Investor Buys San Mateo Bay Center for $156M, Plans Life Science Conversion Play

Longfellow Real Estate Partners has acquired the 250,000-square-foot San Mateo Bay Center for $156 million from Rubicon Point Partners. Although currently 88% leased, the property has significant upside potential as a life science conversion project.

San Mateo is one of the fastest growing life science clusters in the nation. The market currently has 3.4 million square feet in new life science space scheduled to deliver by the end of the year, but 83% is already preleased. As a result, there is only about 590,000 square feet of available space but an estimated tenant demand of 3.1 million square feet.

While the demand supports the conversion project, Longfellow is able to take advantage of the opportunity because nearly 200,000 square feet in leases at the property will turn in the next three years, creating an opening for the ownership to take advantage of the emerging market demand for quality life science space.

San Mateo Bay Center is already a quality building. The previous ownership has infused $17 million in capital improvements in the property since 2015, adding outdoor amenity spaces, a restaurant, fitness center, HVAC renovations, lobby upgrades and parking lot resurfacing. These upgrades only made the life science conversion opportunity more attractive, according to a release from Newmark. The firm’s vice chairman and head of Northern California capital markets Steven Golubchik, vice chairman Edmund Najera, senior managing director Jonathan Schaefler, director Darren Hollak and associate director Jack Phipps represented the seller in the transaction.

The top life science hubs across the country are also seeing increasing demand for laboratory space, encouraging investors in the market to transform quality office space into life science facilities. A partnership between Taconic Partners and Nuveen Real Estate secured $393 million in construction financing for the redevelopment of 125 West End Ave. in Manhattan into a research and laboratory complex. According to JLL, which secured the funding on behalf of the borrower, the building’s floor plates are ideal for a life science conversion. They range from 37,000 to 53,000 square feet and feature 15’9″ heights, industrial grade floor loads, direct loading access on multiple floors and gated shipping and receiving points.

The San Mateo market is already racking up impressive life science users, including Gilead and Illumina, as well as corporate users Sony, IBM and Activision.