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It should come as no surprise that the pandemic instigated a boom in life-science facility construction around the world. Biotechnology facilities can be built from the ground up or converted from existing office, industrial, or older life-sciences sites. Choosing among those options is seldom straightforward.

Thanks to strong academic institutions and well-entrenched industrial hubs, the top three US markets for life-sciences real estate continue to be Boston in Massachusetts and San Francisco and San Diego in California.

Home to Harvard University and the Massachusetts Institute of Technology, the Boston area boasts the most square footage devoted to biotechnology real estate in the world, now totaling over 60 million ft2. From a broader perspective, that area is also home to the largest pharmaceutical cluster in the United States. The San Francisco Bay area has over 50 million ft2 devoted to life sciences, extant or in development. Stanford University is there, along with several University of California campuses. And San Diego, CA — with Scripps Research Institute and more University of California powerhouses — has over 30 million ft2 of life-science space.

The design of a biotechnology facility arises from the type of work it will house — e.g., research or biomanufacturing — and the equipment and technology needed. Developers should plan for the long-term needs of their facilities. Even if a laboratory is starting out small, its research needs can grow and require more space over time. Both “dry laboratories” housing computers and related technologies and “wet laboratories” that work with fluids must follow Occupational Safety and Health Administration (OSHA) standards. Chemists often work with hazardous materials, which highlights the importance of operator safety; biologists work with living things, bringing cross-contamination and environmental safety into play as well.

Process/product development workers must adhere to good laboratory practice (GLP) and good manufacturing practice (GMP) regulatory guidelines as well as those associated with safety and environmental responsibility, which require even more of a facility. Pilot facilities typically take up about 100,000 ft2; commercial biomanufacturing often requires 250,000 ft2 or more.

Major developers in the life-science real estate market include Alexandria Real Estate Equities, BioMed Realty, Breakthrough Properties, Healthpeak Properties, and Longfellow Real Estate Partners. Most experts note that although some 166 million ft2 of laboratory space is available in the United States, the hub regions currently have decreasing vacancy rates. This past spring, I spoke with Josh Parker (founder, chairman, and chief executive officer of Ancora L&G in Durham, NC) about the current state of life-science real estate.

A graduate of North Carolina Central University, Parker oversees his firm’s strategy, policies, and procedures as well as day-to-day operations. He also leads Ancora’s board of directors and sits on its investment committee. In his over two decades as a “serial entrepreneur” in Durham, he has developed a combined 3.5 million ft2 of real estate totaling over US$2 billion in value. Ancora is a vertically integrated investor, developer, and operator of life-science, research, and mixed-use real estate in the United States. As described on its website, the firm “stands at the intersection of commercial real estate with the educational, healthcare, research and development, and commercialization demands driving both higher-education and medical institutions.”

Our Conversation
How does the biotechnology industry’s current facility vacancy rate compare with the national average across industries? At 9%, life science has about half the vacancy rate of the national average (1). And according to some rankings, Boston, for example, has an impressively low 4% vacancy rate. With an otherwise challenging downtown office situation, San Francisco currently faces a life-science vacancy rate of just 2%. Venture-capital (VC) investment is fueling Boston’s robust industry, for one. Despite inflation fears, geopolitical instability in Eastern Europe, and global supply chain issues, the first half of 2022 brought the fourth highest VC biotechnology investment to the state of Massachusetts of any previous full year. VC funds remain high on biotech, which affects life-science real estate. Such investors are attracted to industries with low vacancy rates, which indicate high demand that can help increase pricing power.

How does synergy with universities improve long-term investment security for biotechnology companies? The synergy between biotechnology laboratories and universities reassures venture capitalists and other investors that their investments will pay off over the long term. Seeing office-building conversions spring up in so-called “rust belt” cities could spark a reminder that some industries suddenly left them, decimating those communities. However, biotechnology facilities exhibit more stability, particularly when they have synergistic partnerships with nearby universities, which have secure and long-proven streams of public and private funding.

Philadelphia’s biotechnology boom illustrates just such a symbiotic relationship — sparked by the prestigious University of Pennsylvania’s (UPenn’s) significant investments in life sciences. A seed was planted in 2010 when UPenn started converting a former research and paint manufacturing facility in the Grays Ferry area of Philadelphia, into a combination of modern offices, laboratories, and production space. By 2017, the city’s budding life-science sector celebrated “two first-of-their-kind, FDA-approved gene and cell therapies to treat specific types of cancer and blindness. Those innovative breakthroughs sparked $745 million in VC investment by 2019” (2).

Further Reading from the BPI Archives
Barrett M, Rohs C. Change Is Difficult, But It Is Inevitable: The Value of Integrated Project Delivery to Biomanufacturing-Facility Construction. BioProcess Int. 21(5) 2023; https://bioprocessintl.com/manufacturing/facility-design-engineering/change-is-difficult-but-it-is-inevitable-the-value-ofintegrated-project-delivery-to-biomanufacturing-facility-construction.Gazaille B, et al. Flexible Vaccine Manufacturing: Collaborations Bringing Localized Solutions. BioProcess Int. 20(6) 2022; https://bioprocessintl.com/manufacturing/vaccines/flexible-vaccine-manufacturing-collaborations-bringing-localized-solutions.Gazaille B, Simpson C. Building Manufacturing Capabilities for Adenoassociated Virus Vectors: Key Considerations for Facility Design and Operations. BioProcess Int. 20(10) 2022; https://bioprocessintl.com/manufacturing/facility-design-engineering/building-manufacturing-capabilitiesfor-adenoassociated-virus-vectors-key-considerations-for-facility-design-and-operations.Kappeler SR, et al. A Plug-and-Produce GMP Plant for Cell and Gene Therapy — Part 1: Case Study in Modular Facility Design and Deployment. BioProcess Int. 21(9) 2022; https://bioprocessintl.com/sponsored-content/a-plug-and-produce-gmp-plant-for-cell-and-gene-therapy-part-1-case-study-in-modular-facility-design-and-deployment.

Kappeler SR, et al. A Plug-and-Produce GMP Plant for Cell and Gene Therapies Part 2: Rapid Deployment of a Commercial-Scale Facility. BioProcess Int. 21(10) 2022; https://bioprocessintl.com/sponsored-content/a-plug-and-produce-gmp-plant-for-cell-and-gene-therapies-part-2-rapid-deployment-of-a-commercial-scale-facility.

Khezri A. Purpose-Built Viral-Vector Facility Construction: Applying Quality and Engineering Controls. BioProcess Int. 21(5) 2023; https://bioprocessintl.com/sponsored-content/purpose-built-viral-vector-facility-construction-applying-quality-and-engineering-controls.

Rios M, Judd S. Multimodal Facility Design for Cell and Gene Therapies. BioProcess Int. 20(6) 2022; https://bioprocessintl.com/manufacturing/facility-design-engineering/multimodal-facility-design-for-cell-and-gene-therapies.

Swaney W, et al. Facing a Unique Challenge: Building an In-House Cell and Gene Therapy Manufacturing Facility During the Pandemic.BioProcess Int. 20(6) 2022; https://bioprocessintl.com/manufacturing/facility-design-engineering/facing-a-unique-challenge-building-an-in-housecell-and-gene-therapy-manufacturing-facility-during-the-pandemic.

Temel B, Slivka J, McLaughlin K. Designing Single-Use Facilities for Biomanufacturing Expansion. BioProcess Int. 21(6) 2023; https://bioprocessintl.com/sponsored-content/designing-single-use-facilities-for-biomanufacturing-expansion.

Vlahos E. Challenging the Norms of Facility Design and Innovation. BioProcess Int. 20(7–8) 2022; https://bioprocessintl.com/sponsored-content/challenging-the-norms-of-biopharmaceutical-facility-design-and-innovation/.

Walters P. Scalability in Cell and Gene Therapy Facilities: How Today’s Developers Are Preparing for Tomorrow’s Commercial Success. BioProcess Int. 20(4) 2022; https://bioprocessintl.com/manufacturing/facility-design-engineering/scalability-in-cell-and-gene-therapy-manufacture-how-todaysdevelopers-are-preparing-for-tomorrows-commercial-success.

What considerations come with converting office space? It’s smart to think about creative ways to repurpose legacy office buildings. I believe that reports pronouncing “the death of the office” are greatly exaggerated. Working from home was an appropriate response at the height of the pandemic, but considering the dynamics of innovation and entrepreneurship and the need for people to collaborate, offices still have great value as high-performance workplaces.

We certainly will see some examples of conversions from offices to other uses, including biotechnology and life sciences. In such cases, one of the first policy considerations is ensuring that land use, zoning, and entitlements are appropriate for a favorable conversion and a mixture of uses. I recommend zoning that is proximate to an anchor institution that allows for life-science, office, and other uses such as dining to be brought together in buildings that also can serve their surrounding communities.

Large metropolitan areas such as Dallas–Fort Worth in Texas have substantial vertical density, which creates both code and cost challenges for life sciences in buildings that often are six to 10 stories high or more. So the idea that a life science organization can replace an office is not a foregone recipe for success. Once you’ve determined the policy framework, you have more questions to resolve: Can you mix uses? Is there a smooth pathway to project approval in a given geography? Do you have a code and building-inspections department that understands life sciences? Can that group move the changed use effectively through permitting and thus make conversion useful?

Is demand for biotechnology and medical-research space driving development in secondary and tertiary cities (outside the normal hubs)? How do such regions compare in upfront costs and growth potential? US reevaluation of industrial policy has created a real opportunity to develop postindustrial communities across the Midwest, the Northeast, and the Southwest by converting them to new economic uses such as life-science facilities. Typically such industries provide high-skill, high-wage jobs, and facilities need to be located in areas with existing services and amenities. One risk with old industrial-belt sites is that they can be a bit remote or removed from where talented and skilled workers want to be. The best areas are close to amenities, universities, academic medical centers, and so on. There’s still a need for smaller-scale biomanufacturing located close to where research is happening, with a good amount of flexible space.

Is it more cost-effective and/or environmentally friendly to adapt and reuse existing industrial campuses for biotechnology space? The most sustainable development is redevelopment, in which a site originally meant for one use is converted for another. My firm is a big proponent of urban regeneration and adaptive reuse. We have developed a unique skill set and expertise for reimagining and financing former industrial campuses to create the kinds of places where highly skilled and educated people want to be. There’s embedded carbon in existing buildings, so from a sustainability standpoint, the more we can use existing buildings, the lesser the environmental impact.

That said, one challenge is access to utilities: Do you have enough power and water? How are floor heights? Technology advancements, particularly on the mechanical side of facilities, allow for lower floor-to-floor heights, but investors, developers, and occupants should remain wary of potential cost increases with such projects. Also, companies should be mindful of column spacing, building depth, distances from elevators, and other features that lend themselves to traditional laboratory modules, allow for work with regulated chemicals, and factor in practical matters such as points of egress.

One of the biggest considerations enabling us to convert existing buildings to laboratory use is having distributed services. Historically, when building for life sciences, you would need big infrastructure — e.g., for gas and air — but technology advances now allow us to localize those assets so we can do partial conversions of some buildings, with lower upfront investments in infrastructure such as for mechanicals, gas, air, and so on.

If you take an industrial campus of scale that has been out of use for some time — e.g., the Electric Works innovation district we’ve been converting in Fort Wayne, IN — it can offer an opportunity to create an entire ecosystem (3). Given structural requirements and associated challenges, these can be costly conversions requiring public–private partnerships. Sometimes, converting an existing space for life science makes more sense; other times, it’s better to build from the ground up. The rules of real estate emphasizing location still apply. Important considerations include prioritizing locations where skilled and talented people want to be, with the ability to be part of a larger ecosystem, and with proximity to amenities.

Markets where you’ll find the most success in the near future are those where companies can build critical mass and density — by, for example, developing life-sciences buildings near the talent base surrounding a university or healthcare institution. Successful regions will create a number of different spaces that enable entrepreneurs and companies to collaborate in flexible building spaces.

What about incubators to spark investment in innovative start-ups? Clustering and density are not new ideas, but I caution developers not to be overly ambitious. Ultimately, it’s the cost of the space that dictates what you can do. Some conversions offer great opportunities to get creative.

1 Earls N. 5 Reasons To Consider Investing in Life Sciences Real Estate. Winterspring Capital: Boston, MA, 2023; https://winterspringcapital.com/5-reasons-to-consider-investing-in-life-sciences-real-estate.

2 Muse Q. How Philly’s Bioscience Sector Is Driving the City’s Next Big Real Estate Boom. Philadelphia Mag. 8 December 2020; https://www.pabiotechbc.org/news-and-events/news-releases-and-coverage/how-phillys-bioscience-sector-is-driving-the-citys-next-big-real-estate-boom.

3 Electric Works: Supercharging the Future. Ancora Partners: Durham, NC, 2023; https://www.ancora.re/our-work/electricworks.

Cheryl Scott is cofounder and senior technical editor of BioProcess International, part of Informa Life Sciences. Josh Parker is founder, chairman, and chief executive officer of Ancora L&G, 701 West Main Street, Suite 200, Durham, NC 27701; 1-919-688-9054; [email protected]; https://www.ancora.re.

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