HCP to Start $177 MM Spec Development in South San Francisco
Reporter: Jon Peterson
Posted on February 10, 2015 by publisher6
Link to Article: SSF Development
Irvine-based HCP has broken ground on a new life science spec development in South San Francisco, The Cove at Oster Point. The first phase of his project involves the construction of 253,000 square feet and the entire development totals 884,000 square feet. The company is planning to spend up to $177 million according to this morning’s conference call.
“We feel that starting the Cove at this time will optimally meet the demand in the market. This is reflected in that the direct vacancy for life science properties in South San Francisco is [below] one percent,” says Jon Bergschneider, executive vice president for HCP Life Science Estates.
The company believes that the type of product that it will be creating will be new for the marketplace. “Our amenity center will be a feature that is not seen in any life science project,” said Bergschneider. The amenity center will be located on the first floor of the project. It will include a fitness center, recreation and meeting space, which is typically not found in life science real estate operations.
The first phase of the development broke ground last week. It will consist of two buildings totaling 253,000 square feet. The plan is to have these buildings completed by the third quarter of next year. The other phases of the project will be started based on the leasing success of the first phase.
The leasing efforts on the development will be led by CBRE through its life sciences group. This will include Chris Jacobs, an executive vice president, and Rick Friday, a senior vice president. They both work for the company out of its office in Foster City.
The life science market in South San Francisco has very strong market characteristics. “Strong life science market demand has resulted in a vacancy rate below 1 percent in South San Francisco. This inventory crisis has fueled raising lease rates. Over the last year, lease rates have increased approximately 30 percent from $2.85 to $3.70 NNN per square feet per month. Given the strong market fundamentals, we anticipate lease rates to push past $4 NNN per square foot per month in the near future,” says Jacobs.
He anticipates a mixture of tenants being interested in The Cove project. “We expect the project to attract local tenants from 30,000 square feet, as well as larger campus users,” said Jacobs.
HCP has owned The Cove site since 2011. This is when the company paid $65 million to acquire the 20 acres for the development. The project is projected to be a pre-certified LEED silver project. Some of its other features are a 5.5-acre outdoor green space and retail and hotel entitlements.
HCP is a real estate investment trust that focuses on the healthcare industry. It’s a major player in the San Francisco Bay Area, where it owns 4.8 million square feet of life science space in the region. This includes 2.8 million square feet within South San Francisco.