May 9, 2017
By Mark Terry, BioSpace.com Breaking News Staff
In August 2016, Pfizer acquired San Francisco’s Medivation for about $14 billion. Pfizer is now planning to sublease the Medivation space on Market Street in San Francisco, where the company was housed. It had previously unloaded Medivation’s laboratory space in the Mission Bay.
As anyone looking for housing or business space in the Bay Area knows, prices are sky high and space is at a premium. A February article in Bisnow, noted that there was an expected increased supply of space in the area this year, which is likely to increase vacancy over 10 percent. Up to 2 million square feet of available space is expected. The article noted that, “Salesforce Tower is about 58 percent leased, and 350 Bush is 50 percent leased to Twitch. No pre-leasing has been reported for 181 Fremont. Kilroy Realty is in ongoing discussions for a single tenant lease-out of The Exchange on 16th in Mission Bay.”
In the area, the question is whether existing tech companies will expand into newly available space or new companies will enter the San Francisco area. If the existing tech companies expand, rents are expected to hold. Bisnow writes, “But if the new high-rises take tenants from other buildings with no absorption, rents could inch downward. Continued tech expansion into San Francisco will help counterbalance any upticks in sublease space as it did last year.”
The market has apparently been closely watching Pfizer after the Medivation acquisition to see what it planned to do with the 150,000 square feet of space Medivation was using.
“McKesson and Union Bank, both of which have deep roots in San Francisco, are selling company-owned high-rises and likely relocating many jobs to less expensive pastures,” Eli Ceryak, senior vice president of Cushman & Wakefield told Bisnow. “Many others are evaluating their need to be here, and those decisions could push even more space on the market.”
It’s worth noting that Pfizer retained Cushman & Wakefield earlier this year to sell two buildings in New York City, located at 235 and 219 East 42nd Street, as it plans to move into new headquarters. Its plans are to move into newly leased space in Midtown Manhattan “no sooner than the first half of 2019.”
And just before they went up for sale, Pfizer sold the last chunk of its holdings in Brooklyn.
One advantage of the high prices of San Francisco real estate is that landlords are reported to be offering more perks. This is actually in response to some apparent slowing of cash. As TechCrunch reported in February, “According to PItchbook, investment in U.S.-based startups is right now down 40 percent this year from the amount invested at this point last year. Meanwhile, Medium, DoubleDutch, AdRolland Github are among a growing number of San Francisco-based companies that have downsized recently as they either rethink their strategies or refocus on core strengths while simultaneously reducing their overhead.”
That said, it was only in November 2016 that the San Francisco Bay Area was viewing the area as a huge boom in biotech-related real estate development. “You go where the science is, and guess where that is?” said Mike Futrell, the city manager of South San Francisco, at a November Peninsula Structures breakfast. “It’s in the Bay Area and specifically in South San Francisco.”
