San Diego is now one of the country's leading biotech markets, on a par with the Boston-Cambridge area in Massachusetts or the Bay Area in Northern California.

As in other cities that contain growing clusters of pharmaceuticals and gene therapy-related businesses, a major research university serves as both anchor and talent pool for fledgling biotech companies. In this case, the University of California at San Diego is the intellectual mother ship. But there also are several private research institutions, including the Scripps Research Institute, Salk Institute and the Burnham Institute for Medical Research.

UC San Diego has entered into a joint venture with Burnham, Salk and Scripps, and plans to start construction early this year on a $115 million stem-cell research center. Part of their motivation for the project is to compete for $3 billion in research funds made available by the State of California. That kind of investment in medical research helps ensure that San Diego will continue to draw intellectual talent.

The biggest lease among biotech tenants in the past six months was Eli Lilly, the Indianapolis-based pharmaceutical giant, which leased 125,000 sq. ft. at Campus Pointe. The owner is Veralliance Properties, one of several national developers specializing in biotech properties. Another national biotech investor active in San Diego is BioMed Realty Trust, which is the landlord of a newly finished 83,966 sq. ft. building in University Town Center. The biggest tenant in that building is Illumina, a maker of genetic research equipment.

Northern San Diego also has attracted mainstream office building investors like Hines Interest, the landlord of La Jolla Commons in University Town Center. The national law firm of Paul Hastings Janofsky & Warner recently leased 55,523 sq. ft. in the building.

Despite these stellar deals, landlords may want to limit their expectations about biotech leasing, according to a local expert. The startup companies will likely be fewer in number due to a drying up of venture capital, according to Brian Ffrench a district manager in Julien J. Studley's San Diego office.

In suburban San Diego, at least one significant office sale took place recently — the $148 million purchase of 232,307 sq. ft. Paseo Del Mar building in Del Mar Heights by Metzler North America, a Seattle-based unit of a German investor.

Dutch buyer loves downtown

San Diego is a sprawling city with a suburban character. Downtown, with barely 11 million sq. ft. of office space, according to Cushman & Wakefield, is not the dominant market in a city with 70 million sq. ft. of space. A number of biotech firms have chosen more spacious settings in which to build their horizontal campuses with plentiful free parking.

Downtown, however, has grown in popularity with the explosion of condos and loft housing in recent years. The frustrating crawl of traffic on the county's major artery, Interstate 5, also has strengthened downtown's appeal for both tenants and investors.

In recent years, parking has been a thorn in the side of some commercial tenants, who left downtown for fancier space in the northern suburbs. The downtown office market has a central location that is convenient for “the talent pool, which is spread out all over the county,” says Matt Clark, a vice president in the San Diego office of Cushman & Wakefield.

Although office rent is cheaper downtown than in the costly suburbs — $35.28 per sq. ft. on a full-service, gross basis vs. $47.52 in Del Mar Heights — parking is expensive, with stalls priced at up to $200 monthly. One law firm that fled Del Mar Heights for downtown, Buchanan, Ingersoll & Rooney, is moving into 40,000 sq. ft. in the 707 Broadway building owned by Arden Realty.