BioMed CEO Talks About How Locations Drive Innovation

BioMed CEO Talks About How Locations Drive Innovation

The biotech and life sciences sectors are booming, and an increasing number of innovation districts, hubs and campuses are being created in cities across the country. But just how are these industries shaping the commercial real estate landscape, particularly the office and industrial sectors? To find out, we spoke with Alan Gold, the chairman, president and CEO of BioMed Realty Trust, a developer of life science and biotech properties ranging from traditional office buildings to small laboratories to state-of-the-art, build-to-suit facilities. BioMed Realty Trust is based in San Diego, one of the fastest-growing markets for biotech and life sciences in the U.S. An edited version of that interview follows. 

NREI: How are biotech and life science companies impacting commercial real estate in cities like Boston/Cambridge, San Francisco, San Diego, Philadelphia and Seattle?

Alan Gold: The pace of innovation within the life science industry has dramatically increased the competition for high quality laboratory and office space across all our core markets. The level of demand we have seen over the past several years has significantly reduced the amount of available space, and these declining vacancy rates have driven an upward trend in rent growth, which we expect to continue for the foreseeable future. As an example of how tight the markets have become in places like Cambridge, Mass., we just announced a 295,000-sq.-ft. lease to Alnylam Pharmaceuticals for a very well-located asset in Kendall Square which isn’t set to become available until 2018. In the current environment, we are seeing more and more companies commit to space sooner to ensure that they will be able to secure these core facilities to house their future research needs.

NREI: Why are biotech and life science companies flocking to major cities rather than the suburban office parks they’ve traditionally occupied?

Alan Gold: We believe that the current model of innovation thrives in proximity, not in isolation. If you look at the areas of the country where the levels of innovation are strongest, you consistently find that adjacency to intellectual capital, such as universities and research institutions, is something that companies across the life science industry are scrambling to achieve. These core innovation districts, where we focus our business, sit at the dynamic intersection of public and private industry. What begins an idea for basic research program today could well be the seed for the future treatment options available within the health care industry tomorrow. The highly skilled scientists who these companies are all competing to recruit are drawn to these environments, and the staggering levels of innovation we are witnessing today are a direct result of the interactions which occur in these markets on a daily basis.

NREI: The biotech industry has been around since the mid-1980s. What changes have taken place in the industry over the past 30 or so years?

Alan Gold: While the growth we have seen within the life science industry over the past several decades has clearly been exponential, we believe that the industry remains in its infancy in terms of what it can and will do to extend and improve the quality of life for all of us. The biotechnology industry sits on the leading edge of the endless frontier of innovation, and the research going on today is changing not just the way we treat disease, but how we think about it. From a baseball perspective, in the game of biotechnology, we believe that we haven’t even warmed up the pitcher at this point, let alone started the game. The best days for the life science industry are still very much yet to come.

NREI: What kind of opportunities are emerging in U.S. commercial real estate due to the current biotech boom?

Alan Gold: The sustained leasing demand across our markets has created a compelling opportunity for us to grow our portfolio through new development with significant levels of pre-leasing. We believe that the almost two million square feet of new product which we will deliver over the next few years will provide much needed research space for our tenants, as well as affording us with the opportunity to create more than 500,000 sq. ft. of additional availability in some of the country’s most dynamic centers of innovation. But competition for space is fierce, with 70 percent of that new space already leased.

NREI: How about the changes in health care?

Alan Gold: The desire for all of us to have the highest quality of health care possible has been at the heart of the research and development which the life science industry drives forward and our facilities support. This demand also underlies the wave of capital which the industry has raised over the past several years, which again serves as the fuel for future innovation to solve the world’s biggest health challenges. As the worldwide population continues to age, this demand for new therapies and treatment alternatives should only accelerate. From our perspective, I think we are well positioned to grow with our tenant partners in each of our markets to supply the high quality laboratory and office space to meet their needs.

NREI: Investing in biotech can be risky. What sorts of trends are you seeing in this area? For instance, it looks like immunotherapy and cancer treatments are getting big.

Alan Gold: While the share prices of life science companies are certainly dynamic, we believe the foundation of our business and the overall life science industry could not be more solid. In my more than 25 years in the industry, I can’t recall a time when the capital position of the industry as a whole has ever been stronger, where the FDA approval process has been more efficient, or where the support for innovation and the need for laboratory space was more apparent. I think the upside opportunity associated with our industry improves each and every day. In terms of current trends, I think the progress we have seen in personalized medicine and the way in which it has changed our understanding of how we conceptualize and treat disease extends to every indication of research. The more our society learns about biotechnology, the more we realize how much untapped opportunity remains out in front of us.

NREI: What do you see happening in biotech and the life sciences over the next 10 years, and how will these two fields continue to shape urban areas and commercial real estate?

Alan Gold: As we look into the future, we believe that the foundations of the life science industry are strong and the drivers pushing the endless frontier of innovation forward are both sustainable and enduring. Looking back over human history, the quest for knowledge has always driven our society forward, and we believe the life science industry is well positioned to deliver solutions which will enable the world’s aging population to continue to enjoy longer and healthier lives. We believe that the core innovation districts we have invested in will continue to attract the top research talent to be a part of these dynamic ecosystems, and we believe that the life science industry will follow that talent and thrive in the collaborations which will occur as a result. We believe that the demand for our product type in these markets is a truly unique and differentiated opportunity within the real estate industry, and our team could not be more excited about what lies ahead.

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