Suburban Maryland Class A Life Science Portfolio for Sale

Thursday, May 30, 2019

Holliday Fenoglio Fowler LP (HFF), as exclusive representative for the owner, is marketing a Class A life science innovation center for sale that comprises three lab buildings totaling 138,938 square feet in the Washington, D.C. suburb of Gaithersburg, Maryland. Driven by strong demographic tailwinds, suburban Maryland’s 8.2 million-square-foot lab/life science market is currently only 3.5% vacant, with recent rent growth in excess of 30% and rents now pushing into the mid-$30s on a triple-net basis. The market is anchored by global pharmaceutical giants, a vibrant life science start-up community, strong educational institutions, and permanent government demand drivers.

The property is currently 87% leased to five tenants with a weighted average remaining lease term of 6.4 years, with the sole remaining vacancy being a to-be-delivered lab-ready suite. There is additional lab conversion potential via the last two remaining office suites (19% of RBA). Additionally, approximately 80% of the existing tenancy is lab tenancy, and all in-place leases are triple-net with contractual annual escalations.

Accordingly, the property, which is located at 25, 35 and 45 West Watkins, is a coveted opportunity to acquire institutional quality lab/life science product with upside potential via the lease-up a lab ready suite as well as future conversion of the remaining office space to lab. 

Office Property for Sale Investment Highlights

  • 87% Leased to Five Tenants with 6.4 Years Walt:  The property has experienced more than 100,000 square feet of leasing in the last eight months, addressing 76% of RBA. As a product of that leasing, 25, 35 and 45 West Watkins are now collectively 87% leased to five tenants with 6.4 years WALT. Sixty-six percent of tenancy, which includes global pharmaceutical giant AstraZeneca and Montgomery County, is backed by investment-grade credit entities, while the remaining tenancy is backed by significant multi-national corporations. The property has achieved some of the highest rents in the suburban Maryland lab market for existing product.
  • Entrenched Anchor Tenancy:  Anchor tenant AstraZeneca comprises 53% of RBA and is a top 15 global pharmaceutical company with a $98 billion market capitalization. The tenant has been at the property since 1991 and recently extended their lease through February 2026. Previously known as MedImmune, AstraZeneca’s biologics and research and development arm is headquartered in Gaithersburg. With 3,500 employees, AstraZeneca is the largest bioscience employer in the greater Washington, D.C. region.
  • Demographically Driven Investment with Favorable Market Tailwinds:  Aging baby boomers are driving demand for finished pharmaceutical and medical products, as well as for innovative new treatments for age-old human ailments. As a result, increasing funding has flown into the life science space and generates favorable real estate market conditions across the country. Suburban Maryland’s 8.2 million-square-foot lab/life science market is only 3.5% vacant with rents pushing into the mid-$30s on triple-net basis. Limited supply and robust demographically driven demand are anticipated to generate favorable rent growth characteristics for years to come.
  • Outstanding DNA Alley Location Near Major Demand Drivers and Decision Makers:  The life science property for sale is ideally located in Maryland’s DNA Alley in a robust life science cluster. The Maryland life science market is anchored by timeless and permanent government demand drivers, such as the National Institutes of Health (NIH) and its many sub-institutes, the U.S. Food and Drug Administration (FDA), the National Institutes of Science and Technology (NIST) and the Walter Reed Army Institute of Research (WRAIR). University of Maryland’s Institute of Bioscience and Biotechnology Research at Shady Grove and Johns Hopkins University’s Montgomery County campus at Shady Grove generate a plethora of highly trained biotech employees on an annual basis.

The property will be sold free and clear of debt, providing investors the opportunity to take advantage of today’s low interest-rate environment. For more information on this lab/life science property or any other office properties for sale in the Washington, D.C. area, please contact Jim Meisel, David Baker,  Matt Nicolson, Stephen “Dek” Potts, Andrew Weir or Stephen Conley in HFF’s Washington, D.C. office. 

To view HFF’s current real estate investment listings, please click here to be directed to HFF’s property search page.

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