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Tuesday, Apr 23, 2024
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Signs of Life in Life Science Real Estate

REDEVELOPMENT: Two Submarkets With Different Histories Attract Tenants

SAN DIEGO – A Sorrento Mesa office building is being converted for life science and a downtown building that was converted to lab space has passed the halfway mark in leasing.

Taken together, conversion of the 62,000-square-foot Oberlin Drive office building by King Street Properties, based in Boston, and the new lease of 20,000 square feet in Genesis San Diego are signs that the region’s life science real estate market is rebounding.

Michael DiMinico
Partner and Managing Director
King Street Properties

King Street Properties bought the building at 5825 Oberlin Drive in June 2023 for $36 million and expects to spend $13 million to $15 million on renovations in its first foray into the San Diego life science market, said Michael DiMinico, partner and managing director of King Street Properties.

King Street will renovate the building in phases as existing tenants leave, renaming it Mesa Labworks. The work will start on about 20,000 square feet that will be ready for tenants in August, DiMinico said.

“By year’s end, we hope to be converting the majority of it,” DiMinico said.

The company has been eyeing San Diego for several years, but DiMinico said that “every property we looked at, the price just seemed runaway.”

“We wanted to establish our presence in San Diego without overextending ourselves,” DiMinico said, adding that King Street plans to expand its San Diego portfolio.

“We think there’s a lot of runway for a lot of growth and a lot of opportunity,” DiMinico said. “We’re always looking for what the right next step is for us in San Diego.”

Development Process in ‘Early Innings’

Genesis has been steadily attracting tenants since Phase 3 Real Estate Partners renovated the former Thomas Jefferson School of Law for life science.

Novoron Bioscience previously leased 7,432 square feet of space in Genesis, Native Microbials leased 27,000 square feet, and Excellos leased 36,000 square feet.

“We believe that being located in downtown San Diego near other life science firms, the convention center and the airport will provide a key catalyst for growth,” said Andre Ghetti, founder and CEO of AnaBios.

BJ Van Aken
Executive Vice President West
Phase 3 Real Estate Partners

BJ Van Aken, executive vice president of West of Phase 3 Real Estate Partners, said that AnaBios considered other submarkets, but chose Genesis, in part because much of its workforce lives in proximity to downtown.

“I think there’s just such a unique opportunity downtown that’s fairly untapped, but becoming more and more relevant,” Van Aken said. “In the coming years, it will become even more obvious why downtown should be and is becoming a viable submarket in comparison to the traditional core markets.”

Built entirely on speculation with no tenants signed up in advance, Van Aken said that he expects Genesis to be fully leased within the next 18 to 24 months.

Van Aken said that he was “pleasantly surprised with how much staying power downtown has” in a life science real estate market where space is available in San Diego’s suburban core submarkets for life science.

“The location itself has proven to be something that companies find a lot of value in,” Van Aken said.

Grant Schoneman
Executive Managing Director Life Sciences Group San Diego
JLL

Grant Schoneman, executive managing director of the JLL Sciences Group in San Diego, said that funding for life science companies has started to loosen, which will likely lead to more activity in the real estate market later this year and heading into 2025.

Schoneman, Chad Urie and Taylor DeBerry of JLL represented Phase 3 in negotiating the Genesis lease. AnaBios was represented by Jon Engle and John Hundley of Newmark.

“I think we’re in the early innings and, often, the funding is the first thing to come and then the real estate will follow that,” Schoneman said.

King Street Properties
FOUNDED: 2002
Headquarters: Boston
Founder and Principal: Thomas Ragno
Business: Real estate investment and development
Employees: 23
Website: kingstreetproperties.com
Contact: contact@ks-prop.com
Notable: King Street Properties owns and operates 3.5 million square feet of life science real estate

Phase 3 Real Estate Partners
FOUNDED: 2000
Headquarters: La Jolla
CEO: W. Neil Fox
Business: Real estate development
Employees: 30
Website: p3re.com
Contact: 858-546-0888
Notable: Phase 3’s portfolio includes 5 million square feet of real estate.

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