to consolidate operations. It now leases four single-story buildings totaling 215,000 square feet in Chamberlain’s Gateway Business Park and closed its San Diego facility, integrating development and commercial functions in South San Francisco.
Chamberlain, meanwhile, has a master plan in front of South San Francisco city officials to redevelop Gateway Business Park for 1 million square feet over 10 years.
“Mature companies are demanding (larger) quantities of space,” Von der Ahe said.
Such plans come against the backdrop of a leasing market flooded with properties, like three buildings totaling 348,000 square feet that Amgen Inc. never occupied and put on the sublease market in July 2007.
Biotech industry watchers have long said that entrepreneurs spawned by the region’s culture of innovation, the University of California system, Stanford University and a strong venture capital community keep a steady flow of early-stage biotechs. In the first half of this year alone, for example, that’s translated into 48,016 square feet for KaloBios Pharmaceuticals Inc. in South San Francisco, 41,415 square feet for Cardica Inc. and 37,856 square feet for Codexis Inc. in Redwood City and 36,960 square feet for Anacor Pharmaceuticals Inc. in Palo Alto.
Gilead Sciences may be a perfect example of how those types of smaller companies can grow. It steadily leased space at the Vintage Park Business Park in Foster City, bought the buildings in 2003 and now has a 10-year master plan to demolish eight of the buildings on its 16-acre campus and replace them with up to seven buildings of two to 10 stories for a total of 1.2 million square feet.
“Getting a campus of this size (to rent and then buy) and buildings that are adjacent to each other isn’t easy,” said Gilead President John Milligan.