Montgomery County Racing To Keep Pace With Booming Life Sciences Market
Maryland's Interstate 270 corridor has been a burgeoning life sciences hub for several years, but with the federal government pumping billions into the region during the coronavirus pandemic and more established research tenants beginning to reach maturity, the D.C.-Baltimore region has rocketed to become the third-fastest-growing life sciences market in the country, according to a recent CBRE report.
All that demand has led to a race to get new lab and manufacturing spaces built before potential employers begin looking elsewhere.
“What’s keeping me up at night in the context of life sciences is the speed to market,” Montgomery County Planning Board Commissioner Tina Patterson said at Bisnow’s Mid-Atlantic Life Sciences and Biotech Summit last week.
To keep up with demand, the Montgomery County Council is pushing through a zoning amendment that would cut down the time it takes for new life sciences space to go from sketch to development from 600 days to 160 days.
Patterson said the amendment proposed by Council Member Andrew Friedson, which would create a "biohealth priority campus" use in the county's zoning ordinance, would be a game-changer for new development. Life sciences experts at the event said speed was by far the most critical factor for biotech companies.
“These guys don’t have a horizon of a year or year and a half to deliver their space,” Scheer Partners Senior Vice President Matthew Brady said. “They get … wherever their funds are coming from, and they start burning that capital.”
Brady said the best way to meet the demand was through building lab space speculatively, something that has historically been a rarity in suburban Maryland.
"Taking that risk on the front end and building spec space ... is imperative right now because it doesn’t happen over 18 months; it happens in less than six usually," Brady said.
CBRE found in its report last week that the D.C.-Baltimore region has 31 tenants — nearly doubling over the last six months — seeking 1.8M SF of active requirements, split nearly evenly between lab and manufacturing space. The region has 650K SF of availability between existing inventory and spaces under conversion, according to CBRE, and 714K SF expected to deliver by the end of 2022.
That demand has caught major institutions flat-footed. In Baltimore, the University of Maryland, Johns Hopkins and the city itself only recently began planning to develop lab space that can keep biomedical research spinoffs from the universities local. Demand in the suburbs between Baltimore and D.C. is similarly hot — the vacancy rate for the region is just 1.9%.
Brady said investors can sometimes be skittish around building on spec, but he said the demand is there to build space on a timeline that works for small or emerging firms entering the market now.
“Life science is an inherently risky venture, and everything that goes along with it is also risky,” Brady said. “Understanding that time to occupancy and speed to occupancy is critical to these people, and understanding that the risk associated with developing something on a spec basis in a highly, highly risky business is one of the limiting factors in any market”
Not all spec building is created equal, Equilibrium president Jason Rifkin said.
He noted that while certain kinds of medical office or lab space can be built for a relatively wide range of potential tenants, biomanufacturing space is a much more difficult sell.
“You wouldn't build a bottling plant and hope Coca-Cola takes it because they like the way you built it,” Rifkin said.
Meanwhile, the pipeline of talent to fill those spaces is similarly strained. Rifkin said many of his clients are confessing to issues finding the talent they need.
“We hear that time and again from all these companies, they are having a real hard time finding people,” Rifkin said. “They’re starting to cannibalize individuals from each other.”
GlenLine Investments founder and Managing Principal Scott Nudelman said the industry needs to be “laser-focused” on growing the workforce pipeline for biomanufacturing jobs and other life sciences jobs that don’t require graduate degrees if the region wants to continue its record expansion.
He noted that while the region is a top 5 market for life sciences, there is still room for improvement to attract venture capital funding, something he believes will come with a stronger labor supply.
“We can be focused certainly on the large companies, but we should be equally focused on the two-year programs, the four-year programs, workforce development all the way from quality control up to Ph.D.s and to the executives,” Nudelman said. “I think if we really lead with that we will continue to grow to maintain our top 5 presence that we enjoy today.”
Association of University Research Parks CEO Brian Darmody said the universities could do more with public and private partners to develop a larger, regionwide life sciences hub.
“The distance between N.C. State and Duke is about the same distance as between Johns Hopkins and College Park, but we view College Park and Baltimore as two different regions, whereas Research Triangle, they’ve surmounted that,” Darmody said. “We don’t think as a region.”
While the federal government's life sciences hubs, like the National Institutes of Health and the Food and Drug Administration, are based in Montgomery County, Nudelman said the region should do a better job encouraging those scientists to go corporate.
"We need to be laser-focused on championing stories of government scientists who went into the private sector," Nudelman said. "We don’t have what exists at Kendall Square, where MIT supports scientists going out into the private sector. We don’t have Research Triangle Park. That public-private partnership is lacking a bit. In the next five years, I think the challenge to all of us is to evolve that ecosystem."
Still, the growth in the market indicates plenty of room for optimism, said Ulyana Desiderio, director of biohealth and life sciences in the Maryland Department of Commerce. Desiderio is focused on finding ways to retain talent from university to commercialization to manufacturing to ensure the regional life sciences industry can encompass all stages of business development.
She said universities are collaborating more today than they have previously and noted funding from NIH has returned to strong levels after several years of sequestration and budget cuts.
“There are hundreds of companies in somebody’s brains right now or on a piece of napkin,” Desiderio said. “In terms of what’s coming online, the growth that we’re experiencing is very exciting, and we’re very happy.”