Why Biomanufacturing 'Scares The Hell' Out Of Life Sciences Developers
Developers are trying to meet abundant demand for biomanufacturing space as growing biopharmaceutical firms advance new medicines toward production. But building facilities for the fledgling industry takes a strong stomach.
More biopharma companies are seeking to place their drug production in their own backyard, which, in research-heavy markets like Boston, San Francisco and San Diego, means developers have to find scarce greenfield sites or convert older industrial properties. Beyond the inherent logistical challenges and long delivery times of manufacturing development, rapidly evolving science and the unproven tenants clamoring for space add up to a high-risk environment.
“That scares the hell out of the developer,” Outshine Properties co-founder and principal Bill Hunter said last week at Bisnow’s Greater Boston Lab & Manufacturing Facilities event. “By the time we get the financing, get everything in motion, we’re looking at two years for a [biomanufacturing] facility. If we make that investment, is it still going to be gene therapy? Is that going to be the cool kid at the dance? I don’t know.”
Biomanufacturing facilities are typically housed in warehouses that must be vetted by the U.S. Food and Drug Administration, which certifies the buildings under Current Good Manufacturing Practice regulations, or CGMP. The buildings can be as small as 40K SF or larger than 100K SF and are built to produce small-molecule medicine batches, which are much more complex than the pill mills of decades past.
Modern therapeutics companies, fueled by billions in private and public funding, want greater quality control over the manufacturing process and are moving within an hour’s drive of life sciences clusters. Many existing facilities are largely overseas, and the contract development and manufacturing organizations that produce medicines for the world’s pharmaceutical giants are unlikely to work with new partners because of either a lack of capacity or relationship, experts said.
“While there may be some financial benefits of going outside Massachusetts, I think the risk of doing that, it’s too much of a risk,” said Denis Desmond, head of facilities operations, services and real estate at CRISPR Therapeutics, a gene-based medicines firm set to move into a 263K SF Boston space next year. “From my assessment, of those companies that successfully matured to commercial GMP manufacturing, at least 80% of them have adopted that strategy.”
Developers have either pitched or are in the process of building more than 3M SF of biomanufacturing space around the Interstate 495 Belt. In late spring, 15 biomanufacturing tenants were looking for a combined 1.7M SF around Boston, JLL Senior Research Manager Mark Bruso told Bisnow, but more robust available data on biomanufacturing space is limited.
A ground-up biomanufacturing project can take up to four years to deliver, Desmond said, and risks arise with the long wait. Life sciences companies seek CGMP space between three and seven years after forming, according to JLL research. Many of the companies looking for space today are backed by venture capital but lack the deep pockets of established pharmaceutical companies.
“A lot of these companies don’t have that financial strength,” Hunter said. “They will, we hope they will.”
Development risks in the burgeoning life sciences sector aren’t limited to biomanufacturing. Developers are increasingly targeting urban office buildings to convert to lab buildings, but many aren’t easily adaptable for R&D needs.
Because of the uncertainty, Outshine is developing a hybrid leasing model to “ride the wave” with emerging life sciences tenants, Hunter said.
“We can take the capacity back and have an evolving capacity for other groups that will need that at the same time,” Hunter said.
Office buildings can lack the necessary freight elevators, loading docks, and space for mechanicals needed for life sciences conversions, Avison Young principal Steven Lacerte said in an interview.
He cited 201 Brookline, a 500K SF project that is part of a billion-dollar life sciences redevelopment in the Fenway by Alexandria Real Estate Equities and Samuels & Associates, as an example of a successful build-out.
The developers already secured a 105K SF tenant, gene-editing medicine producer Verve Therapeutics, along with a 65K SF commitment from Kendall Square-based Tango Therapeutics and a 25K SF lease from Newbury Street venture capital firm Third Rock Ventures.
“201 Brookline, purpose-built as a lab building, the layouts are really designed to support that,” Lacerte said. “That type of high-rise can be successful, versus some of the ones being looked at now, older buildings that are just not laid out to support lab buildings.”
The conversion plays have crept into Boston’s Financial District, where Oxford Properties, Nan Fung Life Sciences Real Estate and The HYM Group have laid out plans to build labs in largely vacant office buildings. But zoning codes that restrict life sciences use at higher stories make the bulk of Boston’s skyscrapers untenable for potential R&D tenants.
Choosing an urban conversion in the heart of Boston or Cambridge over a suburban life sciences campus might seem like a prudent real estate decision, but it is loaded with risk on the tenant side as well.
“There are going to be tenants that are going to regret moving into buildings that were poorly converted,” Desmond said.
CORRECTION, OCT. 27, 11:45 A.M. ET: A previous version of this story did not properly identify the Current Good Manufacturing Practice regulations enforced by the U.S. Food and Drug Administration. The story has been updated.