San Jose life science conversion play lands first new tenant in a year

Allay Therapeutics will establish corporate headquarters in North San Jose after year-long search for manufacturing facility

San Jose life science conversion play lands first new tenant in a year
Allay Therapeutics' CEO Adam Gridley and their new corporate headquarters at 2720 Zanker Road in North San Jose (Allay Therapeutics, Blue Rise Ventures)

The joint venture working on converting a North San Jose office and research campus into a complex for life science companies has signed its second tenant, representing its first new lease there in about a year.

Menlo Park-based Allay Therapeutics will establish its corporate headquarters at BioSquare Silicon Valley, the life science conversion project by Blue Rise Ventures and PCCP on one side of Zanker Road between East Trimble and East Plumeria roads, the startup said in a news release Thursday. Allay leased 50,000 square feet at 2720 Zanker Road, a two-story, approximately 65,000-square-foot building, according to Allay’s release and Blue Rise’s David Farrell. It plans to occupy its new base this spring and finish building out its labs there by this fall, the release said.

The lease — which Allay signed on Dec. 21, Farrell said — comes about a year after San Jose BioCube signed on to be BioSquare’s first tenant. The life science incubator took half of one of the complex’s seven buildings, totaling 35,000 square feet. Blue Rise and PCCP disclosed the deal while announcing their plans to rebrand what was formerly known as the Valley Tech Centre into what they touted as Silicon Valley’s first dedicated life science project.

Allay’s new headquarters is designed to combine the startup’s research, manufacturing and development activities, and is a testament to “our significant growth as a company over the last year,” CEO Adam Gridley said in a statement. The startup’s mission is to eliminate opioids from post-surgical recovery programs, and it’s developing a drug called ATX-101 that’s aimed at blocking pain in total knee replacement patients. It completed a $60 million Series C funding round in September and is on track to complete a mid-stage trial for ATX-101 by the end of this year, Gridley said in an interview.

While almost all of the Bay Area’s biotech employers are headquartered north of San Jose, Allay picked the city as the site of its new headquarters because of the relatively low rents and the fact it could build out its labs and offices there faster than in other places, Gridley said. The company’s new base also is “central to our workforce, which is really spread across the Bay Area. It ended up being just perfect for us,” he said.

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The lowest asking rents for life science real estate in Santa Clara County, which includes San Jose, were $1.95 a square foot, excluding expenses, at the end of the third quarter of 2021, Kidder Mathews data show. That’s well below the lowest asking rents in neighboring San Mateo County, $3.50 a square foot, and almost half as much as in Alameda County, $3.75 a square foot, according to Kidder Mathews.

Allay plans to relocate existing operations from a medical device incubator in Menlo Park called The Foundry, where the company is renting about 10,000 square feet, and some offices and labs it’s subleasing in Fremont in the East Bay to San Jose, Gridley said. It likely will have about 40 employees working out of its new headquarters by early next year and projects that the workforce will grow to 60 or 70 people over the next couple of years, he said.

The startup is also expanding overseas, recently doubling its footprint in Singapore to roughly 10,000 square feet after renewing and expanding its research and operations facilities there, Gridley said. Similar to its San Jose headquarters, Allay plans to occupy its expanded Singapore facilities by this spring and finish building out labs there by this fall.

The company’s San Jose lease runs for 10 years, Blue Rise’s Farrell said; he and Gridley declined to disclose how much Allay is paying at the start of its lease term or the size of its tenant improvement allowance, although that allowance was a “key part” of the lease deal, Gridley said. Blue Rise and PCCP are asking for $2.65 a square foot a month to rent the site of Allay’s new base.

Commercial real estate firm JLL represented both Allay and the Blue Rise-PCCP venture in the deal. Brokers Kyle Caldwell and Grant Yeatman represented Allay, while Toss Vallentine, Mark Bodie and Chris Owusu represented the joint venture.