The competition among cities is fierce for bringing in vital industry. It’s even more complicated when you throw intellectual property and extremely specific tenant needs into the equation. How can you attract, and accommodate, the growing industries of biomedical and biotechnology that make up life sciences?
Smart Business spoke to Stephanie Marino, first vice president of CB Richard Ellis, about the challenges presented to both the life science industry and its advocates in real estate.
How is finding building space different for the life science industry?
The biggest obstacle for mid-tier biomedical companies is that they are typically in the Phase One or Phase Two stages of the FDA approval process when they’re looking for a new facility. The majority of these companies are being financed through venture capitalists or angel investors. The focus is not to spend money on bricks and mortar. Rather, the primary goal and objective of the investor is to spend money on the research and development and get the product to the market, which on average takes a billion dollars over a 10-year term per product. The amount of capital and time needed for medical device companies is far less.
Given these facts, it’s understandable why they are hesitant to spend money on real estate. These companies, however, do need to have the right space and the right operational environment to make sure the products they’re developing are approved by the FDA at the end of the day. Various factors can affect their product, such as temperature, humidity, air quality or offsetting vibrations in the building.
How is it different from the agent’s end?
There are very few commercial real estate brokers that understand life sciences and its intricate needs. It’s a whole different world and a new language. Since funds are limited, a lot of these start-up companies will occupy a former lab space that has some features they can use, but that doesn’t really fit their needs. It is not until they get further down the road, five, six, seven years into their life cycle, that they can justify to their board and investors the need to invest significant capital to relocate and build out a new facility.
I get involved with these companies as early in their life cycle as possible, usually when they’ve been in existence for about 12 to 24 months. You must learn and understand not only the real estate needs, but also what the company does and how they operate. The relationship I build with my clients is for the long term.
What is the status of the life science industry today?
Boston is the No. 1 market for life sciences today. This is predominantly due to MIT. The university partnered with the state early on and put the infrastructure into build facilities to lease to life science companies. They put a stake in the ground and took a tremendous risk, but it’s paid off. San Diego and San Francisco are the next two cities where a lot of venture capitalists and angel investors are located. Naturally, they want the companies they’re funding to be nearby.
Atlanta ranks seventh in the tier of life science cities nationally. Georgia Tech has one of only three nanotechnology facilities in the U.S. About four years ago, Georgia was ranked No. 12, so we’re stepping up. However, the state of Georgia has not committed the economic resources required to compete with our neighboring states to attract, retain and grow our life sciences community.
What kinds of incentives are there for life science companies moving into a new state or city?
There’s a separate pot of money in Georgia, which the governor and state Legislature have earmarked, called the Life Sciences Facility Fund. The 2007 budget has allocated $8 million that emerging life sciences companies can apply for grants. This is different (from tax incentives) in that the funds can be applied toward furniture, fixtures and equipment. The Facilities Fund helps mid-tier life science companies get into a new building because the cost of their real estate is extremely high. For example, a basic build-out for a 50/50 open partition plan for an office runs about $30 a square foot for just base building finishes. The price to actually build out a lab space for a life sciences entity can be, on average, anywhere from $150 to $450 a square foot.
What do you see in the future of Atlanta’s life science industry?
Our two greatest challenges in Atlanta are that we don’t have a large number of life sciences venture capitalists and angel investors, and we don’t have the work force talent needed to run all aspects of a life sciences company. One of the initiatives the state has adopted, along with a few other cities, is developing programs at the high school level to give students an introduction to the life sciences. Universities in Georgia are beginning to offer life science programs to further grow the intellectual capital.
But life sciences in Atlanta are growing. The Bio 2009 Convention which is the major global life sciences convention will be here in Atlanta. I think that might shed a little more light.
STEPHANIE MARINO is first vice president at CB Richard Ellis in Atlanta. Reach her at (404) 504-5950 or stephanie. email@example.com.