Clusters, New Markets Vital To Life Sciences Industry As Challenges Mount
Innovation drives investment into startups and the real estate that researchers, scientists and technology experts need to succeed. But the paucity of true innovation districts, and the challenge of creating clusters that foster new designs and discoveries, has been a real riddle, especially for life sciences real estate.
At Bisnow’s National Life Sciences Summit on Tuesday, moderated by Alloy Properties Director of Asset Management Alicia Hinds, panelists talked about the evolving marketplace, with a special focus on the importance of these clusters to real estate and development, and the features and strategy that can help create or grow new clusters in secondary and up-and-coming markets.
“Talent is the currency of innovation,” Ancora CEO Josh Parker said. “And that has to scale.”
Real innovation in the industry is concentrated in roughly three dozen counties across a country with more than 3,000 counties, Parker said. The world, and the life sciences industry, don’t need another Silicon Valley or Kendall Square, he said.
The task of starting new clusters will be more complicated next year, with a slowdown in which big, show-stopping deals are much harder to come by, as is the capital that makes deals happen. But there’s critical importance in expanding opportunity, both in terms of making more room for innovation and widening the tent for diversity and inclusion within biotech.
Panelists underscored the wisdom of traditional cluster-building strategy; a nexus for innovation and ideas needs the proximity and collaboration of local academic and research institutions and a sense of place and quality of life that can attract top-tier talent. That specific ingredient list is beginning to be applied to more secondary markets, grounded by local colleges and universities.
Sterling Bay principal and Director of Life Sciences Suzet McKinney, whose firm is working on life sciences clusters in Chicago and elsewhere, said there is a lot more happening in secondary and tertiary markets that’s worth keeping an eye on. And the need for space, especially more affordable space during a time of belt-tightening and more selective venture capital funding, presents an opportunity.
“Quite frankly, companies have a lot of choice in the marketplace now,” she said. “Back in the days when Silicon Valley and Kendall Square were emerging, people were following the dollars. Post-Covid world, we’re seeing companies large and small hone in on what their employees want.”
She said it would be smart for small to midsized cities to really study and research what employees want and break down transport, housing, talent pool and quality, and cost-of-life challenges in anticipation of pitching firms on the value of relocating or setting up shop.
Gensler Managing Director and principal Smita Gupta seconded that notion, saying that it’s not just about the labs and offices. Developers and cities need to think about retail, schools and proximity to other jobs for families with two working parents. Talent is seeking good spaces, good experiences and places they can make a life and career. Many life sciences directors are following suit with larger, multi-use development plans anchoring labs with larger retail and commercial projects.
Transwestern Executive Managing Director Justin Brassell, based in Houston, said the “competitive nature of talent” is the key driver. While working on a Houston-area project for Alexandria Real Estate Equities, he said that research showed talent would stay three times longer at the same role in the Texas city; without a dense collection of other biotech firms nearby, they weren’t as likely to switch jobs, providing a useful draw for Houston.
It’s important to remember the industry isn’t just about top-tier talent with multiple degrees. Life sciences and biomanufacturing can prosper in places that set up talent pipelines with top-tier universities or community colleges, Gupta said. It’s been an especially valuable investment and initiative in North Carolina, which has made biotech talent growth a cornerstone of its business development strategy.
Don’t forget about development talent. There’s often still a knowledge gap in the real estate and development community when it comes to life sciences in smaller and emerging markets, and it can be tough to find the construction or engineering talent needed for building out labs, Parker said.
Another big advantage for up-and-coming markets may be in biomanufacturing. A wave of new technologies, such as mRNA and cell and gene therapy, require a big expansion of biomanufacturing space, and that demand means more facilities, which often can’t find space in expensive, crowded coastal markets. Many existing clusters lack water resources and enough cheap land, so filling in this gap can be a leg up for aspiring clusters.
Offering that competitive cost advantage may be the best way for clusters to attract more attention right now. In a capital-constrained market, which may slow expansion projects in new cities, it’s key to tap into the anxiety over costs.
“The term for the next 16 months is going to be capital efficiency,” Parker said. “Companies will be much more thoughtful about how they utilize their capital.”
