Life Sciences Trends in Bay Area Real Estate

Allen Matkins partner Caroline Chase led a panel of leaders in the life sciences real estate sector, including Becka Studer, Phase 3 Real Estate Partners; Evan Schwimmer, Longfellow; Douglas Crawford, Mission Bay Capital; Barry Paxton, MAI Construction; and Kevin Koblik, MBH Architects, regarding life sciences trends in the Bay Area. The discussion focused on life sciences as the new “highest and best use” and related real estate demands. Overall, the panelists have a positive outlook for life sciences in the Bay Area and expect growth in the industry to continue.

Trend 1: Follow the Resources

In the past, the focus on life sciences has been on the research and funding side of the industry. Research is of course vital to developing products and securing the funding to produce them. However, life sciences companies must also consider the space they need for product development, manufacturing, supply chain, and operations. Their workers and suppliers must be willing and able to readily access the facilities, a key factor to consider when selecting a new location.

Cities with high-quality research universities, existing pharmaceutical companies, a solid workforce, and networks of venture capitalists, tend to thrive in this sector. More recently, life sciences companies have started to migrate from cities to neighboring areas, such as Sorrento Mesa near San Diego and on the Peninsula, south of San Francisco. There, they still have access to the research facilities and workforce, but they are more likely to find the space they need for operations and supply chain.

One question raised by the panelists is whether the West Coast can maintain its momentum in life sciences. In an attempt to attract life sciences companies, East Coast states, including North Carolina and Pennsylvania, have offered incentives such as grants and tax incentives for companies that bring manufacturing jobs to their states.

Trend 2: Locate in Clusters

Life sciences companies tend to cluster in places where they can find the resources they need to develop, operate, and grow their companies. It’s no surprise, then, that they have traditionally clustered in locations that can provide the research, talent, and funding required for their companies.

Once a few companies are set up and running, others tend to follow since life sciences companies are culturally bred to collaborate. This proximity of life sciences companies to one another is mutually beneficial. Even casual conversations and meetings spark ideas to push the industry in new directions.

Trend 3: Repurpose Existing Buildings

When a life sciences company is looking for a new space, there are two options: construct a purpose-built building or find an existing building that can be retrofitted. Finding buildings designed specifically for life sciences companies has traditionally been a challenge, either because they aren’t currently available or the lead time for entitlements is too significant. As a result, a recent trend is to convert existing office and even retail spaces to life sciences use. That is also costly since existing buildings typically require major modifications to make them usable for life sciences use, including increased floor-to-ceiling heights and other lab-related modifications.

Trend 4: Plan for the Future

Real estate developers and government entities can benefit from listening to current and potential life sciences tenants. Innovations and development within the sector, regulatory changes, and demand for their products will affect demand for real estate, workers, and infrastructure.

The changing needs of life sciences companies should be taken into consideration, including the infrastructure needed to support those companies, such as warehouse manufacturing space within close proximity to the life sciences office and laboratory uses.

To learn more, please visit our Real Estate Life Sciences information center.