COMMENTARY | COLUMNISTS | SARAH AUSTIN

Real estate trends in life science industry

The life science industry occupies a significant portion of real estate in San Diego and is evolving at a rapid pace. At a recent CREW (Commercial Real Estate Women) San Diego educational lunch program, led by Crista Swan of Project Managers Advisors Inc., a panel of experts discussed the driving factors that are changing the industry and the innovations the real estate community is implementing in response. Four key trends emerged.

Downsizing Big Pharma

In San Diego’s life science market, companies are trying to do more with less space, and the average square foot allocation per person is declining.

“Big Pharma is driven by the blockbuster drugs, and companies have neglected to fill their pipeline,” said Ryan Egli of CBRE. “So companies are outsourcing business to San Diego’s small, privatized drug companies in order fill their pipelines,” adding that San Diego benefits greatly by occupying this niche.

Not only are Big Pharma companies downsizing, they are also relocating to Boston. “Boston has time-zone advantage over San Diego,” said Nancy Hong of BioMed Ventures. “Since the city is closer to Europe, the Big Pharma hub, companies are finding it easier to conduct business meetings and travel.”

Hong also said that if activity were to shift to Asia, the geographical advantage would shift in San Diego’s favor.

Kennon Baldwin of Furguson Pape Baldwin Architects defended San Diego and its appeal to biotech industries saying, “San Diego has more Ph.D.s than anywhere in the country. This is driving entrepreneurship and the next generation of companies.”

The panel agreed that San Diego’s universities, research and educated population attract biotech companies, but said the lifestyle and weather of San Diego are unique differentiators.

Shift to institutional ownership

Out of the 13.6 million square feet of real estate occupied by San Diego’s life science industry, corporate landlords own 9.3 million, while only 4.3 million are privately owned. Alexandria Real Estate, Biomed Realty and HCP are the “Big Three,” representing 60 percent of the leasable life science space in San Diego.

Baldwin said that in 2005, landlords drove 5 percent of life science construction projects. Since then, up until 2013, landlords drove 25 percent of the projects. “These figures indicate that landlords are making more investments to attract tenants,” he said.

“The Big Three landlords are competitive, and this competition is driving amenities,” Egli said. “We are starting to see more and more life science companies develop exciting, informal workspaces. This may cause the rent to go up, but in turn so does worker productivity [go up].”

Michael Dorris of HCP added that life science companies can’t afford not to follow suit. Competition between companies is fueling the market and benefiting San Diego’s economy.

Emergence of incubators, accelerators

Incubator programs typically provide space for startups, while accelerator programs promote growth and expansion. With entrepreneurship and startup companies on the rise in San Diego, accelerators are becoming more prevalent.

Entrepreneurs and startups are working with significantly less money, and that is driving the market for smaller workspaces. “Companies are learning to do more with less space and striving to be more capital efficient,” Hong said.

An example of a thriving accelerator is Torrey Pines Science Park. “The space was initially unrentable,” Dorris said. “HCP refurbished the building with new amenities and shared space. Now three tenants occupy the building and share common spaces, which save them a significant amount of money.”

Non-pharma companies’ growing market

San Diego’s biotech market is growing and pharmaceuticals are no longer the primary focus. The industry now encompasses wireless health, medical devices, biofuel, bio-chemicals and diagnostics. “Because of San Diego’s broad-based economy, this change in focus will work in San Diego’s favor,” Baldwin said.

“When it comes to biotech, San Diego has a lot of strengths it can capitalize on,” Hong said.


Austin is an account manager and social media strategist at TW2 Marketing, a San Diego-based marketing and public relations firm that provides services to CREW San Diego.

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