Health Care Giant Buys Emeryville Life Science Campus

Sutter Health has purchased BioMed Realty’s Emery Yards life science campus for $450M, with plans to transform the 12-acre complex in Emeryville into a 1.3M SF medical hub.

BioMed’s campus includes two life science buildings, located at 5555 Hollis Street and 5300 Chiron Way and encompassing a total of 530K SF, as well as a 1,992-space parking garage. The deal includes two vacant lots at 4563 Horton Street and 1400 53rd Street.

Sutter is planning to invest $1B in a medical hub on the property that will be called the Sutter Emeryville Campus, including construction of a 335K SF hospital that is scheduled to be completed by 2033.

The Emeryville campus is the second massive flagship development in the Bay Area that Sutter has announced in the past three months. In December, the Sacramento-based nonprofit health care giant unveiled plans to spend $800M to transform empty office buildings at two sites in Santa Clara into a 1M SF medical hub.

Sutter is partnering with The Sobrato Organization and the Palo Alto Foundation Medical Group to create two campuses, to be called Sutter West Santa Clara and Sutter East Santa Clara, on sites about a mile from each other on Mission College Boulevard.

San Diego-based Biomed delivered the first phase of Emery Yards, which originally was planned to be a 1.3M SF life science lab and office campus, as Emeryville became the epicenter of a life science downturn in the Bay Area.

The life science vacancy rate in Emeryville peaked at 39% in the third quarter of 2024, the highest of any city in the East Bay market, which had an average vacancy of 14%, according to CBRE data.

The overall 44M SF life science market in the Bay Area rebounded in the fourth quarter, ending 2024 with a huge surge in leasing activity led by large deals in the San Francisco Peninsula, which accounted for nearly 86% of the total volume of 1.9M SF across the nine-county region.

The surge in life science leasing, which more than doubled the Bay Area’s Q3 2024 total of 704K SF, represented an 89% increase over the 10-year, quarterly average for the region.

Life science occupancy in the Bay Area also rebounded sharply in the fourth quarter, with positive net absorption totaling nearly 351K SF, up from minus 768K SF in Q3. The Peninsula led the occupancy surge, with positive net absorption totaling 360K SF in Q4, swinging up from minus 547K SF the previous quarter, CBRE reported.

The continuing arrival of a wave of new supply prevented these positive trends from putting a dent in the overall life science vacancy rate in the Bay Area, which ticked up to 28.7% in Q4.

Four Bay Area projects encompassing nearly 1.1M SF were delivered in the fourth quarter. The largest ground-up project that arrived in Q4, Beacon Capital’s 540K SF Berkeley Commons project, was delivered fully vacant. The largest life science conversion project, Kilroy’s 37K SF Bohannon project in Menlo Park, also was delivered fully vacant.

The onslaught of new supply will continue in 2025. At the end of 2024, 13 life science projects, including ground-up developments and building conversions, were under construction encompassing a total of 2.7M SF in the Bay Area.