Why The Boom In Biomanufacturing Is Just Getting Started
Manufacturing facilities that make the next generation of drugs and therapeutics are seeing a burst of interest across the country, rising from their former status as a niche subset of life sciences real estate.
An exceptionally large spigot of money, from private venture capital as well as federal sources like the National Institutes of Health, is dramatically expanding the drug and therapy development pipeline, and along with it, the need for modern biomanufacturing buildings.
“There is a shortage, and I think it’s probably one of the most underreported segments of this whole life science space,” CBRE Senior Director of Research Ian Anderson said. “People should be paying more attention to it. We’ve had millions of square feet of lab and R&D space come to the market in the last few years, all full of scientists coming up with new solutions, and the more innovation we have, the more production needs to take place.”
Many technologies, therapeutics and startups are maturing, entering late-stage clinical trials that require small-scale production runs. And, as is common across the industrial real estate landscape, these manufacturing facilities are competing with the voracious need to expand e-commerce operations, making site selection more challenging.
The Boston market alone has seen an explosion in the development of spaces, as well as new developments. JLL Senior Research Manager Mark Bruso said that just a few years ago, there were maybe five or six prospective biomanufacturing tenants looking for roughly 500K SF total in the region; today, there are roughly 15 tenants looking for 1.7M SF. He said biomanufacturing represents a third of all demand for life sciences space in Boston today.
“Historically, a lot of these companies relied on outsourcing manufacturing to contract manufacturers, but with the huge increase in the amount of drug development, CMOs are at capacity,” Bruso said. “New science is inching closer to commercialization."
Biomanufacturing facilities can be broken down into three main types of buildings. First are smaller pilot manufacturing sites, which run around 100K SF and are where companies typically make small productions runs of their own drugs. There are contract manufacturing outfits, or CMOs, which serve multiple clients. Lastly, there are the large-scale plants, roughly 250K SF or larger, what one might traditionally think of when they envision a massive pharmaceutical company.
These are all flat, single-story boxes, for the most part — the frame is simple to build, but once all the specialized manufacturing equipment and custom build-outs are added up, costs can multiply considerably.
“They can be two to three times more to develop than labs and R&D spaces,” Anderson said. “It’s just a box, but what goes into the box is so expensive.”
Mark Matan, director and principal at Matan Cos., a Maryland-based, life sciences-focused firm that started out developing warehouses, said the shift to developing biomanufacturing facilities has been relatively simple: It’s all a big box, and the average tenant size is 100K SF or more.
"We provide the rectangle,” Matan said. "We're not new kids on the block."
But there are specific twists. Zoning needs to be relatively flexible, tenants prefer to avoid multi-tenant situations, and there simply aren’t many greenfields and parking lots left to develop these types of large, one-story spaces; they need more parking than, say, a warehouse, because of the denser concentration of workers.
Matan said many developers wouldn’t give up their allowable floor-area ratio, but doing so is worth the per-square-foot premium tenants pay to be close to R&D hubs.
While it’s true the machines and technology for creating therapeutics and drugs has consistently improved and take up less space, Cushman & Wakefield Life Sciences East Region Lead Daniel Hackett said, companies still need office and warehouse space, so there’s a limit to how much more efficient they can get.
JLL’s Bruso said there’s a “scramble” to find more capacity, especially for pilot sites — companies in the midst of trials tend to want to keep manufacturing close to their lab facilities. In Boston, for instance, this is pushing up against the boundaries of the I-495 ring, typically the border of life sciences development.
As is typically the case when it comes to life sciences development of all stripes, Boston is seeing significant activity on this front, as are San Diego and San Francisco. Talent like biologists and skilled labor, as well as the cold chain supply chain, are key to locating these facilities. But other markets have also seen increased growth, including Philadelphia, New Jersey and Maryland.
The Maryland I-270 corridor, boasting hundreds of biotech companies and lots of new manufacturing spaces, has a very similar feel to Silicon Valley right now, Matan said.
“They all have the next greatest things," he said of the growing biotech companies.
Matan points to the NIH, a massive source of life sciences funding, to the south and Fort Detrick, center of the nation’s biological defense initiatives, to the north. The corridor is bracketed by government centers of research and funding, and it has been “supercharged” since Covid and Project Warp Speed vaccine development, he said.
“Similar to why lobbyists want to locate on K Street in D.C.,” Matan said. “It’s the nation’s capital. Similarly on the bio side, companies winning large government contracts want to locate nearby.”
Matan Cos. has 2M SF of biomanufacturing space in the pipeline, which falls far short of the existing demand, he said. The 500K SF they recently delivered is already pre-leased. With firms like Ellume entering the market with new biomanufacturing space, he sees the demand exploding.
In North Carolina, the Research Triangle, especially Raleigh, is also seeing more investment.
North Carolina Biotechnology Center Director of Life Science Economic Development Laura Rowley said in addition to lower costs and a better cost of living, much of the growth in biomanufacturing in cities like Raleigh has come from state investments in education specific to biomanufacturing, focusing on growing the incumbent workforce and creating an intentional and targeted training pipeline. (Maryland’s own version of this, More Jobs For Marylanders, has steered millions to develop the infrastructure for this industry.)
The small city of Sanford, North Carolina, for instance, is hardly on the map, but it has three big players — Pfizer, Abzena and Audentes Therapeutics — in town.
“Lots of other clusters have the academic expertise, but they don’t understand the scaling and what’s needed to take it commercial,” Rowley said. “We have a nice critical mass of gene cell therapy companies doing their manufacturing here, and have individuals experienced in commercial manufacturing of these products, a new skill set.”
Bruso predicts demand will only grow — a good indicator is the sheer number of clinical trials, specifically stage 2 and late-stage trials, which have “ballooned” over the past four to five years, he said. New science, such as mRNA therapies, will increasingly lead to new discoveries, new startups and new trials, requiring more space, especially in the existing big three life sciences hubs.
CBRE’s Anderson believes the big opportunity will be in contract manufacturing, especially those offering services to smaller startups that may not have space at incubators, as well as in the Bay Area, where there’s less capacity than in Boston.
Right now, the CMO space is disparate, without any single player dominating. And like biomanufacturing as a whole, it’s moving from the fringe to be a much more important part of the industry.
“We’re still in an early stage,” Anderson said. “We’re not quite sure how it’s all going to play out, but the momentum is there.”