Presidio Bay Preps 2 Life Sciences Projects In Burgeoning San Carlos Market
Longtime Bay Area developer Presidio Bay Ventures is the latest player to get in on a growing trend of life sciences development in the small city of San Carlos, California, with a pair of projects underway: 777 Industrial, a 146K SF Class-A lab and office space, and 642 Quarry, a 472K SF, six-story research and development campus.
Set between the city of San Francisco and Silicon Valley, San Carlos has been a rising star in Bay Area life sciences real estate in recent years. The 2014 opening of the $200M San Carlos Center, a unit of Sutter Health, and Alexandria Real Estate Equities’ 2019 announcement that it was planning to build a 1.6M SF biotech campus that would include the former Kelly-Moore Paints headquarters were early milestones that helped to catalyze a spree of land acquisition and development.
Core and shell construction on Presidio's 777 Industrial project are expected to be complete at the end of this year, and the company plans to break ground on 642 Quarry in the middle of next year.
“With Alexandria making such a large bet, it’s a large economic driver,” Presidio Bay Managing Partner and founder Cyrus Sanandaji said.
Alexandria in March proposed another San Carlos development, a 105K SF, three-story project on the city’s east side. Earlier this year, Phase 3 Real Estate Partners picked up a 247K SF campus in town for $102M.
Connected to the region via rail transit, San Carlos offers a key midpoint for development and more accessible housing to attract talent, Sanandaji said. For years, developers and startups have found homes amid the city’s industrial districts, traditionally home to auto shops and metalworking studios, but more recently to wineries and breweries.
Growth in San Carlos continues to pick up momentum as Bay Area life sciences has seen a mixed 2023. The region has led the nation in National Institutes of Health funding and seen shifts in rental rates indicating a potential rebound is in the works, but some local developers have said the market is softening.
San Francisco, which has been a difficult area for life sciences development, has seen very low vacancy, while South San Francisco, which has boomed in recent years, has historically had limited supply.
That is expected to change in coming years. There are 5.4M SF of labs under construction in the region, including 2.1M SF under redevelopment.
Sanandaji said that in recent years, when VC funding was booming and vacancies were low, any space would do for companies flush with cash. Now, with more supply and select startups able to shop around, it is important to provide more lifestyle amenities to lure tenants.
At 777 Industrial, adjacent to Alexandria’s campus, there is space for smaller firms that have cleared a few funding rounds and are looking for 30K SF to 40K SF. It will include e-bikes, EV charging stations, an on-site fitness center and a roof deck equipped with an outdoor kitchen. At 642 Quarry, the larger research campus, the space includes bocce and pickleball courts, an outdoor amphitheater, a public art program and on-site childcare.
Sanandaji said leasing has grown rapidly at the two projects since the beginning of Q2. Firms had been holding off on making space decisions in the unsteady funding market, but now they either have regulatory approvals or new funding to bolster a move to a new and larger space.
“Yes, people are economically driven, but owners are looking at retention, they're looking at the cost of the health and wellness, the happiness of their employees,” he said. “The conventional thought is that if you’re a life science company, there is no work-from-home. That's not necessarily true. Lab folks tend to take up just half the total square footage.”
