Exclusive Q&A: Alexandria COO Discusses Bay Area Biotech And Future Growth
Alexandria Real Estate Equities is one of the country's leading science and technology REITs. Its presence in the Bay Area is substantial, especially as a marquee owner and operator of life sciences campuses.
The real estate firm recently inked Verily Life Sciences in a long-term sublease of a multi-building campus containing 407k SF in South San Francisco. COO and head of the S.F. region Steve Richardson talked with us about Alexandria’s strategy and shared his thoughts on the landscape of biotech and the state of real estate in the Bay Area.
Bisnow: Biotech is having a resurgence, especially in South San Francisco. Do you have any ideas on what's driving this?
Steve: Broad-based growth in the industry is driving increased real estate demand. New company formation is continuing at a healthy pace; high-quality existing companies are maturing and are either expanding clinical trials or beginning commercialization; and finally, there are large-scale organizations such as Verily entering the South San Francisco Market.
Bisnow: How has Alexandria designed its portfolio to meet these needs and succeed in that environment?
Steve: We are 100% leased in all of our San Francisco Bay Area submarkets—Mission Bay, South San Francisco and Stanford. This demonstrates that our life science campuses have performed extremely well. We have a very experienced and trusted regional team that is deeply engaged with our clients in all facets of their businesses and we have benefited from these long-term relationships with nice internal growth. We also provide expansion opportunities to our clients, and have another 400k SF capability in South San Francisco to accommodate future growth.
Bisnow: Any thoughts on the supply cap and shortage of land in the Bay Area?
Steve: Mission Bay is an absolutely supply-constrained market with the rigid nominal allocation of space via the Proposition M regulations. There are very few opportunities for expansion in this cluster today, although we are working hard to address that challenge. The South San Francisco and Stanford clusters are also very tight markets.
Bisnow: Some biotech IPOs have sputtered a little. Do you think these are signs of a broader downturn, or are people overreacting?
Steve: There certainly was historic demand in the biotech world over the last year or two. We fully expect it will continue to be strong as we are tracking 2.8M SF of demand in the Mission Bay, South San Francisco and Stanford clusters. The capital markets are liquid and the IPO window continues to be open, as six companies have already gone public this year. The capital markets may not be operating at historic levels, but we think they will certainly continue at healthy and sustainable levels.
Bisnow: What are the things that Alexandria is thinking about in 2016 as you manage to grow?
Steve: Since we are 100% leased, we're very mindful of accommodating our existing tenant base and ensuring the execution of our development pipeline. In San Francisco, we have three major projects underway totaling 873k SF, with our very skilled and experienced team executing on those projects. We watch the broader life science industry trends very closely. There is a solid foundation for continued industry growth and it looks to be very healthy as all of its segments continue to drive expansion of our mission-critical research and development platforms.
