Basconcillo: Life-sciences firms are drawn to the Bay Area primarily because of talent, an established cluster of major biotech/life-science companies and close ties to venture capital. These companies draw talent from notable universities such as UCSF, Stanford and UC Berkeley, as well as globally. Additionally, the Bay Area attracted 30% of private funding nationally, thanks to strong ties with venture-capital firms on Sand Hill Road in Menlo Park and investment firms in Mission Bay that specifically invest in biotech/life-science startups.

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GlobeSt.com: What are these companies seeking in your market that is in short supply?

Schoneman: San Diego life-science companies continue to seek out newer, high-quality lab space that provides ample natural light in the office and lab areas. Many of these companies are smaller companies, with space needs under 10,000 square feet, and are looking to secure space that creates an engaging and collaborative work environment. Tenant demand from smaller companies has been strong, pushing availability in this size range to short supply. Consequently, landlords are actively repositioning vacancies into smaller suites in order to deliver more space to keep up with the demand.

Lantgen: Built-out clean-lab as well as wet-lab space continues to be in short supply. The interesting thing about this is that demand is greater in the smaller size ranges than the larger sizes. The smaller requirements are earlier-stage businesses within the life-sciences space as they continue to evolve. These are seeds to a larger need and funding round or acquisition.

Basconcillo: Though there are plenty of office options to house administrative functions, lab space is in very short supply. Until recently, the Greater Bay Area had not seen speculative development geared specifically to lab users in more than eight years, except for a few new developments in micro markets like Emeryville, Berkeley and Mission Bay. The aggressive expansion of the life-sciences industry, combined with tech companies like Google branching out and forming their own research units geared toward technology in biotech, is spurring demand, finally prompting more landlords to break ground on new-generation lab development.

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GlobeSt.com: What are landlords doing to attract these firms in your market?

Schoneman: Landlords continue to reposition older, more-antiquated space with newly designed lab and office space. This is a trend that started about 10 years ago and continues to be pushed to new levels by San Diego's largest life-sciences landlords. These larger biotech landlords are very established in the San Diego market and are well capitalized to be able to provide tenants with high-quality class-A facilities that also include access to common amenities that tenants can utilize. Some landlords are also looking to invest in new startup biotech companies, partnering with them on multiple levels—not just the real estate.

Lantgen: Orange County landlords are doing little to nothing to attract life-sciences firms. It's a huge opportunity for a savvy landlord to actually attempt to capture. The industry is extremely cluster driven and, due to the investment in equipment and infrastructure, create a real opportunity for tenant retention in the long term. It's difficult to recreate, to say the least.

Basconcillo: Newly built space is being snapped up pretty quickly by tenants. As a result, some landlords in San Francisco and the Peninsula have begun to convert existing R&D and office space for life-sciences users with lab requirements. Much like the R&D-to-office conversions we've seen in Silicon Valley, this creates opportunities for tenants in the market in need of space on a more immediate basis and at slightly lower costs when compared to brand-new construction.

GlobeSt.com: What else should our readers know about life-science clusters?

Schoneman: The supply of lab space in the San Diego life-sciences cluster (Torrey Pines, UTC/Campus Point, Sorrento Mesa, Sorrento Valley) has grown by more than 1.5 million square feet during the past four years. In large part, this growth has been attributable to life-sciences landlords acquiring office buildings and converting them to biotech lab space, but it has also included new ground-up development. Cluster growth is expected to continue as more ground-up development occurs and landlords look to pick-off underperforming office buildings and reposition them into lab facilities. Throughout the balance of 2017, the local cluster is anticipated to add another 500,000 square feet of new inventory (both new development and repositioned buildings), bringing the total inventory of life-science buildings to more than 15 million square feet.

Lantgen: I've had three requirements/referrals in the last 90 days for emerging companies in need of wet-lab space. They are all going through the funding rounds to continue to grow. If landlords were interested in investing in lab space the space the same way they looked to capture “creative” or “technology” tenants, the ecosystem would continue to thrive at a more accelerated rate. If they do not, this skilled workforce, which I'd argue is more technical and specific than most creative tenants, will be migrating to markets where this is a greater availability of that space.

Basconcillo: The Bay Area's local life science sector has been growing at a rapid pace, thanks to the merging of industries brought upon by advancements in informatics in pharmtech, big-data analytics and software. As a result, the life-science workforce has grown by 6.5% on a year-over-year basis. Although technology companies have been the center of attention during this current economic cycle, the Bay Area's local life-science sector is expected to see ongoing growth.

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SAN DIEGO—From an existing infrastructure to an accessible talent pool, San Diego, Orange County and the Silicon Valley have much to offer life-sciences companies. GlobeSt.com spoke with three JLL executives about their respective markets for this sector: Grant Schoneman, SVP in San Diego; Jason Lantgen, VP in Orange County; and Christan Basconcillo, research manager for Silicon Valley and the San Francisco Bay Area.

GlobeSt.com: What is the draw for life sciences companies in your particular market?

Schoneman: A major draw that attracts life-sciences companies to San Diego is the existing infrastructure that is in place to support research companies of all size ranges. There are a number of existing lab facilities, along with highly capable and educated landlords to help support the facility needs of biotech companies. There are also a number of specialized service providers to help with the operational needs of life-sciences companies. Arguably one of the largest draws to the San Diego market is the highly educated workforce. The market has a large number of highly educated scientists, with more than 2,600 post docs aggregated within San Diego research institutes only, not to mention all of the Ph.Ds located within the regions more than 750 R&D, diagnostic and medical-device companies. This educated workforce has also attracted a number of large pharmaceutical companies to make San Diego one of their primary R&D locations.

Lantgen: Life-sciences and device companies in Orange County are equally focused on the same things: access to skilled talent, skilled senior leadership/advisors and research institutions. There is no greater lif-sciences ecosystem than what exists in this greater Southern California market, off which Orange County, at the epicenter, thrives and from which it pulls. The number of higher-education schools, research institutions, grants, etc., create an immense opportunity for businesses to thrive. Orange County specifically has been at the epicenter of the medical-device industry as well as the ophthalmology industry.

Basconcillo: Life-sciences firms are drawn to the Bay Area primarily because of talent, an established cluster of major biotech/life-science companies and close ties to venture capital. These companies draw talent from notable universities such as UCSF, Stanford and UC Berkeley, as well as globally. Additionally, the Bay Area attracted 30% of private funding nationally, thanks to strong ties with venture-capital firms on Sand Hill Road in Menlo Park and investment firms in Mission Bay that specifically invest in biotech/life-science startups.

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GlobeSt.com: What are these companies seeking in your market that is in short supply?

Schoneman: San Diego life-science companies continue to seek out newer, high-quality lab space that provides ample natural light in the office and lab areas. Many of these companies are smaller companies, with space needs under 10,000 square feet, and are looking to secure space that creates an engaging and collaborative work environment. Tenant demand from smaller companies has been strong, pushing availability in this size range to short supply. Consequently, landlords are actively repositioning vacancies into smaller suites in order to deliver more space to keep up with the demand.

Lantgen: Built-out clean-lab as well as wet-lab space continues to be in short supply. The interesting thing about this is that demand is greater in the smaller size ranges than the larger sizes. The smaller requirements are earlier-stage businesses within the life-sciences space as they continue to evolve. These are seeds to a larger need and funding round or acquisition.

Basconcillo: Though there are plenty of office options to house administrative functions, lab space is in very short supply. Until recently, the Greater Bay Area had not seen speculative development geared specifically to lab users in more than eight years, except for a few new developments in micro markets like Emeryville, Berkeley and Mission Bay. The aggressive expansion of the life-sciences industry, combined with tech companies like Google branching out and forming their own research units geared toward technology in biotech, is spurring demand, finally prompting more landlords to break ground on new-generation lab development.

|

GlobeSt.com: What are landlords doing to attract these firms in your market?

Schoneman: Landlords continue to reposition older, more-antiquated space with newly designed lab and office space. This is a trend that started about 10 years ago and continues to be pushed to new levels by San Diego's largest life-sciences landlords. These larger biotech landlords are very established in the San Diego market and are well capitalized to be able to provide tenants with high-quality class-A facilities that also include access to common amenities that tenants can utilize. Some landlords are also looking to invest in new startup biotech companies, partnering with them on multiple levels—not just the real estate.

Lantgen: Orange County landlords are doing little to nothing to attract life-sciences firms. It's a huge opportunity for a savvy landlord to actually attempt to capture. The industry is extremely cluster driven and, due to the investment in equipment and infrastructure, create a real opportunity for tenant retention in the long term. It's difficult to recreate, to say the least.

Basconcillo: Newly built space is being snapped up pretty quickly by tenants. As a result, some landlords in San Francisco and the Peninsula have begun to convert existing R&D and office space for life-sciences users with lab requirements. Much like the R&D-to-office conversions we've seen in Silicon Valley, this creates opportunities for tenants in the market in need of space on a more immediate basis and at slightly lower costs when compared to brand-new construction.

GlobeSt.com: What else should our readers know about life-science clusters?

Schoneman: The supply of lab space in the San Diego life-sciences cluster (Torrey Pines, UTC/Campus Point, Sorrento Mesa, Sorrento Valley) has grown by more than 1.5 million square feet during the past four years. In large part, this growth has been attributable to life-sciences landlords acquiring office buildings and converting them to biotech lab space, but it has also included new ground-up development. Cluster growth is expected to continue as more ground-up development occurs and landlords look to pick-off underperforming office buildings and reposition them into lab facilities. Throughout the balance of 2017, the local cluster is anticipated to add another 500,000 square feet of new inventory (both new development and repositioned buildings), bringing the total inventory of life-science buildings to more than 15 million square feet.

Lantgen: I've had three requirements/referrals in the last 90 days for emerging companies in need of wet-lab space. They are all going through the funding rounds to continue to grow. If landlords were interested in investing in lab space the space the same way they looked to capture “creative” or “technology” tenants, the ecosystem would continue to thrive at a more accelerated rate. If they do not, this skilled workforce, which I'd argue is more technical and specific than most creative tenants, will be migrating to markets where this is a greater availability of that space.

Basconcillo: The Bay Area's local life science sector has been growing at a rapid pace, thanks to the merging of industries brought upon by advancements in informatics in pharmtech, big-data analytics and software. As a result, the life-science workforce has grown by 6.5% on a year-over-year basis. Although technology companies have been the center of attention during this current economic cycle, the Bay Area's local life-science sector is expected to see ongoing growth.