LA’s Expanding Life Sciences Market Aims To Boost Talent, Avoid Startup 'Black Hole'
Los Angeles isn’t used to being overshadowed. But when it comes to the life sciences, it’s a distant third behind in-state rivals San Francisco and San Diego, both national powerhouses. But that unfamiliar position outside the spotlight may soon be working to its advantage.
A JLL report that came out last week, which ranked LA the seventh-best cluster in the country, noted that the incredible national demand for, and lack of, lab space means the city’s proximity to San Francisco and San Diego is a huge asset. Space in those markets averages $70 and $60 per SF, respectively, according to CBRE, versus $38 in Los Angeles, making it a candidate for overflow from both cities.
“What LA lacks in a centralized cluster it makes up for with talent, innovation, and institutional presence,” the report notes.
The growing market will also benefit from LA’s multifaceted economy, which is already a center of tech and media, and the nation’s largest manufacturing hub, said David Whelan, CEO of trade group Biosciences LA.
In addition, the city has assembled its own highlight reel of big life sciences firms and important deals, including pioneering multinational Amgen, immunotherapy firm Kite Pharma and Xencor, a homegrown firm that spun out of CalTech and develops antibody drugs. Oxford Properties Group dropped $133.5M earlier this month for the 118.5-acre Southern California Innovation Park in Santa Clarita, a city 30 miles northwest of LA, with an eye toward expanding its life sciences investments.
But the challenge that still stifles the city’s life sciences scene, and presents an opportunity for growth, is startup support, both in terms of finances and space. Despite a relatively small inventory of startup labs, Los Angeles has long been a key center of research, boasting UCLA, USC, CalTech and research institutions and medical centers like City Of Hope, Cedars-Sinai and the Lundquist Institute. The region annually brings in $1.9B in National Institutes of Health funding — a proxy for innovation potential and typically a huge driver of startups, spinoffs and commercialization — more than any other area except Boston. The challenge has been building a web of support for startups and commercialization in a region that’s very decentralized.
“That’s our biggest issue here, nobody is aware of the innovation here, and I’ve been shouting it from the rooftops,” Biocom California LA Executive Director Stephanie Hsieh said. “We’re bigger in cell therapy than the Bay Area. But for years, that innovation has gone and migrated to the Bay Area, San Diego or Cambridge because we haven’t had any place for it here at home.”
LA has seen recent efforts to change that, especially funding. Cushman & Wakefield Executive Director Shaun Stiles, who has been involved in LA life sciences for three decades, said even a decade ago, there wasn’t much VC interest in hometown firms. But it’s started to turn around. A cadre of new investors, from Mount Wilson Ventures to Wavemaker 360, are focused more on biotech in LA. Westlake Village BioPartners, co-founded by Beth Seidenberg and Sean Harper, two Amgen alums, has raised $800M for local firms, and Vida Ventures, which is based in Boston and LA and closed an $825M life sciences fund this summer, has turned more of its investment toward the West Coast.
Increasingly, more lab space is taking shape for firms that benefit from this influx of capital, plugging up what Hsieh has called a “black hole” for promising LA startups looking to stay local. Lab Launch CEO Llewellyn Cox, who helped develop an incubation space in Monrovia that opened in 2015 and is set to launch an 11K SF Lab Launch@ATX graduate space in Atwater Village by the end of the year, said the problem was straightforward.
“There were two factors, a lack of entry-level funding — who’s writing that first check, who’s writing those seed checks — and there simply was no lab space,” he said.
The vacancy rate in the LA market was a minuscule 1.5% in June, according to Cushman & Wakefield, an extremely tight market likely delaying firms from expanding or pushing them to move. The region only has 11.2M SF of lab space total, per Newmark, with about 750K SF under renovation or construction. In comparison, San Francisco has 31M SF of existing space and another 3.8M SF underway. Other newer incubator spaces, such as BioLabs at the Lundquist Institute, HATCHSpaces and LA BioSpace on the Cal State LA Campus, are also adding to the stock of incubator space.
Other projects seek to grow the entire pipeline all the way down the line, to later-stage, more mature firms. The Lundquist Institute is developing a new biotech park in Torrance that will come online in the next couple of years, while Capsida’s new gene therapy manufacturing facility that opened over the summer in Thousand Oaks underscores the biomanufacturing potential in the city. This fall, Hsieh also plans to convene city planning officials and leaders from the region — LA County is famously a web of 88 different municipalities — to educate them on the economic benefits of more lab space and accelerate the zoning and permitting processes to speed up development.
LA’s lab space growth mirrors its stereotypical sprawling character, which some analysts see as a challenge. Stiles believes the fragmented nature of growth has created a series of small clusters around a number of anchor institutions: Pasadena in the near northeast around CalTech, labs in the Westside and El Segundo near UCLA and the coast, and Thousand Oaks in the northwest near Amgen. Spread over the massive Southern California landscape, it makes it hard for everyone to connect the dots.
Cox believes that narrative is simply rubbish.
“We’ve built this ecosystem for years, and we’ve all worked through the pandemic,” he said. “Physical proximity isn’t necessary. That’s based on legacy without a lot of proof.”
LA’s benefit, especially when compared to its California neighbors, is talent, quality of life and relative affordability, fair tradeoffs for a commute, he said.
As Cox puts it, biology needs space to grow, and once it has that, it’s self-sustaining. He said the cliched “if you build it they will come” narrative bothers him since he feels it does a disservice to the reality of the talent and potential in the Los Angeles market.
“It’s just not about people coming; they’re already here,” he said.
Learn more about Los Angeles' position in the life sciences realm at Bisnow's Shaping The Future Of West Coast Life Sciences digital summit Sept. 23. More info and tickets here.