By Meghan Hall
Pasadena, Calif.-based Alexandria Real Estate Equities is moving forward with expansion and redevelopment efforts throughout the San Francisco Bay Area, and it is wrapping up the City of San Carlos approvals process for a 530,000 square foot development called Meridian 25 at 887 Industrial Road in San Carlos, Calif., according to the San Francisco Business Times. Alexandria, an office REIT, is known around the Bay Area for the construction of high-end life sciences and technology office spaces, such as The Alexandria Center for Science and Technology in Mission Bay in San Francisco.
Project plans for the development consist of two six-story buildings containing Class A office space, although Alexandria received the green light at a city council meeting in June 2018 to retrofit the buildings to accommodate for laboratory space and R&D offices in the already-approved plans. The city’s approval to amend the site’s zoning to accommodate life science tenants also applies to the other address Alexandria owns along Industrial Road, according to city documents.
Alexandria purchased the site — which includes 821 to 881 Industrial Road — fully-entitled from Windy Hill Property Ventures in June 2017. Alexandria paid $85 million, or around $634 per square foot, for the 134,000 square foot, six building portfolio. The buildings were primarily designated for research and development uses. Alexandria’s procurement of the site quickly followed the acquisition of 960 Industrial Road for $64.96 million, or around $299 per square foot. Currently, 960 Industrial Road is developed with a 217,000 square foot industrial building and was formerly occupied by L-3 Electron Devices. Plans to redevelop the site into an additional 500,000 square feet of office space could be submitted in the near future.
Earlier in the year, Alexandria also purchased a building at 1450 Page Mill Road within Stanford Research Park for $85.3 million. The 77,000 square foot technology office building is subject to a 51-year ground lease and was 100 percent leased to Bengaluru, India-based information technology company Infosys Limited for 12 years.
The original project plans were in part typical of a larger Bay Area trend in which developers buy up existing R&D space to redevelop into offices, which tend to be more profitable per square foot. Although R&D rents are also on the rise, property owners can garner about a dollar more per square foot, according to Colliers International’s 2018 Third Quarter Research Forecast Report for the San Francisco Peninsula. Current asking rents for R&D space average about $4.31 per square foot, while rates for office space come in at $5.31 per square foot.
San Carlos’ east side has historically been home to a variety of industrial businesses such as automobile repair shops and metalworking studios. Alexandria’s acquisitions in the city and their redevelopment of existing properties into viable R&D and office space for life science companies will bring needed inventory to the market, which has seen R&D vacancy rates hover around 2.4 percent and office vacancy rates at 5.4 percent on the Peninsula in recent years.
A host of other small to midsize life sciences companies live along Industrial Road, including NuGEN Technologies, Novartis Pharmaceuticals, LakePharma and Helix. According to data provided by the City of San Carlos, 12 to 14 biotech related companies call the town home.
As of this writing, representatives from the city of San Carlos have not responded to The Registry’s request for comment.