Hedge Your Bets: Mixed Use Covers Bases in Uncertain Times

Hedging your bets appears to be taking hold as the commercial real estate investment strategy of choice in uncertain times as we emerge from the pandemic and look for a safe harbor in a looming economic storm.

In the unfamiliar territory that is the landscape of post-pandemic markets, the biggest players in real estate investment have been deploying vast amount of capital in recent months to shift the focus of their portfolios between asset classes.

One is unloading office properties, another is beefing up an industrial footprint, a third is betting the farm on value-add multifamily. They’re putting their chips down on markets with short supply, counting on rising rates, labor and supply disruptions to continue hindering construction.

When the roulette wheel that is the US economy finally stops moving and the R-word is confirmed—it’s either next week, on New Year’s Eve at 11:49 p.m., or in 2023, bet the over-under—they all hope to hit the jackpot.

But in California, where the future usually is defined for us, developers increasingly are carving out a hedge in mega-developments where investors parlay their bets into several asset classes in one play.

The latest mega-mixed-use project to be unveiled in the Golden State is Bayland Development’s plan to build a 1M SF, $800M complex that combines a life science research hub with an upscale hotel on Sierra Point, a man-made peninsula in Brisbane, a suburb of South San Francisco.

The development, to be known as 9000 Marina, will include 657K SF of office and life science R&D space, an 11-story hotel with 608 rooms, a 1,200-space parking podium, an outdoor pool and a chapel. In addition to the lab and R&D space, half of the office footprint will be reserved for life science occupants, according to a report in the San Francisco Business Times.

Baylands also is moving forward with the 580-acre Brisbane Baylands mega-complex, which will include 2,200 homes and 7M SF of commercial space. The project, on a former rail yard, is expected to break ground in 2023.

Brisbane is the epicenter of a surge in life science development, including Healthpeak Properties’ 1.3M SF life science campus at 8000 Marina. Another recent development, The Shore at Sierra Point, is a five-building campus encompassing 620K SF on a 23-acre site.

On the other side of Brisbane’s marina, the GENESIS Marina life sciences campus is scheduled for delivery in Q3 2023. The complex, with three interconnected buildings, will offer more than 560K SF of Class A lab and office space with convenient access to nearby Highway 101.