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Apple Seen Taking Another Big Space for Expanding San Diego Workforce

Exclusive: Tech Giant Said to Be Sole Tenant at New Kilroy Building in University Town Center


Kilroy Realty Corp. signed an undisclosed "major technology company" to take all the space in this office building under construction in San Diego's University Town Center neighborhood. (CoStar)

Tech giant Apple leased a third office in San Diego's busy University Town Center neighborhood, taking a full building under construction by Kilroy Realty Corp., according to three sources familiar with the transaction.

Kilroy said this week it had signed a long-term lease with an undisclosed "major technology company" to take the full 160,400 square feet at its building under construction at 9455 Towne Centre Drive, scheduled for completion in mid-2020.

Apple, Los Angeles-based Kilroy, and Apple's brokers at JLL did not immediately respond to requests for comment. A leasing at that property would be the third in San Diego for Apple, after it leased two entire buildings in the bustling UTC office enclave earlier in the year, making room for its growing local workforce.

Earlier this year, Apple officials boosted hiring plans for San Diego, saying the company would employ 1,200 instead of the previously announced 1,000 it announced in late 2018 as part of a larger nationwide expansion. Apple in March said it would need "hundreds of thousands of square feet" of real estate in San Diego to accommodate local growth plans.

"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.

In October, Apple leased the full 204,000 square feet at BioMed Realty's Apex building under construction at 9775 Towne Centre Drive, scheduled for delivery in 2021. That deal came after Apple's late 2018 lease of the entire 96,000 square feet at Irvine Company's property at 9779 Towne Centre Drive.

Commercial real estate professionals around San Diego have said Apple would probably need to take much more space to accommodate its local workforce plans.

Michael Labelle, executive vice president and branch manager in the San Diego office of brokerage Savills North America, said more local Apple leases could be on the way.

"They are looking for up to another million square feet," Labelle said.

Ron Miller, senior vice president in the San Diego office of brokerage Colliers International, said Kilroy and several other developers have recently been focused on catering to the growing life science industry in UTC, meaning expensive investments in specialized new construction and redevelopments of older traditional office buildings. At the same time, they are also leaving themselves room to adjust plans for new speculative projects in mid-stream if a significant non-biotech tenant comes along and the rent terms are lucrative.

"If you’re going to invest initially in what’s going to be specialized life science space, and then you're going to turn around and instead make it available for a non-life-science tenant in that location, it had better be a major Fortune 500 or similar type of high-credit tenant," Miller said. "It’s a smart move by Kilroy."

During a third-quarter earnings call with analysts in October, Kilroy Chairman and CEO John Kilroy said the developer was "active in negotiations" for the building at 9455 Towne Centre Drive, which was being developed to accommodate both life-science and non-life-science users.

"A strong location and highly amenitized state-of-the-art environment is attracting interest from a range of media, tech and life science companies," Kilroy said. "We expect this to be well leased before shell completion mid next year."

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