As New Players Enter the Market, Expert Says the Key to Successful Life Sciences Projects is Finding the Middle Ground

HOK, CBRE
Courtesy of HOK

By Meghan Hall 

The life science industry has exploded in recent years, its rise further catalyzed by its stability during the last eight months as other sectors have pressed the pause button due to the pandemic. Historically, life sciences real estate has been dominated by a few major players, such as Alexandria Real Estate and BioMed Realty who specialize in life science product and know the sector inside and out. As more and more developers enter the life science scene, however, global architecture, design and engineering firm HOK has some advice on the do’s and don’ts of life science projects. 

The life science industry has gone through several evolutions over the past market cycle, beginning with a number of start-ups growing rapidly after spinning off from companies such as Roche and AstraZeneca. As larger firms began to acquire new start-ups or reacquire their former spinoffs, the need arose to bring the new acquisitions under one roof.

“It is reflected in their real estate. They’re trying to consolidate all of these new companies onto a campus so that they do feel like they’re part of the ecosystem,” explained HOK’s Regional Director of Science and Technology Rob Williamson. “I think that’s one of those unique elements of how the market is moving.” 

The life sciences industry has become one of real estate’s five largest markets in the United States, growing by 101 percent year-over-year, according to a report by CBRE. Venture capital funding is also at record highs, increasing from 86 percent over 2019, continuing to feed the industry with new innovators and established players keen on growth. 

Innovation centers or clusters have become central to these ecosystems, and with the industry’s resiliency strongly established and an idea of how lucrative life sciences real estate can be, property developers and landlords want a piece of the pie. This explosion of interest in life sciences real estate, according to Williamson, is the latest development in the industry.

“We’re seeing developers that weren’t traditionally life science developers [recognizing] opportunities in that market and either trying to reposition existing commercial assets to be life sciences, rethinking or redesigning existing entitlements that weren’t intended to go life sciences to become a life sciences capable product, or looking for new acquisitions that would allow them to enter into that marketplace with the likes of the Alexandrea Real Estates, Longfellows, that have been doing life sciences as their core business for many years,” explained Williamson. 

However, for many, the transition from typical commercial real estate into life sciences poses a few challenges that newcomers may not be prepared for directly off of the bat. 

Williamson added, “But what those new developers are struggling with is how to create a pro-forma and how to completely understand what the market needs…Things are changing so rapidly and COVID-19 is just accelerating that.”

There are a number of factors that need to be considered in order to produce a successful life sciences project, according to HOK. For both individual buildings and campuses alike, key factors such as a site’s proximity to other life science users, academic and government research institutions and a live-work-play environment can be key. 

When it comes to programming and design, flexibility is also extremely important. Life science users—particularly start-ups—often begin in incubators and rapidly outgrow their spaces, meaning they are hesitant to commit to long term leases. In spaces like these, avoiding overspecialization is a priority.

For start-ups recently acquired by larger companies, as well as on larger campuses, there is a need to incorporate acquisitions seamlessly into a larger corporate culture. For spaces like these, avoiding overspecialization can be key.

“What we try to do with our projects is not create silos within the physical design, and that’s what most of these companies are looking for—synergy between different research groups,” said Williamson. “Within physical real estate, as soon as you start creating floors and separating groups by floor, you create a natural silo…From a design perspective, you’re responsible for coming in and drawing together floors to encourage interaction and collaboration.” 

Additionally, stated Williamson, it can be difficult for newcomers to measure the return on investment that collaboration spaces provide in a pro-forma, even though it is often where much of the innovation within a company occurs.

“What these larger organizations are realizing is that a lot of collaboration space, that soft space, is where they’re getting a lot of their innovation. There’s real value to that…but it takes away from the traditional efficiency ratios that we use to evaluate whether a design is highly efficient from a developer standpoint.”

It is becoming more commonplace for developers to introduce collaboration space into labs in an effort to decrease disruption to work by changing environments entirely. Project teams are also looking to create a better spatial connection between the research and support environments. Increasing visibility into lab spaces through increases in glass, sight lines and programming are pivotal for companies looking to showcase their work.

Other major considerations for developers include structural and mechanical, particularly floor-to-floor heights, and, for those embarking on a innovation district-like project, the creation of amenities. 

“They have to create a whole ecosystem that supports that life science use and get people attracted to that area,” Williamson said.

Striking the balance can be feasible with proper planning and will ultimately lead to long-term viability of the asset. When thoughtfully done, new life sciences product should be able to support both growing and established companies at all stages of their business cycle.

“I think that there is going to be a flood of product on the market, and that it will range from substandard to product that is highly specialized, maybe over specialized,” said Williamson. “My advice is be cautious and be intentional about how you enter [the market].”

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