Bioscience Has Unique Real Estate Needs
At CB Richard Ellis, the Life Sciences Group falls in the industrial category, because a lot of life sciences companies want industrial-type buildings that can be customized to accommodate wet lab space and whatever else the company specifically requires, said Drew Miller, an associate and industrial advisor in the company’s Grand Rapids office. With everything that was going on in and around Grand Rapids, Miller decided to get involved in the Life Sciences Group when he joined the company two years ago, because no one else seemed to be focusing on that area of real estate.
At the time it established the Life Sciences Group, CB Richard Ellis had professionals operating in all the major markets — New Jersey, Massachusetts, the California research triangle, Maryland and Philadelphia, among others. The company realized that the ability of its real estate advisors to coordinate amongst themselves and share information, ideas and trends would become more important as time went on, explained Thomas P. Sullivan, senior vice president and director of the Life Sciences Group Advisory Board.
“Being in New Jersey, it was a very logical evolution for me because of the concentration of pharmaceutical and biotech companies, mainly pharmaceutical companies in New Jersey,” Sullivan said. “It was very natural to have that focus.”
Of the 60 members of the Life Sciences Group globally, 55 are in North America. Sullivan noted that every member of the Life Sciences Group is a professional broker and is expected to maintain a high degree of local market knowledge on available inventory, where existing wet lab space is located, and which buildings are suitable for retrofit.
Over time, secondary markets started to play a larger role in both the pharmaceutical and biotech industries, and as CBRE grew, it maintained coverage of virtually all the primary and secondary markets, Sullivan said. The secondary markets include cities such as Denver, Atlanta, Miami, Phoenix, Salt Lake City and Grand Rapids.
“In a market like ours, we don’t have a lot of incubator graduate space or existing facilities that can be retrofitted,” Miller said. “We’re starting to see some of the companies come out of the incubator space and build or develop new facilities that are very specific to their type of business and what type of lab space they’re going to need, if they need it at all.”
Though the West Michigan area is home to established companies such as Stryker, Perrigo and Pharmacia, relative to other markets, the Grand Rapids market is kind of in its infancy stage, Miller said. The incubator space in the West Michigan Science & Technology Initiative here and in the Southwest Michigan Innovation Center in Kalamazoo are at capacity, he noted.
“I’ve been talking to both centers about what the next step is — whether it’s the development of a graduate center or working with those companies,” Miller said. “Luckily Grand Rapids and Kalamazoo have some philanthropic local investors like the Van Andel and Stryker families that have been putting money in to help the life sciences grow.”
Sullivan said in a more mature life sciences market like New Jersey, at any point in time about 200,000 to 300,000 square feet of lab space is available. The space ranges from pharmaceutical space that’s 20 to 30 years old, which is rated as Class C and Class B-minus, on up to newly built, Class A space for direct lease or sublease. In the primary markets, space is typically available in the 10,000- to 50,000-square-foot range, he said.
According to Miller and Sullivan, the more specialized the need is, the more likely the company will have to build out the space specifically for its needs. Biotechs and smaller pharma companies, for instance, need research and development space, such as biology labs, chemistry labs, benchtop analytics and tissue culture areas, which are less expensive to build out. Some biotechs and pharmas evolve into pilot-scale production, where they make small batches for clinical trials.
Conversely, companies in the medical device arena don’t have much need for labs; they’re more device-oriented assemblies that get into electronics, components and plastics, which require basic and developmental R&D, he said. Their space needs can be slightly larger and more along the lines of a high-end component assembly operation.
Early and mid-stage biotechs and smaller pharmaceutical companies tend to cluster around locations where initial research has started or where initial technology transfer or commercialization of compounds or components has started. The clusters often form in close proximity to research universities and research institutions.
Companies that already have products have to make commercial scale quantities for human consumption, whether they make it themselves or outsource it to contract manufacturers. That’s where the bigger manufacturing space needs come in for both pharmaceutical and biotech firms.
All of the professionals in the Life Sciences Group have to join and maintain local membership in biotech organizations, similar to Grand Valley State University’s West Michigan Science & Technology Initiative. Maintaining membership in those organizations and attending the dinners and conferences is in and of itself training, Sullivan added.
The company also sponsors annual corporate training events for its members at CB Richard Ellis in Chicago every other year, and monthly conference calls to discuss what’s happening in its various markets across the nation, Miller said.
“The thing that we do very well is sharing and working together on what’s happening in the marketplace,” Miller said.