Apple Expansion in San Diego High-Tech Hub

Tech giant Apple Inc. is planning a major expansion in San Diego and has leased all of a new office building currently under development by BioMed Realty in the bustling University Town Center neighborhood, according to three sources familiar with the deal. The iPhone maker agreed to occupy the full 204,000 square feet of office at BioMed’s Apex building, under construction at 9775 Towne Centre Dr. and scheduled for delivery in 2021. The building is next to the tech company's existing outpost, a more than 96,000 square-foot building owned by Irvine Co. at 9779 Town Centre Drive, where Apple leased all the space in late 2018.

BioMed Realty, a San Diego-based firm that is part of New York-based investment manager Blackstone Group, announced Oct. 30 it executed a long-term lease with an unnamed Fortune 50 company for the entire four-story Apex development. BioMed said Wednesday it was not naming the tenant, and Apple representatives did not immediately respond to requests for comment.

UTC is a growing hub for technology and life-science-oriented tenants, which also include tech rival and Seattle-based online retailer Amazon Inc., which last year moved into new offices in a nearby building owned by Alexandria Real Estate Equities Inc.

Apple, based in Cupertino, California, has never officially announced the specific work areas of its growing San Diego workforce, but has recently placed ads for jobs in software and hardware engineering and design areas. Earlier this year, Apple officials boosted hiring plans for San Diego, announcing it would employ 1,200 instead of the earlier 1,000 figure it announced in December last year, as part of a larger nationwide expansion. The company said in March it would need "hundreds of thousands of square feet" of real estate in San Diego to accommodate its growing team in the area.

"San Diego will become a principal engineering hub for Apple, with new positions distributed across a number of specialty engineering fields, to include both hardware and software technologies," Kristina Raspe, vice president of global real estate for Apple, said in a March statement.

No new leases were mentioned by Apple in its Oct. 30 fourth-quarter earnings call or regulatory filings preceding its earnings reports, which showed the company posting revenue of $64 billion for its latest quarter ended Sept. 28, up 2% from a year ago. Apple was the nation's third-largest company by annual revenue at the end of 2018.

But local brokers have previously said Apple would probably need more than one building beyond the one it had already leased to meet that employment goal.

"The word was that they [Apple] received several responses when they were looking for locations, and they were very interested in taking advantage of the trained technology labor pool in San Diego," said Michael Labelle, executive vice president and San Diego branch manager at brokerage firm Savills, who was not involved in the deal. "I think they’ll probably be drawing from the employment base that also works at these other tech companies like Qualcomm."

Meanwhile, Jason Hughes, chief executive of San Diego-based brokerage Hughes Marino, said the BioMed location makes sense for Apple, given its proximity to the building it has already leased in UTC.

BioMed is among the nation’s largest holders of life science and healthcare-related properties. Apple recently announced new nationwide health-related studies in conjunction with major institutions such as Harvard University, the American Heart Association and University of Michigan, focused on areas including heart health, mobility and hearing.

"Leveraging the devices customers use every day and our world-class security and privacy, we hope to democratize medical research and bring everyone to the table to make the next big breakthroughs possible," Apple CEO Tim Cook said during the company's earnings call this week.

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