Life sciences companies are using modern creative space to attract and retain employees and provide an environment that fosters innovation, BioMed’s Realty Trust’s chairman and CEO Alan Gold tells GlobeSt.com exclusively. The firm has recently made news by revealing its fourth-quarter 2014 and full-year 2014 financial results, which showed strong performance and subsequent momentum into 2015 that resulted in the company raising the midpoint of FFO guidance for 2015 to $1.44 per share. BioMed has also broken ground on i3, a 316,000-square-foot life sciences development here in the UTC submarket. We spoke with Gold about life sciences real estate, what he foresees happening in this space over the next year and what users look for in this unique property sector, which is thriving in San Diego.
GlobeSt.com: Why do you focus on life sciences real estate?
Gold: A couple of other gentleman and I developed a concept in 1992 after being involved in real estate transactions with life sciences companies. We created a business plan, marketed it to Wall Street and raised equity capital out of a company in Pasadena, then went public as Alexandria Real Estate Equities. I left in ’98 and formed the predecessor to BioMed, then took BioMed public in 2004 with the focus of taking advantage of a niche—the scientific-laboratory niche—which is the intersection of innovation and the knowledge communities. This intersection creates tremendous opportunities and specific needs for real estate in a very clustered and local way.
We continue to be very excited about the life sciences industry. We believe there is a need for additional healthcare because of the increasing age of the population and need for higher-quality healthcare. This proves to be a significant driver for new innovation.
The other thing we didn’t fully understand when we began this was the endless frontier of innovation. We knew it was occurring, but the pace continuously amazes and excites us. We’re continuing to see better diagnostic tools, better drugs, higher-quality healthcare, and it’s being done at a less-expensive price or overall cost, which drives further demand for these technologies.
GlobeSt.com: What do you foresee happening with regard to this space over the next year?
Gold: The demand for this type of space comes from a unique business cycle associated with life sciences companies. While other industries are more tied to the general economy and how strong demand is for goods and services, the life sciences industry is driven by demand for products, innovation and access to capital. For the least three-plus years, there has been a tremendous increase in the amount of capital raising and capital availability for the life sciences industry. Last year, 106 new public companies were created; the year before that, 70-75 new companies were created; the year before that, 50; and the year before that, 0 or 1. So, the significant increase in new companies focused on driving new technologies and using new technologies to create products for this industry has driven demand for life sciences real estate. In every one of our markets, the availability for this real estate has shrunk dramatically, and we are enjoying increasing rents and constrained supply based on increasing demand.
GlobeSt.com: What do these users look for in their real estate?
Gold: In addition to location that is adjacent to the knowledge communities and innovators in the market—it has to be properly located—the actual facility has to be able to accommodate scientific research laboratories, controlled air space, controlled airflow within that space and the right infrastructure equipment such as boilers, chillers and mechanical equipment. Because these companies are innovators, they’re looking for spaces that are iconic and inspire their employees to continue to innovate. In order to attract employees, they need a highly amenity-rich location where transportation is high quality and access to it is easy. It’s all about accessing employees. You can’t have the company without the right quality of employees. Innovators, scientists and researchers here in San Diego that don’t exist in many other markets—the same with the Bay Area and the other markets we’re in.
GlobeSt.com: What geographical areas of the country are strongest for this type of real estate?
Gold: We cater to the entire continuum of the innovation of the life sciences sector, starting from basic science to drug discovery to companies with fully approved drugs. Here in San Diego, the knowledge communities surrounding UCSD and the innovators coming out of the Salk Institute, Burnham-Moores and Scripps Research are strong. There’s also a high concentration up in Seattle and in some of the premier universities such as MIT, Harvard, Yale and the University of Pennsylvania. In addition, we concentrate on the San Francisco Bay area, Baltimore, Wake Forest, Chapel Hill, Durham and the Research Triangle in North Carolina, and we have also identified a unique opportunity in Cambridge, UK.
JLL reports that employment in the life sciences sector in 2014 grew by 5.2% in San Diego, and record leasing last year has pushed direct availability to 6.2%. Also, all four of the prominent life sciences submarkets here are seeing development or redevelopment activity.
i3 will be an iconic life sciences campus that will provide San Diego’s biotech community with top-quality research space within a highly collaborative environment.
–Grant Schoneman, Vice President | Life Sciences Group
This article previously ran in GlobeSt.com.
Post on LinkedIn: The San Diego life sciences market continues to be a major player in both the national and global market. The region, viewed as the third largest life sciences market in the country – behind Boston and San Francisco – is home to more than 600 life sciences companies and over 80 research institutes that employee around 50,000 people. Share on LinkedIn
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