3 Basic Instincts Drive Life-Science Industry
- Apr 08, 2015
If there was one sector that remained immune to the financial crisis and continued to grow despite the economic downturn, it would be the life-science real estate market.
“When capital becomes scarce in one aspect in the life-science industry, it pops up in another area. The research part of the industry isn’t tied to the economy,” Alan Gold, CEO of BioMed Realty Trust told Commercial Property Executive.
Gold, the co-founder of life sciences real estate and a native of San Diego, one of nation’s fastest-growing markets for biotech, paid a visit to the CPE office during his business trip to Manhattan recently and shared his industry’s secret to success throughout real estate’s volatile economic cycles.
CPE: Alan, give us a short introduction to your company and its vision.
Gold: Our people, over 250 employees are focused on providing scientific research laboratories at the intersection of innovation and healthcare industries. We believe that we’re doing it because of the importance of what our tenants are doing and that is creating new and innovative technology and drugs to service their patients.
There are three basic instincts that are driving the industry and driving the success of biomed:
1) Pursuit of knowledge. We as humans have pursued knowledge since the beginning. With that knowledge, there’s an endless frontier of innovation. This drives the knowledge community, which are the universities.
2) Innovation – the endless frontier; this is driven by the life-science industry.
3) Human instinct to survive. It is our goal to live a long and healthy life. This drives the medical, healthcare industry.
Because of those three instincts, life-science real estate will be at the forefront and the driver of the innovation industry and economic growth for a long time.
These facilities are mission critical, they’re vital to their communities. They operate 24 hours a day, seven days a week. They can’t do the research without having the facility. Research drives these companies and the companies need research to create innovative technologies to meet the needs of their patients. We’re service providers to an industry that’s trying to help patients. They don’t use third-party providers, but have internal staff that understands these are 24-7 facilities and they cannot go down.
CPE: What impact, if any, has the Affordable Care Act had on the shaping of the needs of your clients?
Gold: The industry is trying to be more efficient by utilizing resources more efficiently. The answer to that is innovation, companies are coming up with innovative technology. If it becomes less expensive to do something, more people want it. The industry is less expensive now and people want it.
CPE: Why are universities key drivers for life-science real estate development?
Gold: They’e part of the knowledge community, that’s where groundbreaking new research comes from. It’s fantastic that universities have that mission and have access to bright, innovative students that are there to pursue the science. Now they’re getting into the business of translating the research that they’re doing to create new opportunities for companies to be formed.
CPE: Could you mention some of your clients for whom you’re a service provider?
Gold: Regeneron is one of our larger tenants. It’s a darling of the science community located up in Westchester and Tarrytown, NY. Regeneron started out with 200, 000 square feet. Today it’s over 1 million square feet (in size). They’ve developed three strong products. Their market cap is close to $100 billion. When we acquired them their stock price was trading at $3. Now it’s trading at $480. Wish we would’ve bought their stock (laughs).
CPE: What are some investment trends you’re seeing in big pharma and how does that translate into real estate leasing and purchasing?
Gold: Big pharma is continuing the trend of moving out of their campuses in suburban locations and into the innovation hubs where there’s an intersection of the knowledge community, the life science community and the medical community. They need to be there to attract the high quality talent/personnel and be able to take advantage of the technologies that are coming out of those locations. For example Baxter. We’ve just leased 200,000 square feet to Baxter in Deerfield, Ill.
CPE: Is there something that you’re working on right now, anything in the pipeline?
Gold: We haven’t discussed some of the drivers of growth opportunities within the company. Not only do we have 1.6 million square feet of space to lease, but we also have over $800 million worth of development under construction. We’re delivering a 300,000-square-foot build-to-suit for Regeneron. We’re delivering a 40,000-square-foot project in the U.K. for Takata. We’ve just announced last quarter a 360,000-square-foot build-to-suit for Illumina. We’re in the process of developing 120,000 square feet in Seattle, etc. The activity is very exciting in the market because of the activity going on in the life-science sector, the amount of new IPO, the amount of capital that’s been flowing into the life-science sector is dragging the demand for real estate.