The Explosion Of The Bay Area's Biotech Sector Is No Accident
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While the Bay Area is the center of tech innovation, it is fast becoming the center of the biotech and life science industry as well. The Bay Area accounts for 40% of the global biotech industry, according to City of South San Francisco Director of Economic and Community Development Alex Greenwood.
Within that 40%, one-third is concentrated in South San Francisco, meaning one-seventh of the world’s biotech industry is within a one-mile radius of South San Francisco, he said during Bisnow’s San Francisco Healthcare and Life Science event Thursday.
“Big pharma companies seem to be migrating from the East Coast our way looking for ways to solve the patent cliff and partner with protein-based research happening within our cluster,” Greenwood said.
In the early days of drug manufacturing, Pennsylvania and New Jersey were the centers of innovation, according to DPR Construction Bay Area Business Unit Leader Mike Marston. Within the last five years, New Jersey's and Pennsylvania's life science workforces have declined 20% and 5%, respectively, while California's has increased 7%.
A significant amount of money has flooded into the Bay Area, which has helped spark growth. Venture capital spending in the Bay Area was $4.5B in 2016 with Boston coming in second with $2.9B. New Jersey is not even on the radar, Marston said. California also has received 730,000 National Institutes of Health grants, which is 80% more than any other area.
Currently South San Francisco has 11M SF oof f research and development space, 20,000 employees and 215 companies, including biotech giant Genentech, according to Greenwood. With a pipeline of 6M SF of R&D space, Greenwood expects business activity to accelerate in the city over the next five years. HCP, Alexandria Real Estate, BioMed Realty and Phase 3 Real Estate Partners have all been working on life science complexes.
South San Francisco has a well-educated permits staff able to fast-track permits and work with the time constraints some companies may be under, Greenwood said.
What Is Driving The Bay Area’s Innovation Creation
The Bay Area has three main legs of innovation with UC Berkeley, University of California San Francisco and Stanford, which have helped create an environment of innovation throughout the area, Wareham Development partner Geoff Sears said.
Companies are drawn by talent, much of which comes from these universities. About 70% of the employees at many of these biotech and life science companies hold doctorates, and highly qualified, well-educated talent is hard to find in every city, according to Sears. Because of the culture of entrepreneurship, companies create spinoffs and attract other companies, which spur additional growth around the cluster, Sears said.
While South San Francisco offers a huge bio cluster, the East Bay is coming into its own. It offers other qualities that South San Francisco may not have, such as a strong urban fabric, Sears said. Emeryville, where Wareham Development has a large footprint, offers places for people to walk and get lunch and has higher density.
What also has helped South San Francisco and the East Bay grow their life science clusters is a lack of space in San Francisco. When Mission Bay was originally conceived, UCSF was supposed to be a feeder of talent into a biotech cluster where there would be incubator spaces and places for people to grow into, Truebeck Construction Senior Project Executive Mike Jackson said.
When the market turned in 2008, Salesforce bought a lot of the land and sat on it for years. With the development of the Warriors arena and other offices, the cluster lost its ability to grow. Companies like Illumina found land in Peninsula cities like Foster City for their Bay Area offices instead.
Regardless of what specific city a company chooses, people like being in the Bay Area and it is attractive to the younger generations coming out of college since it is a fun place to be, according to Marston.
With so many companies and innovators coming to the Bay Area, the region continues to struggle with traffic, a lack of housing and affordability that can threaten to stifle the R&D pipeline.
South San Francisco’s Greenwood said his city is redeveloping downtown to better serve the biotech community. Market-rate and affordable housing is being built, and the city is partnering with biotech firms to enhance the transit network and the last-mile/first-mile transit to BART and Caltrain. A mixed-use development from Greenland USA will provide a live-work-play community within walking distance of the biotech cluster.
Although a big focus has been on housing, communities also need to focus on schools and transit upkeep, Sears said. Below the university level, schools have been neglected and students cannot get doctorates if they do not finish high school. Continued funding of NIH grants and increased funding to schools is needed to maintain the stream of high-skilled talent and the level of innovation within the region, he said.