The Necessary Elements of Flex Buildings

Solomon: “Many flex property owners are upgrading interiors to include new restrooms and showers for employees who run or ride during the day, which is a majority in this active beach town.”

SAN DIEGO—Assets that offer curb appeal and a strong aesthetic, with good loading and truck access and a minimum of one to two truck doors, are among those that attract investors in flex buildings, BLT Enterprises ‘ chief development and legal officer Rob Solomon tells GlobeSt.com. The CRE investment company has acquired Sorrento Tech III , a 30,000-square-foot flex building in the Sorrento Mesa submarket of San Diego, that is located adjacent to Sorrento Tech II , a two-building office and R&D campus that the firm acquired earlier this year. We spoke exclusively with Solomon about the necessary elements of flex buildings in this market and how flex buildings have changed over the last decade. GlobeSt.com: What are the most important features flex buildings must have, particularly in the Sorrento Mesa market? Solomon: When investing in flex buildings, we look for assets that offer curb appeal and a strong aesthetic, and we typically target single-tenant, free-standing properties as opposed to multi-tenant. In addition, flex buildings must have good loading and truck access with a minimum of one to two truck doors; a minimum clear height of 15 feet for warehouse space; substantial power to accommodate office , manufacturing and life-science uses; and robust mechanical systems to fully condition the premises. Locally, top-performing flex buildings are located in western Sorrento Mesa and offer walking access to retail . The best properties are those that have been repositioned to include decks, indoor-outdoor collaborative space, as well as abundant natural light through the addition of skylights and unobscured window lines. In addition, many flex property owners are upgrading interiors to include new restrooms and showers for employees who run or ride during the day, which is a majority in this active beach town. GlobeSt.com: How have flex buildings changed over the last 10 years? Solomon: The bones of most flex buildings have remained the same, but many projects have been repositioned to take advantage of the in-demand attributes I mentioned above. As owners and operators, we are constantly looking for ways to improve our tenants’ quality of life, and we continue to add features such as glass roll-up doors, new high-efficiency glazing systems, drought-tolerant landscaping, façade upgrades, and high/exposed ceilings in office areas. GlobeSt.com: How would you describe the market for flex buildings in Sorrento Mesa? Solomon: The flex market in Sorrento Mesa has seen some softening due to the recent downsizing of Qualcomm within the market. However, many of the spaces that Qualcomm has vacated are being back-filled by other medical-device, life-science and technology companies. There has been significant growth from companies such as Dexcom, Tandem Diabetes Care, Cue, ACON Labs and Inovio Pharmaceuticals . We are also seeing growing tech demand from companies such as Google, NuVasive and Huawei . Sorrento Mesa has an R&D inventory of 6.5 million square feet with an approximate vacancy of 8% or approximately 600,000 square feet, while average triple-net lease rates are at $1.70 per square-foot. GlobeSt.com: What else should our readers know about this transaction? Solomon: With the adjacent project, Sorrento Tech II, we have now invested approximately $20 million in capital and own nearly 100,000 square feet in a campus-style setting that allows us to better accommodate our tenants’ space needs. With these acquisitions, we can accommodate office, warehouse, lab and R&D uses from as small as 8,000 square feet. We recognize the potential in this submarket and anticipate that this will be the first of many projects for us in Sorrento Mesa.