San Diego’s life science real estate market drew a major investment in August with the $567 million purchase of a handful of Sorrento Mesa buildings and five acres of adjacent land by Sterling Bay West – the West Coast arm of Sterling Bay and Harrison Street.
The two Chicago-based firms plan to develop the property into a 1.1 million square-foot life science campus.
The total cost of the project, including the purchase price of the property, will likely be about $1.5 billion, said Rodney Richerson, principal of Sterling Bay West.
The property is at 10390-10445 Pacific Center Court, 5910 Pacific Center Blvd., and 9985 Pacific Heights.
The deal included four life science buildings, a vacant building suitable for spec office and lab space, and two office buildings totaling 420,229 square feet.
Four of the buildings are fully leased for 10 years, Richerson said, with Wacker Chemical in 10290 Pacific Center Court, Tanex BioPharma in 10394 Pacific Center Court and 10421 Pacific Center Court, and Qualcomm in 10445 Pacific Center Court.
A lease is pending for the building at 10398 Pacific Center Court, but Richerson declined to name the tenant.
He said Harrison Street and Sterling Bay West plan to develop the vacant land into a ground-up life science project.
Development is scheduled to start in 2023 with a goal of completing construction in five to six years, Richerson said.
Richerson said Harrison Street and Sterling Bay West made such an expansive purchase because “scale in the life science side is important.”
“You’ve got to be able to provide a lot of optionality for your existing tenants and growth opportunity,” Richerson said.
Combined with the Torrey Pines and Sorrento Valley deal, the Sorrento Mesa purchase gives the companies “a substantial foothold in the submarket and we are excited to continue expanding our joint presence in the market,” said Richerson.
“The acquisition of this particular portfolio offers Sterling Bay West and our partners at Harrison Street a rare opportunity to deliver scale in San Diego, which historically has been controlled by a short list of large public REITs (Real Estate Investment Trusts),” Richerson said.
In still another life science deal, a vacant Sorrento Valley Road office building was sold for an undisclosed price to Phase 3 Real Estate Partners with plans to renovate it for life science or replace it with a ground-up development of life science space.
“The Sorrento Mesa life science and technology real estate market is extremely supply-constrained with very few sites remaining for future development,” said Brunson Howard, executive managing director of Newmark, a commercial real estate brokerage. Newmark brokered the deal on behalf of the seller, CIRE Equity.
Newmark in a recent report ranked San Diego as one of the fastest growing life science real estate markets in the country.
The firm estimated that nearly 1.2 million square feet of life science space was under construction or being redeveloped in San Diego. Still to come is development of nearly 7 million square feet of life science space that’s been proposed.
CEO, chairman and co-founder: Christopher Merrill
Annual revenue: $60 million
Company description: real estate investor/manager
Notable: Harrison has acquired more than 3 million square feet of life science lab, research and innovative space since 2018.
CEO: Andy Gloor
Business: real estate investment and development company
Revenue: $28 million
Notable: Sterling Bay has a portfolio of more than $5 billion with a development pipeline of more than $10 billion.