Could you please provide a brief overview of BioMed Realty and the reasons for focusing on the life science sector?
At its core, BioMed Realty provides infrastructure (labs and real estate) to clients who need to focus on science and advance their research - from drug discovery and development firms, to medical devices, agricultural research, and technology providers (increasingly so, in fact). Our footprint spans North America, from San Diego to San Francisco, Boston, Seattle, and Boulder, Colorado, but we are also present in Cambridge, United Kingdom. All of these markets have robust life science ecosystems, and real estate plays an important role in attracting and retaining talent, for instance. We serve 294 customers in total, ranging from large corporations like Pfizer to small biotechs.
Our campuses have grown in size, with an overall portfolio of approximately 20 million square feet (including what we have in development). We also manage and operate real estate, and because of our size and scale, we can do so very efficiently, including from a sustainability standpoint.
Which companies are currently driving demand for life science real estate?
The demand pattern has shifted in recent years. One side of the market is comprised of large companies that are expanding their footprint in core markets (a good example is Takeda, which recently signed a 15-year lease totaling approximately 600,000 ft in Cambridge, Massachusetts); the other side is represented by venture-backed players that need anywhere between 5,000 to 15,000 ft. In fact, two-thirds of all the research being done is conducted by emerging biotech companies that have under $500 million in R&D and less than $200 million in revenue.
There are public companies in the middle of all of these (they may be pre-revenue or in the later stages of their clinical trials), though they have been struggling recently as public markets have been tough on them since mid-2021. Overall demand is high, with 4% vacancy, so it makes sense to continue introducing new products to the market.
Some of your colleagues have expressed concern that the sector will face a shortage of lab space in the near future. What are your thoughts on this?
We share this concern, which is why we are working on several new projects, including three upcoming spaces in Boston and another in San Francisco (when fully built up, it will spread across 3.79 million ft). The market is currently underserved, and we will require even more infrastructure to support tenants as they expand.
You frequently refer to your portfolio as "state-of-the-art," what distinguishes it?
On the one hand, the buildings are extremely energy efficient, with robust HVAC and plumbing systems installed throughout the space to ensure proper ventilation; in fact, we use a single - pass air method that refreshes the air in the labs every hour. We are also providing various safety nets for potential power outages in order to ensure that lab work can continue under any circumstances.
There are also first-rate amenities such as conference centers, cafeterias, and fitness centers. Gateway of Pacific in South San Francisco is an excellent example; we constructed a USD 55 million amenity center that is more hospitality-oriented and provides an exquisite experience comparable to a limited-service hotel.
The global pandemic has had varying degrees of impact on various real estate segments; how has your area of business been affected?
The pandemic actually put our industry in the spotlight, demonstrating what it is capable of and how important it is to society. When dealing with the type of experiments that this field requires, it is impossible to work remotely. While there was some disruption in March 2020, we were back up and running quickly, and the facilities remained open. Vaccine research increased dramatically, and a large amount of capital was injected into the market, fueling a surge in demand for functional real estate. Even if public markets were not cooperative, the overall impact on our sector was positive.
What are you most excited about in the coming years, and what do you hope to achieve with BioMed Realty?
Our immediate focus is to continue building these larger campuses, primarily through development. In addition to the 20 million square feet we currently have, including our operating portfolio and in process developments , we have the ability to add another eight million square feet across the six markets in which we operate. It will be exciting to see this through.
Oncology research continues to dominate the sector, but personalized medicine and cell and gene therapy are all promising areas that will grow in the coming years. The labs will need to make some adjustments to accommodate them, but the buildings are still suitable for this type of research. Having a front-row seat to the innovation that is taking place is exciting in and of itself - only about 5% of diseases have cures at this point, so there is so much more to be done out there.
Is there a final message you would like to send out?
North America and Europe account for 65% of new product introductions, and we are extremely fortunate to have a functioning ecosystem that encourages and rewards innovation.
I hope entrepreneurs in this space continue to be supported, including from a capital perspective, because this will allow them to recycle it right back into the industry, and address the remaining 95% of conditions that are waiting for effective therapies.
