Life Sciences Sector Claims Silver Lining To Economic Gloom

The Bay Area’s life sciences sector has not only thrived during the coronavirus pandemic but also flourished because of it. The dash toward developing vaccines and treatments for the respiratory disease caused by the virus pushed the industry into the spotlight, stimulated funding and gained favorable public opinion.

And while biotech’s origins in the region have over time built a framework for the industry’s success for existing companies, it also extends to new starts.

Mission Bay Capital Managing Partner Doug Crawford works with biotech startups to make them more capital-efficient, “faster, focused and frugal." In 2020, his company received more lab space applications than ever before, reflecting a seemingly insatiable appetite for innovation, Crawford said at a Bisnow webinar on Feb. 25.

Companies working in Mission Bay Capital labs have operated at between 95% and 100% potential throughout the pandemic, he said.

“I think the life science industry, in general, has been one of the great silver linings of a pretty rough year,” Biocom Bay Area Executive Director Michelle Nemits said.

"The industry, however, has really stepped to the forefront and very early on recognized that it was going to be this industry in particular that brings the world out of this bad situation," she said. "One of the things that has been showcased is the way the industry has come together in an unprecedented fashion to meet this global challenge.”

The inception of this shining moment dates back to 1976 with Genentech's founding, which led to South San Francisco's designation as “the birthplace of biotechnology.” Since earning the title, the city has morphed into a seeming capital of biotechnology, with iconic life sciences campuses like the Genesis Towers, The Cove at Oyster Point and Gateway of Pacific, among many others, becoming defining features of the landscape.

Three months ago, the city council approved a 15-year master plan for Genentech to double in size and gave the green light for life sciences commercial real estate companies like Healthpeak and Alexandria to keep building, according to South San Francisco City Manager Mike Futrell. The city having the largest industrial land sector in San Mateo County makes it primed for even more life sciences growth, Futrell said.

“It's really a Bay Area phenomenon,” Futrell said. “I hear that over and over again from biotech professionals. They want to be near other professionals, and that's why you have these clusters. So yes, you can build a lot cheaper in Idaho or Nebraska, and they may even pay you to go there, but you're not going get the top-level professionals to go there because they know the collaboration isn't there.”

The atmosphere of collaboration has formed over decades fed by graduates of Stanford University, University of California Berkeley, University of California San Francisco and other schools. These institutions churn out young STEM professionals who populate biotech companies and start their own all over the region where there is a healthy amount of existing R&D space and momentum for both new construction and conversions from other product types. Additionally, Bay Area cities have the experience, zoning framework and appropriate building codes to handle varied life sciences uses.

Crawford said biotech startups in his orbit have raised over $4.8B since 2013. The main driver of the industry’s growth is the quality scientific research that yields therapeutics that positively impact people’s lives, he said. These results fuel more capital investment, leading to further growth and companies chasing limited space.

Truebeck Construction project executive Kelley Wathen said during the webinar that one way her company has been able to add value during this high-demand era is to work with developers early in the process on a phased approach where a design is in place for a heavy life sciences build-out, but the capital investment is delayed until a tenant lease is signed. That way, a developer can pay minimal upfront expenses during the initial period of uncertainty over who their tenants will be and what they might need but have a plan ready once they do.

“Developers are kind of hesitant to take a building that's being converted from maybe office to life science,” Gidel & Kocal Construction Co. Senior Project Manager Steve Smith said during the webinar. “They're kind of hesitant to spend all that money, but the other side of that is a lot of these startups and a lot of these companies that are signing leases. They want to sign on the bottom line, and they want to be operating in that space within two, three or four months.”

“There's a huge demand, and if developers can plan their projects to meet that demand, they won't have any problems,” Smith said.