By Jon Peterson
Irvine-based HCP has started development on its latest life sciences project in South San Francisco. The public REIT has begun the first phase of its Sierra Point project with a development cost of $220 million, as stated in the company’s 2017 fourth quarter earnings report.
The initial phase of the project will be two separate buildings covering a total of 215,000 square feet, which has been started on a speculative basis. An initial delivery of this space is being planned for late 2019. Sierra Point is a multi-phased project covering a campus-style development with a total square footage at full buildout of 600,000 square feet. New phases will be started as demand for space increases and the timing is ripe. The property owner could be investing an additional $170 million into the project going forward, as stated by the public REIT in its fourth quarter of 2017 earnings conference call.
HCP decided to start the development of Sierra Point based on the demand for its other major life sciences development project in South San Francisco, The Cove, which has a total development cost of $720 million. The first two phases of this project are now fully leased, and there is strong interest in Phase III of the project, as well.
Phase II of the Cove totals 231,000 square feet and reached initial occupancy by the third quarter of 2017. Phase III is planned to deliver 336,000 square feet with initial occupancy by the fourth quarter of 2018. HCP projects that once the projects become stabilized yields on these assets should be in the range of 6 to 8 percent. Stabilization is typically when a property reaches 90 percent occupancy or greater.