Kilroy Lands Life Science Tenant in High-Demand Section of San Diego

Lou Hirsch

September 20, 2021

Tandem Diabetes Care Takes More Than 180,000 Square Feet in Del Mar Heights

Kilroy Realty Corp. has landed Tandem Diabetes Care Inc. as a tenant in one of its Del Mar Heights office properties in San Diego, the latest biotech lease for the developer in one of the costliest parts of the metropolitan area.

Tandem, a maker of technologies such as insulin pumps, said in a regulatory filing that it would lease more than 180,000 square feet in a deal that comes as demand from life sciences companies escalates in the region.

The filing by locally based Tandem with the Securities and Exchange Commission shows the company entered into an agreement to lease 181,949 square feet of new administrative, laboratory and research and development space at 12400 High Bluff Drive in Los Angeles-based Kilroy’s Del Mar Corporate Centre campus.

It’s the second large biotech lease this year for Kilroy and its third overall in this northwestern San Diego office neighborhood, which has historically been one of the region’s most expensive and in high demand, more associated with financial service and law firms seeking upscale quarters near Interstate 5.
That has changed in the past few years, as San Diego’s biotech cluster — the third-largest in the nation after those in Boston and San Francisco — has migrated east and north as office and lab space has run out in its original hub in La Jolla’s coastal Torrey Pines neighborhood.

“Life science firms have signed among the biggest leases in the Del Mar Heights submarket since 2019,” said Joshua Ohl, director of market analytics for CoStar Group in San Diego. He noted that the neighborhood has in the past two years performed as a “natural extension” of a trend that has generally kept the life science industry anchored in an area that includes the campus of University of California, San Diego, a key industry research center.

The shift beyond Torrey Pines accelerated about six years ago when several life sciences companies set up shop in new projects in the University Town Center neighborhood, directly adjacent to the UC San Diego campus. Those firms then began taking space about two years ago in existing renovated and redeveloped properties to the north in Sorrento Mesa and then farther north in Del Mar Heights, where I-5 meets state Route 56.

Tandem expects to take its new space at the Kilroy campus in two phases, 143,850 square feet effective Sept. 1, 2022, and 38,099 square feet effective May 1, 2025, according to the Sept. 17 regulatory filing.
The initial monthly base rent in the first phase is approximately $906,000. The nearly 13-year lease also includes a first right of offer from Kilroy for an additional 34,569 square feet in the High Bluff Drive building if the space becomes available. Newly built or renovated office space in Del Mar Heights usually comes at a premium. The neighborhood's average monthly rent of $4.27 per square foot is well above the San Diego regional average of $2.95, but space in the newest buildings, including One Paseo, has gone for well into the $5 to $5.50 range, according to CoStar data.

Tandem plans to use the first phase of the new lease to relocate from 77,458 square feet it occupies in four separate buildings in the Sorrento Mesa neighborhood. Tandem and Kilroy officials did not immediately respond to CoStar News’ requests for comment.

In July, life science firm DermTech leased all 95,997 square feet in Kilroy’s Del Mar Heights office building at 12340 El Camino Real. In 2018, Acadia Pharmaceuticals signed on as an early tenant and leased 67,000 square feet in its nearby One Paseo mixed-use complex off El Camino Real, which was completed last year.