On the cutting edge Featured

7:00pm EDT November 24, 2006

California’s wealth of top research institutions and the talent they attract have given rise to scores of companies whose names have morphed into household words in just a few years.

In the life sciences and biotech industries, upstarts of a decade ago are now industry leaders, having cracked through a once-lofty barrier through product innovation, strong management skills and the backing of venture capitalists.

Unlike tech firms that moved from basement bedrooms and garages into high-rises, these scientific firms have less flexibility housing their operations. Zoning ordinances, community sentiment, plumbing, electrical and other infrastructure issues all influence where they can establish business. Because of their unique needs and the occasional obstructions that towns and cities may place in their paths, setting up shop can be harder for them. Needed are the skills of a seasoned commercial real estate pro if firms in these sectors are to take their business concepts and turn them into reality.

Smart Business spoke with Jonti Bacharach, vice president at CRESA Partners Orange County, a real estate advisory firm that represents tenants and space users, about the value that professionals bring to the “house-hunting” process for life sciences and biotech companies.

Why can’t life sciences and biotech companies just move into a high-rise or other available office space?

At the most basic level, life sciences companies do not consider high rises an option because their occupancy costs are so high. Also, because these are rather traditional office environments, a landlord likely will not allow them — because of unique space needs — to operate there.

Life sciences and biotech firms almost always require a significant build-out of raw space. Their biggest cost arises in constructing labs within an existing space. Here we need to adequately manage significant reconfiguration of standard building construction systems to accommodate the demands, unique to biotech/lab operations. Service or consulting firms, which typically occupy high rises, almost never face these challenges.

Because biotech companies work with material that area residents could feel would have an adverse effect on the environment, they must be housed in a community that accepts the nature of their work. Landlords, other tenants and civic leaders must be supportive of their business.

A good adviser can also point out the many benefits these firms bring to the community, including higher tax rolls and the prestige they have garnered as they sit on the cutting edge of their industries. A skilled real estate adviser and systems specialist can provide insight and leadership that will result in many hundreds of thousands of dollars in savings to the organization.

How do you find life sciences companies the structure they need?

It’s very rare for a life sciences company to move into a building without making some modifications. Generally, we’re looking at a ‘box,’ such as a warehouse or a flex building, which is a structure designed to accommodate businesses as disparate as light manufacturing companies and wet labs.

Several factors must be taken into consideration when determining the optimum facility solution, including geographical parameters of the requirement. Does the company need to be close to airports, research institutions or hospitals? Cost is always a consideration, as well as zoning restrictions and waste disposal, among myriad other issues.

How can life sciences companies reconfigure raw space?

First by asking the right questions, illuminating unforeseen cost considerations, and then creating a strategic plan designed to effectively address each issue. Most such companies have unique operational requirements that must be addressed in the context of their specific business. Our approach is to provide a broad base of highly specialized senior level specialists who will oversee and manage this process in order to reduce facility and operational-related expenses, while also ensuring that maximum efficiencies are realized. This also ensures that the project will come in on time — and, often, under budget.

JONTI BACHARACH is vice president in the Newport Beach offices of CRESA Partners. Reach him at (949) 706-6600 or at jbacharach@cresapartners.com.