Transit Adjacent Life Sciences Development Site in San Francisco Hits the Market

1111 Pennsylvania Avenue, Newmark, San Francisco, UCSF Mission Bay, Alexandria, Pier 70, Mission Rock, Islais Creek, Hunters Point
Courtesy of workshop1

By Meghan Hall

Another potential life sciences development site in San Francisco has been posted for sale—and is being marketed as an “extraordinary” opportunity for potential investors. 1111 Pennsylvania, located in the rapidly growing Dogpatch neighborhood, is up for grabs as it nears the end of the entitlements process. According to public records, the property is owned by workshop1, an Oakland-based development, architecture and brokerage practice.

“What is unique about this [property] is the underlying zoning is Production, Distribution and Repair (PDR), and so the team that has entitled the project has anticipated a lab building or higher-end PDR building,” explained Newmark’s Executive Managing Director Mark Geisreiter. The firm is marketing the property on behalf of current ownership. “The city has recently done some changes to the way they define lab space, and so there is a number of tenants that would be interested in San Francisco for new lab spaces.”

Guidance pricing for the property was not immediately available, as current ownership is looking to let the market dictate pricing after a year of uncertainty caused by COVID-19. The roughly 0.88-acre parcel sits between 25th and Pennsylvania Streets. Current plans will allow for 182,943 rentable square feet of space to be developed. Documents on file with the City indicate the development will rise four stories in height over a two-level basement. There will be just over 16,000 square feet of lobbies, 143,900 square feet of non-life science laboratory and 11,280 square feet of bike and vehicle parking. A 16,800 square foot rooftop terrace is also planned. 

With entitlements expected to be completed by June of 2021, ownership is bringing the property to market ASAP. The timing will give investors a chance to develop a life sciences project—an asset class that has become increasingly coveted in the San Francisco market.

“This is an opportunity to be one of the first buildings to come out of the ground to develop really well-located lab space,” noted Geisreiter. “The site is near Caltrain, and you’re a straight shot into South San Francisco. It’s a really transit-oriented site.”

The project site is also just a half mile from UCSF Mission Bay, one of the world’s leading research universities and a talent hub for life sciences employers. The university has generated more than 43,000 jobs and $8.9 billion in economic impact. Its presence has allowed more than 260 life sciences companies to enter the San Francisco market since 2003, when the City allowed such uses back into its limits.

The result has been an explosion of life sciences growth and demand. Newmark reports that tenant demand for laboratory and research and development sites are outpacing supply by more than 200 percent, which offers downside protection to investors. Additionally, the San Francisco life sciences market has recorded a zero percent direct availability rate since 2014.

With just 1.2 million square feet of life sciences space—220,000 square feet of which are owned and occupied by Kaiser—San Francisco has not seen new life sciences development completed since 2010, states Newmark. The severe shortage of supply has increased estimated asking rates to about $82.50 per square foot triple-net.

“If you look at the life sciences market in San Francisco, there is very little true life sciences space in the market,” said Gesreiter, who is only aware of one project with lab in the city. “They’re coming at this with a very, very low vacancy rate.”

Newmark also predicts San Francisco’s life science cluster will continue to be bolstered by growth and waterfront development at Mission Rock, Pier 70, Alexandria, Islais Creek and Hunters Point. The projects will transform San Francisco’s waterfront into a “premier location.” Additionally, more than 5,000 housing units have been recently delivered, are under construction or in planning.

Geisreiter added, “1111 will be a perfect building. I think you’ll see tenants that would like to explore a different market, and I think there’s a very good chance the life science cluster in Mission Bay expands.”

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