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SAN DIEGO-In an effort to obtain a well-positioned building in a market with significant barriers to entry, San Diego-based Veralliance, in partnership with Prudential Investors, purchased Campus Point Technology Center for $72 million.

The two-story R&D/light manufacturing building resides in Campus Point, between the University Town Center (UTC) and Torrey Pines areas of San Diego. San Diego County’s industrial market has recently experienced a slump in demand, as the start of 2007 brought about the first quarter of negative net absorption that the county has seen in three years. This decrease, which studies say is partially due to an increase in newly constructed buildings, has not been significantly felt in Torrey Pines, however.

The biotech hub, which has fared well, has influenced companies such as San Diego-based Veralliance to invest in surrounding-area properties. The 424,345-sf building is currently only 42% leased to one tenant, Kyocera Wireless Corp., who recently scaled back its spatial demands due to offshore manufacturing, says Bret E. Gossett, a principal in Veralliance.

Despite the decrease in occupancy, Veralliance has high hopes for the center, which it acquired from Qualcomm Inc. for $170 per sf. Gossett tells GlobeSt.com that Veralliance is happy with the building’s position and close proximity to Torrey Pines – a high-demand market, which seems to be immune to the county-wide industrial slowdown, where new developments face large barriers to entry.

“Torrey Pines continued to achieve the highest rents with its premium R&D-Flex space averaging $2.45 per sf per month,” asserts the Industrial Market Trends Study: San Diego Q1 07, which was put out by Grubb & Ellis. According to the study, at 2.8% vacancy Torrey Pines boasts one of the lowest vacancy rates in the county.

Gossett notes that the center could further benefit from its near-Torrey Pines location if it had a life-science component. “The property piqued our interest given that it lends itself to a life-science conversion in addition to its flexibility to be leased to office and R&D users,” Gossett says. “[With the new vacancy,] all of a sudden it’s opened up to multiple tenant categories, which will offer tremendous flexibility during lease up.”

According to Gossett the property will most likely undergo such a significant renovation that “you literally wouldn’t recognize the building,” though he acknowledges that the center may stay the same if a tenant emerges who is willing to take the remaining space as-is.

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