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Thursday, Oct 6, 2022

Current Economic Climate Creating Demand for Submarket Space

Sorrento Valley and Sorrento Mesa have some of the region’s oldest commercial properties, with inventory dating back to the 1970s and earlier, but those submarkets have recently seen a rise in redevelopment, renovation and leasing activity.

Those markets have long been home to firms in San Diego’s technology cluster, led by wireless industry giant Qualcomm Inc., which continues to expand its real estate footprint in both Sorrento neighborhoods. In addition, experts note that many firms in developing industries like wireless health care monitoring want to be located near Qualcomm, further boosting demand for space.

Over the past two years especially, San Diego’s life sciences industry has increasingly found a home in the Sorrento submarkets, as the biotechnology and pharmaceutical sectors interact with other high-tech research industries and seek alternatives to high-demand markets like Torrey Pines and University Towne Center.

According to fourth-quarter data from the brokerage firm Cassidy Turley San Diego, Sorrento Mesa’s life-science property vacancy rate was 6.2 percent at the end of 2012. That was lower than Torrey Pines’ 12 percent and UTC’s 9.3 percent.

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In adjacent Sorrento Valley, where the life-science vacancy was 21.1 percent, landlords have recently been investing in major upgrades to make properties competitive with modern amenities expected by today’s high-tech firms.

Among those is San Diego-based BioMed Realty Trust Inc., among the region’s largest life-sciences landlords, which recently completed a multimillion-dollar renovation of Coast 9, a nine-building campus that it purchased in 2010.

BioMed officials said the 163,000-square-foot campus now hosts 18 life-science companies with more than 400 workers, and many of those firms were added in the past year. Tenants include Ambit BioSciences, Genalyte and DiscoverRx.

The company has not disclosed its exact investment in renovating the campus, parts of which date back 40 years, but the project included updating its meeting, fitness, recreation, dining and collaborative spaces.

Company president Kent Griffin said campuses like Coast 9 help meet a growing need to serve smaller, early-stage firms involved in life-sciences research and development.

“You have to serve the market that is there,” Griffin said. “Compared with other cities where we have properties, a larger share of the life sciences firms are small or medium-sized companies.”

Tracy Murphy, BioMed’s director of leasing and development, said the current economic climate overall is raising demand for space in the Sorrento area and other life-science neighborhoods, spurring the firm to scout sites for more renovation and development. For instance, the company recently received city entitlements for a three-building, 300,000-square-foot campus that it plans to build in UTC, called Innovation Center.

Murphy said BioMed is in the process of lining up tenants, and an exact construction timetable for the UTC project has not been set.

Chris High, director in the office specialty group of brokerage firm Cushman & Wakefield, said a healthy venture capital environment is helping early-stage technology firms grow their research and development, which in turn is raising demand for space among those companies in the Sorrento submarkets.

There are also infrastructure improvements taking place in the area that should make Sorrento more viable for the daily transportation needs of more companies. For instance, the state’s recent $90 million Carroll Canyon Road extension off Interstate 805 will likely go a long way toward alleviating traffic jams along I-805 and I-5.

“The west side of Sorrento Mesa has been most in demand for tenants, and the east side has had severe congestion problems for a long time,” High said.


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