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September 20, 2016

Developing office properties is a show of confidence in a market’s strength. Investing more than $1 billion to develop a campus focused on the life sciences and technology industry has the potential to transform a market.

A joint venture between Greenland USA and Ping An Trust and minority equity partners Agile Group and Poly Sino Real Estate Fund recently acquired The Landing at Oyster Point, a 42-acre waterfront development site located in South San Francisco, for $171 million.

The plan is to develop a large-scale office and research and development complex to support the expanding life sciences industry. The to-be-renamed property will total approximately 2.25 million square feet, in addition to public open space and recreational areas.

According to JLL’s U.S. Investment Outlook, international capital transactions into the U.S. reached $16.8 billion at mid-year, with Chinese and South Korean capital accounting for three quarters of closed transactions. While Chinese investors have a well-documented penchant for high profile commercial real estate transactions, the deal profile has been primarily trophy residential developments or existing office and hotel properties. Now, their sights are turning increasingly toward office development.

“Mainland Chinese investors have been actively pursuing residential development opportunities and stabilized trophy office and hotel properties in U.S. gateway markets for the past four or five years, but interest in office and life science development is more recent. It shows an increased appetite for risk in those sectors.” says Rob Hielscher, Managing Director with JLL Capital Markets. “The Landing at Oyster Point is the largest fully entitled waterfront development site in the Bay Area, and the scale of the project was attractive to investors looking to develop a flagship project.”

The Landing at Oyster Point’s location is also a unique target for mainland Chinese investment. The site sits in South San Francisco in the Bay Area’s Peninsula office market, positioned between San Francisco and Silicon Valley. According to Hielscher, The Landing at Oyster Point transaction is a signal that Chinese developers are expanding beyond the central business districts of gateway markets. “Chinese investors are starting to cast a wider geographic net due the scarcity of large scale development opportunities in gateway cities, and the increasingly strong occupier markets in areas surrounding gateway cities.”

In particular, tech sector growth is creating strong real estate conditions on the Peninsula. According to JLL’s U.S. Technology Outlook, the San Francisco Peninsula has increased tech employment 5.0 percent year-over-year and received approximately $1.8 billion in venture capital funding from Q3 2015 to Q2 2016, factors which increase the appeal of a life sciences and biotechnology commercial real estate investment.

“We anticipate that Chinese capital will remain very active in the United States over the coming years, with increasingly broad investment criteria in terms of both product types and locations,” concluded Hielscher.

Rob Hielscher
Managing Director, JLL Capital Markets

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