The life science sector continues to be alive and well in the Bay Area.
In a transaction reminiscent of a time past, a sublease space made available by one life science company was quickly snapped up by another in South San Francisco, and a sizable amount of space, to boot. On September 3rd, 2020, Five Prime Therapeutics, based in South San Francisco, entered into an agreement to sublease 115,466 rentable square feet of office and laboratory space to Sutro Biopharma, according to Five Prime’s Form 8-K SEC filing of the same date.
The two companies agreed that subject to certain limitations, Sutro will be able to move in effective April 1st, 2021. Over the first 24 months of the sublease term, Sutro will occupy 85,755 square feet at 111 Oyster Point Boulevard, a number that will then scale to the full 115,466 square feet in months 25 and beyond. The monthly base rent will begin at $424,487.25 for the initial amount of space at $4.95 per square foot, growing to $702,589.12, or $6.08 per square foot in months 73 and beyond.
In addition to the monthly rent, Sutro will also cover a portion of the operating expenses of the premises, as well as taxes, assessments and fees associated with renting the premises. Sutro will also have to pay its own portion of the utilities.
The property is part of Healthpeak Properties’ The Cove at Oyster Point campus, a 20-acre Class A waterfront campus consisting of seven buildings totaling one million square feet. The Cove offers a mix of uses, including world-class amenities such as an upscale AC Hotel, Foundry & Lux Restaurant and Bar, state-of-the-art fitness center and 20,000 square feet of retail space, according to the company’s web site.
South San Francisco is home to the largest biotech cluster in the world, with over 200 biotech companies and 11.5-million square feet of biotech space on 500 acres, according to a statement from the city’s web site.
Despite the onset of the COVID-19 pandemic in March, the Bay Area life science market had an impressive second quarter, reporting 543,114 square feet of gross absorption and 106,644 square feet of positive net absorption, according to a second quarter industry report by Kidder Mathews. Santa Clara and San Mateo Counties had strong leasing activity, accounting for nearly 70 percent of the total Bay Area activity. The development pipeline remains active, with 3.08 million square feet under construction, of which 70 percent is pre-leased. Vacancy rates rose moderately to 3.27 percent, up from 3.19 percent in Q1 2020. However, life science demand is strong in this region, since 3 million square feet of tenant requirements are currently being tracked by Kidder Mathews.