A partnership between Trinity Capital Advisors and Starwood Capital Group is beginning what’s expected to be the largest mixed-use research development in North Carolina’s Research Triangle, a project totaling nearly $1 billion in investment to meet anticipated demand from growing life sciences companies.
The 109-acre advanced life science campus unveiled earlier this year, called Spark LS, is scheduled to get underway this week in Morrisville, North Carolina, after months of “blocking and tackling” with the site plan’s approvals and permits, said Jeff Sheehan, managing partner at Charlotte, North Carolina-based Trinity Capital Advisors.
The first phase of the 15-building, 1.5 million-square-foot campus totaling four buildings and about 500,000 square feet — or about a third of the project — is beginning on a speculative basis, Sheehan told CoStar News.
“We are going on a speculative basis, but you could call it a very informed and confident speculative approach because we have three existing projects in the market totaling roughly 4 million square feet and we are seeing the demand firsthand,” Sheehan said. “We are hearing about demand falling off in other life science markets, but we haven’t experienced that here yet.”
Life science has been a bright spot in the office market, but investment velocity has slowed in recent months as the rising cost of debt has hit some investors. North Carolina’s Research Triangle is still seeing a rise in rental rates as vacancy dwindled through last year, according to a recent report by Cushman & Wakefield. This comes as the Research Triangle region has about 8.2 million square feet of life science space under construction, according to the real estate firm.
Sheehan said he suspects North Carolina’s Research Triangle region hasn’t experienced a drop in demand because the market is relatively affordable for real estate costs and on labor than other U.S. cities typically known for life science, including San Francisco, Boston and New York. Those costs have become increasingly important to life sciences companies as they look to stretch their last round of funding, he added.
The life science campus is being developed in the Raleigh-Durham area, which has one of the world’s largest life science clusters and is home to 569 of North Carolina’s 735 life sciences companies, according to Cushman & Wakefield data.
At full build-out, Spark LS is expected to have 1.5 million square feet of lab and bio-manufacturing space meant to help would-be tenants advance from discover to delivery. The campus will be located near Research Triangle Park, a mile from Interstate 40 and less than four miles from Raleigh-Durham International Airport. Plans include 15 buildings connected by green spaces, restaurants, health-conscious retail, a STEM education and amenity center, and several multiuse outdoor recreation areas.
The initial phase of Spark LS includes two bio-manufacturing buildings and one multistory research and development building. The phase also includes an amenity and retail center with a fitness center and a place to house eateries. The initial bio-manufacturing building is expected to be complete by the end of June 2023, with the other buildings following in 2024. The first phase of construction on the campus also includes an amphitheater and outdoor common spaces.
The buildings will have built-in flexibility to cater to a wide variety of would-be tenants, Sheehan said. Sheehan declined to share the specifics of the asking rates on the space, but said they are in line with market rents for flexible space. The initial phase is bent toward delivering bio-manufacturing space because North Carolina can offer this kind of property at a discount compared to Boston or New York, where this kind of real estate is difficult to find, Sheehan said.
The real estate firm has a $2.2 billion portfolio of roughly 4 million square feet of life science space in North Carolina and has worked with hundreds of tenants at various stages of growth.
Unlike the Research Triangle Park, the nation’s largest research park totaling 7,000 acres, which has certain development covenants that don’t allow for a true mixed-use development, Spark LS is adjacent to the park, not in the park, giving the developers the ability to inject a truly mixed-use environment into a life science campus.
“We are putting our money where we think the market is going and that’s this project that blends bio-manufacturing and research and development in a highly amenitized campus setting,” Sheehan added. “For the first time, you can have manufacturing and go to a floor where researchers can advance new ideas and collaborate on the spot at a large scale.”