In what has been billed as one of the biggest life science leases ever for the San Diego County market, Neurocrine Biosciences has leased 535,000 square feet of space in a Carmel Valley campus that is still under construction. The location will become the company’s new corporate headquarters.
Neurocrine signed a 13 ½-year lease on four buildings at Aperture Del Mar on Carmel Valley Road at Route 56 with an option to renew the lease, said CFO Matt Abernethy.
“We ran out of lab space,” Abernethy said.
The company also has an option to expand to a fifth building at Aperture to take an additional 125,000 square feet of space.
The rapidly growing company plans to move in stages starting in 2023 as the new campus is finished from its headquarters just down the road at 12780 El Camino Real. “This will allow us to double our research and development organization. That’s our desire and our growth expectations,” Abernethy said.
Finding a Home
Neurocrine focuses on treatments for neurological, neuroendocrine and neuropsychiatric disorders.
The company has developed FDA approved treatments for tardive dyskinesia, Parkinson’s disease, endometriosis, and uterine fibroids, according to its website.
Abernethy said Neurocrine chose Aperture as its new headquarters in part because the timing of the project fit the company’s expansion plans.
“There’s an absolute lack of lab space that’s available in the market,” Abernethy said. “This site, because of its entitlements, was the first site that was going to be able to deliver.”
Gemdale USA, a subsidiary of the Chinese company Gemdale Corp., acquired the 15.7-acre Aperture site from Lincoln Property Company in 2019 and began building the campus on spec, targeting life science companies.
The project will have multiple balconies and exterior stairwells, designed to encourage collaboration.
Planned amenities include an event lawn, sports courts, walking paths, a dog park, an amphitheater, fitness areas and a gym.
Abernethy said that Neurocrine is hiring but has been hampered by the lack of space at its current location. He said hiring will ramp up as Aperture is completed.
“We have to build a home then we have to find the people to move into that home,” Abernethy said.
The company has a total staff of about 1,100 — with about 600 employees in San Diego.
“If you take the factor of we’re doubling our lab space, it’s pretty clear to see our expectation to double our employee base,” Abernethy said.
Chad Urie, managing director of the commercial brokerage JLL, said that Neurocrine’s leasing of Aperture comes at a time when life science space in San Diego could get even tighter because rising interest rates have created some uncertainty about future life science construction.
“Now we’re in a period of time where construction costs across the board have gone up 20% in the last 30 days in addition to a rising interest rate market,” Urie said. He and Grant Schoneman of JLL represented Aperture in the lease transaction.
All of that puts upward pressure on rental rates and financing costs for new construction projects.
“The San Diego marketplace is digesting right now what is the impact of rising interest rates relative to what their original financial proformas were and what rents do they need to make it work,” Urie said.
While that may not affect projects already under construction, Urie said it could prompt developers to have second thoughts on projects that would come online in 2024 or 2025.
“Is there enough inventory coming to meet demand? I think there are question marks today on whether that’s going to happen or not.”
Headquarters: Del Mar Heights
CEO: Kevin Gorman
Business: Pharmaceutical company
Annual revenue: 2020 $1 billion; 2021 $1.3 billion
Stock Symbol: NBIX
Notable: Neurocrine has four FDA-approved therapies for tardive dyskinesia, Parkinson’s disease, endometriosis, and uterine fibroids, as well as clinical programs in multiple therapeutic areas.