The future of real estate in the life sciences sector – food, medicine, healthcare, life sciences

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What is the current real estate situation in relation to the life sciences industry? Simply put, the demand for premises for both new and growing biotech companies is outstripping supply and, in fact, is at the forefront of commercial real estate growth as the new economic growth cycle begins after COVID.

Allen Matkins and UCLA Anderson Forecast recently co-hosted a webinar to share their thoughts on the future of the life sciences industry and what it means for the real estate industry as it works to meet the needs of this growing sector. Webinar moderator: Jerry Nickelsberg, Director of UCLA Anderson Forecast and Professor of Economics at Anderson School at UCLA. The panelists included Martin Toney, Partner Allen Matkins; Nikki Lin, Director of Entrepreneurship and Commercialization, UCLA California Nanosystems Institute; Steve Rosetta, CEO of IQHQ; as well as Chad Urie, Senior Managing Director of JLL.

“The tides have changed,” Steve Rosetta said. “Life sciences are popular not only with real estate investors, but also with venture capital, lenders and all kinds of capital sources, which creates an interesting environment.”

Martin Tonney agrees. “I have never seen this kind of competition and more pressure to close deals quickly, and this is true in all the markets I operate in, including San Diego, the Bay Area, Seattle and Boston,” he said.

Given the current growth in the life sciences sector, several questions arise regarding real estate needs. What factors make a particular field attractive to the life sciences? Can secondary markets be developed? Should the real estate industry focus on retrofitted premises or purpose-built buildings and structures? Will the life sciences industry continue to grow?

What factors make the city the center of the life sciences industry?

Several cities, such as Boston, San Francisco, and San Diego, are major hubs for the life sciences industry. Chad Uri explains why. “It’s no different from technology,” he said. “It’s all about talent. Where does it come from? Is he already there? Can I type efficiently and quickly? What is the flow of talent so that I can continue to feed my company? ” Because candidates for jobs in the life sciences require specialized education and training, companies will be located in areas with a sufficiently large pool of talent.

What factors play a role in creating the “right” environment for life sciences companies to grow and flourish? “Talents, venture capital groups and real estate are driving growth,” said Uri. “You can usually find people who become serial entrepreneurs who tend to repeat and do things over and over again, only on a larger scale,” he said. “These things have been around for a long time in San Francisco and Boston; they continue to develop in San Diego. “

What about other markets?

So far, secondary markets are developing slowly; It is difficult for a city to create this talented environment from scratch. Again, because the workforce in the life sciences industry is highly specialized, the availability of talent in the field is important. Many US cities have tried to establish centers of innovation and incubate life sciences. However, Rosetta noted that “it is not an easy task because you need to build a critical mass of talent that specializes in different sectors or specialties in the life sciences industry to be able to continue to grow.” In addition, there must be affordable real estate that companies can expand on.

However, Nikki Lin is optimistic about the future of Los Angeles as a center for the life sciences. “The organic evolution of San Diego, the openness, the willingness of the community to accept the scientific community – it was interesting, and its footprint is slightly smaller than in Los Angeles,” she said. “We’re wondering if we have the right institutional context in Los Angeles. We have universities, we have research institutes, we have a community, we have a large number of people to work with. However, we are far from each other. For Los Angeles, we feel the time has come. “

Uri noted that until last year his firm did not close any life sciences deals outside of San Diego. He currently operates in markets such as Los Angeles, Seattle, Houston, Austin, Chicago and Pittsburgh. Why change? “You end up returning to the same thing – talent,” he said.

What other factors influence the development of secondary markets? The right educational programs at local universities and the hospital system can facilitate cross-collaboration.

Transformed space versus new space

Given that there is a lot of empty space in the market, especially retail space, survey participants were asked if life sciences businesses could use premises that have been converted for their specific needs.

While several renters are willing to retrofit existing premises, Rosetta’s firm is focusing on above-ground, purpose-built buildings due to the special needs of life sciences companies and their lab space requirements. There are always sacrifices when converting. They usually need to be rented out quickly and quickly, and in the end, the building may still not fully meet the requirements of life sciences companies. This is a big investment with a certain amount of risk.

Lin noted that a converted lab might be the right choice for a company moving to the next stage of development, but a larger, established company may need additional space. Even so, transformation is needed to attract new incubator companies to move into a specific field and develop that field as a center for the life sciences.

Other factors affecting the viability of transforming existing spaces for the life sciences are zoning requirements and the impact on nearby office space and / or residential areas. Most people don’t need a backyard research lab, especially if it deals with diseases, pharmaceuticals, and various chemicals.

Will the growth continue?

The COVID-19 pandemic has brought attention to the life sciences industry and its growth has been significant. Will it continue?

All the participants in the discussion think so. Lin noted that government funding dollars are a good barometer in this regard. For example, last year the University of California, Los Angeles received $ 1.4 billion in research funding. If this kind of investment goes into research and development at the academic level, it will certainly lead to more enterprise growth in the life sciences industry.

In addition, there is a growing tendency to view the life sciences industry as part of national security. While such companies have sought to expand in areas that would lower their operating costs – possibly overseas – it is now more viable to operate domestically as much more funding is available.

Many large real estate developers now have dedicated staff dedicated almost exclusively to bargaining with biotech companies. Given the current growth in the industry and the likelihood that such growth will continue, this trend will undoubtedly continue for the foreseeable future.

The content of this article is intended to provide general guidance on the subject. You should seek professional advice regarding your specific circumstances.

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