The Future of Real Estate in the Life Sciences Sector | Allen Matkins
WHAT FACTORS MAKE A CITY A HUB FOR THE LIFE SCIENTIFIC INDUSTRY?
Certain cities like Boston, San Francisco, and San Diego are major hubs for the life science industry. Chad Urie explains why. “It’s no different from tech,” he said. “It’s all about talent. Where does it come from? Is it already there? Can I recruit effectively and quickly? What’s the talent pipeline so I can keep feeding my business? “Because candidates for life science jobs require specialized education and training, companies will locate in areas with a large enough talent pool.
What factors play a role in creating the “right” environment for life science companies to develop and thrive? Talent, venture capital groups, and real estate to fuel growth, noted Urie. “You generally find people who become serial entrepreneurs, who tend to keep repeating and doing things over and over, just on a larger scale,” he noted. “These things have been around for a long time in San Francisco and Boston. It’s evolving in San Diego. “
WHAT ABOUT OTHER MARKETS?
While the secondary markets are slowly developing; It is difficult for a city to create this talented environment from scratch. Since the workforce in the life sciences industry is highly specialized, the availability of talent in a particular area plays an important role. Many cities in the US have tried to create centers of innovation and start life sciences. However, Rosetta noted that “it is not an easy thing to do because you need a critical mass of talent who specialize in different sectors or subjects within the life science industry to continue growing.” In addition, real estate must be available into which companies can scale.
However, Nikki Lin is optimistic about Los Angeles’ future as a center for life sciences. “The organic development of San Diego, the openness, the willingness of the community to join the scientific community – that was interesting and a footprint a little smaller than in Los Angeles,” she said. “We wonder if we have the right institutional context in Los Angeles. We have the universities, we have the research institutes, we have the community, we have a large population to work with. However, we are far apart. For Los Angeles, we feel that the time is now. “
Urie noted that his company had not had any life science deals outside of San Diego until last year. Now it works in markets like Los Angeles, Seattle, Houston, Austin, Chicago, and Pittsburgh. Why the change? “Ultimately, you are returning to what talent is,” he said.
What other factors are influencing secondary market development? The right educational programs in local universities and a hospital system can make collaboration easier.
CONVERTED SPACE AGAINST NEW SPACE
Given that there is a lot of free space in the marketplace, especially retail space, panellists were asked if life science companies can use spaces that have been remodeled for their specific needs.
While several landlords are willing to remodel existing spaces, Rosetta’s business is focusing on basic, purpose-built buildings due to the specific needs of life science companies and their need for laboratory space. There are always sacrifices associated with conversions. They usually need to be done quickly and rented out quickly, and in the end the building may not yet fully meet the needs of life science companies. It’s a big investment with some risk.
Lin noted that a converted lab space might be the right choice for a company moving into the next stage of development, but a larger, more established company might need a floor space. Even so, remodeling is needed to attract newer incubators to relocate to a specific area and develop that area as a hub for life sciences.
Other factors influencing the feasibility of converting existing space for life sciences include zoning requirements and the impact on nearby office and / or residential areas. Most people don’t want a research lab in their backyard, especially when it comes to diseases, pharmaceuticals, and various chemicals.
WILL THE GROWTH CONTINUE?
The COVID-19 pandemic has put the life science industry first, and the growth has been significant. Will it go on like this?
All panelists agree. Lin noted that government funding dollars are a good barometer in this regard. For example, UCLA received $ 1.4 billion in research funding last year. When this type of investment in research and development flows at an academic level, it is sure to lead to more growth in life science companies.
In addition, there is a growing tendency to view the life sciences industry as part of national security. While such companies wanted to expand in areas that would lower their operating costs – perhaps overseas – it is now more profitable to operate domestically as there is much more funding available.
Many large real estate developers now have dedicated staff who focus almost entirely on doing business with life science companies. Given the current growth in the industry and the high likelihood that that growth will continue, this trend will undoubtedly continue for the foreseeable future.