City Center Realty Partners in a joint venture partnership with Contrarian Capital Management has acquired the Parker Innovation Hub, a three-building office property in Berkeley's innovation district. The partnership plans to convert the property into a life science facility totaling 40,500 square feet.
The three properties in the Parker Innovation Hub are located at 2607 7th Street, 918 Parker Street and 2612 8th Street near several other City Center Realty Partners projects, including The Public Market Emeryville, a 14-acre mixed-use site that is the developer is converting into a biotech hub with 400,000 square feet of new life science buildings, along with up to 60,000 square.
Emeryville, located south of Berkeley, is emerging as the next great life science hub in the Bay Area. With proximity to San Francisco and Silicon Valley, which have a low vacancy rate of 5.7%, Emeryville is attracting biotech and life science companies looking for quality, available space. More than 150 biotech companies are already located in Emeryville, including Novartis, Bayer Healthcare, Amyris and Zymergen. Demand is already exceeding supply. According to Newmark, the life science market has only 122,000 square feet of existing availability but 620,000 square feet of active tenant requirements.
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Parker Innovation is in the middle of this action. The property is across the street from Bayer Healthcare campus, which is expanding to 1.7 million square feet. City Center Realty already has leased spec lab space to Huue, a venture-backed biotechnology company that creates environmentally-sustainable dyes.
City Center Realty Partners isn't the only investors betting on the market. Long Market Property Partners acquired a 22,043-square-foot research and development property at 1440 4th St. in Berkeley, California, with plans to convert the property into a life science use, for example. The investor secured $9.75 million in financing to purchase and reposition the asset.
While there is a strong pipeline of new construction and conversion projects, it seems developers can't get properties out of the ground fast enough. Kidder Mathews reports vacancies approaching zero in most submarkets around Northern California and lease rates continuing to climb with Class A space fetching over $7 per square foot NNN. In San Diego, new construction rents in prime submarkets have increased 25 percent year over year. The cost of building new life science facilities has doubled over the past five years to $300 and $350 per square foot.
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Kelsi Maree Borland
