'They Do the Science, We Do the Real Estate'

Murphy: “San Diego is probably the healthiest we’ve seen in 15 years by way of supply and demand.”

SAN DIEGO— BioMed Realty takes a proactive stance to leasing with life-sciences tenants like Illumina , staying ahead of the market to support their science through real estate, West Coast leasing director Tracy Murphy tells GlobeSt.com. The firm recently acquired a two-building, approximately 144,300-square-foot laboratory and office property in the UTC life-science market here, UTC Campus @ Towne Centre , from W.P. Carey for approximately $55 million—BioMed’s first acquisition since being acquired by affiliates of Blackstone Real Estate Partners VIII for approximately $8 billion in January. In addition, BioMed has signed a 10-year lease announced will genomics world- leader Illumina Inc. at its i3 campus, a 316,000-square-foot development currently under construction in the also in the UTC life-science market. i3 will serve as an expansion of Illumina’s headquarters, with move-in expected in July 2017. GlobeSt.com spoke exclusively with Murphy about the firm’s latest advancements, what has changed since the Blackstone acquisition and what the Illumina lease indicates about this submarket. GlobeSt.com: What is your company’s view on leasing in the San Diego market and your approach to expanding here vs. other markets? Murphy: Our view on the leasing environment in San Diego is a really healthy one. San Diego is probably the healthiest we’ve seen in 15 years by way of supply and demand. There’s been an uptick in demand triggered by the amount of capital that’s come into our market. We’ve never been tighter in terms of vacancy and supply, and the supply we do have is being absorbed by enormous growth in this sector. There was a 10% increase in demand in San Diego for life-sciences space in March. Like in each of our seven core markets—Seattle, San Francisco, San Diego, New York, Philadelphia, RTP and Boston/Cambridge— venture capital is strong, and it’s a positive time for us. GlobeSt.com: What’s changed for your company since the Blackstone affiliate acquisition? Murphy: Truthfully, we have the same business plan and the same space we’ve always supported—we just have an attractive capital partner. The format in which we are receiving our capital is the only thing that has changed.

The i3 lease agreement marks the third major lease for new construction that BioMed Realty and Illumina have completed within the last 15 months.

GlobeSt.com: What does Illumina’s lease in the i3 campus indicate about the market? Murphy: Companies are still confident, space is still flourishing and there’s a lot of new demand. For companies like Illumina that are looking at employee recruitment and retention, it’s important to offer the work/lifestyle kind of environment people thrive in. They are committed to it here like so many other tenants with which we work. GlobeSt.com: What else should our readers know about BioMed’s leasing activity? Murphy: The dynamics that have been created by funding coming in have boosted the leasing market. There’s been a tremendous amount of IPO activity in the last few years, and San Diego has benefited from it. The life-science economy is one of the greatest in San Diego; we used to have a strong tourism focus, but life science is so powerful here, and leasing has checked that. If you look for empty parking lots, you won’t see that many unless a tenant is scheduled to move in. After an IPO, a company could be twice its size overnight. The way we track these companies is really proactive in terms of their needs and helping them understand what’s next. They do the science, and we do the real estate. We can be a strategic partner and really support their science through real estate. We have done three quasi build-to-suits in the last 15 months for Illumina, which speaks to the health of the industry.