Life Science Just Gets Better
Life science is having a great run but the industry hasn’t even started, according to what developers, owners, designers, and builders told 350 guests at Bisnow’s 4th Annual Life Science Summit yesterday. (Hide your Star Trek DVDs, the scientists are coming.)
Business models are collapsing as the industry strives to create new products faster, cultivate new ways of working with academia, and commercialize advances in gene therapy. As new companies grow and change their focus, landlords and developers are changing with them. (They're changing so fast you might say they're experiencing schizogony. The life scientists get that joke.) Owners need to re-engineer leases to be as flexible as the buildings they alter for tenants that are expanding, shrinking, and being bought-out. But one constant in this evolving universe is the value of being near the world-class institutions in Cambridge and the Longwood Medical Area.
Consider The Fallon Co’s agreement to sell for $1.1B the 1.1M SF complex it developed on Fan Pier in the Seaport for Vertex. Such "value events" come rarely and illustrate the industry’s worth, says keynote speaker, DLA Piper’s Geoff Howell. Some of the smartest investors in real estate and healthcare are chasing life science deals. (Put money into life sciences and you might live forever.) Their projects can be a huge win for cities by creating 24/7 environments to attract talent.
Jacobs Global Buildings’ Chris Leary, our moderator, peppered the panel with insightful questions that reflect the many projects he’s working on. For Forest City, he and his team designed the latest addition to University Park, a 240k SF building on Mass Ave. They recently completed Lab Central, 22k SF of co-working labs and the fit-outs for Foundation Medicine’s 60k SF at 150 Second St and InVivo Therapeutics’ 21k SF at One Kendall Square.
Some may be concerned about Vertex Pharmaceuticals leaving nearly 700k SF of offices and labs in Cambridge for the Boston Seaport. But BioMed Realty Trust VP Bill Kane (surrounded by colleagues Lindsay Sard, Ashley Myslinski, and Allison Reid) isn’t one of them. For BioMed, which owns 3M SF in Kendall Square and the LMA, it’s a “real estate gold mine” (no pick axe or mountain man beard required); a chance to have an existing asset that’s 80% ready for new tenants. Small- and medium-size companies—the industry’s “innovative core”—may fill it up since they signed 33 of the 44 life science leases inked in ’13.
Related Beal, a '70s pioneer in East Cambridge and later in Lexington, is now eyeing the area around Boston Medical Center and BU’s BioSquare in the South End, says EVP Steve Faber. There’s room to develop new space and neighborhood amenities abound. It’s a live/work/play environment in waiting. (So come all ye craft brewers and boutique vintage clothing stores!) Steve says private developers are seeing a new influx of capital and learning how to handle leases for tenants unlikely to be there by the end of the term. Executing such leases takes a fast-moving legal team. Despite rents reaching into $70s/SF, Cambridge is still a favored front in the critical war for talent; talent trumps rent.
Companies use virtual collaboration to help develop their science faster but they still value face-to-face exchanges. They also want to be close to MIT, Harvard, and their uniquely talented people, says Frank Wuest, president of Forest City Science & Tech Group. Investors are confirming that premise. In ’13, Massachusetts venture capital firms raised $5.4B, one-third of the VC money raised in the US. The Nasdaq Biotech Stock Index is now at 277, down from its first quarter peak of 329, but a 21% jump from its 215 level of a year ago. This helped spur a wave of 35 healthcare IPO's in Q1. The acceleration of capital formation is the fastest he’s seen. With landlords now able to charge $70/SF for office space, some lab space is being converted into office; a turn around from a few years ago.
But those buildings are best if they're on the Red Line given Millennials’ disdain for the car, says King Street Properties principal and panelist Tom Ragno (right) with partner Steve Lynch. (People haven't loved bikes this much since 1817, when they were still called dandy horses.) There’s been an explosion of partnerships—big pharma investing big time in local companies to fill their new product pipeline—and a surge of manufacturing in Massachusetts. The Dutch company UniQure is setting up shop in King Street’s Lexington complex where they can meet their need for huge amounts of power, air handling capacity, and hire intelligent workers.
With the accelerating pace of change in science and technology, architects are finding new ways to make space easily adaptable, says Architectural Resources Cambridge’s Bryan Thorp. More than ever, architects are working with contractors during the design phase to create buildings that meet client needs and are practical to build. ARC is doing the interior fit-out for the 135k SF that Dana Farber leased in National Development’s Longwood Center, which is under construction. The challenge: divide large floor plates into small, collaborative research communities. In retrofitting existing space the issue is upgrading the power supply to meet current energy codes.
To keep up with the fast-moving industry, construction firms also have changed their delivery systems, says Lend Lease’s Scott Tereshak. His company collaborates with architects from design through construction, using modeling throughout the process. In the Bristol Meyers Squibb manufacturing complex at Devens, Scott’s team is adding a 230k SF development lab, a 120k SF clinical manufacturing facility. Both will be completed Q4 ’15. They’re also adding infrastructure to the campus—back-up generation, additional cooling and parking (until scientists in those labs can figure out how to teleport us, they'll need to park).