Understanding Market Maturity: Key to Attracting Tenants in Emerging Life Science Clusters

By: Brooks Slocum + Adam Spagnolo

A surge of private and public funding is redrawing the commercial Life Sciences map.
Whereas biomedical and pharmaceutical innovation has historically clustered in Greater
Boston, San Francisco and the Research Triangle, investments in commercial Life Sciences
facilities have overflown to emerging markets and clusters throughout the nation. A key
consideration to attracting Life Sciences tenants is understanding market maturity and its
impact on the potential facility types needed by growing companies. Owners and
developers are simultaneously looking to SGA to navigate this evolving landscape.
Real estate organizations know to engage SGA early in their life sciences journeys
because there are many subcategories of laboratory— and in this capital-intensive realm,
there is an advantage in making flexible buildings that can accommodate different science
types. It is even more critical to leverage SGA’s expertise because we can predict clearly
what the science will be in an emerging market.

SGA advises investors to understand what the firm refers to as the Market Maturity
Pipeline, which centers on the various facility types tenants in the Life Sciences market
may require, from basic research to corporate headquarters to packaging and distribution.
Market maturity is distinct from company maturity, which is also distinct from product
maturity. The three move independently, though a start-up with a new project can mature
all three at the same time.

Programming distinctions depend on a market’s stage of emergence. Accelerators
and incubators have to come first when a metropolitan area is entirely new to Life
Sciences; SGA often advises real estate organizations to position properties as incubators
and accelerators, which have to come when nurturing local business. These spaces may
require less robust mechanical and structural infrastructure versus more mature facilities
such as cGMP. Understanding the different infrastructure requirements enables an owner
or developer to better market a property that closely aligns with the potential needs of
prospective tenants. There is also an alternate path, which is when a large mega-company
moves into an area previously not involved in biopharma to take advantage of an educated
but untapped potential employee base, either in research or manufacturing.

In a more robust market, where startup companies have progressed to later stages
of R&D, SGA advises clients to embrace the greater infrastructure and specialization that
corresponds to process development and pilot manufacturing. In fact, making a lab space
extremely flexible and adaptable generally means lots of infrastructure to accommodate
anything which might happen, while more specific labs can be built “lighter.” In addition,
SGA has developed techniques for pivoting a building’s program toward office uses—or,
conversely, to heavier R&D uses—as the facility and tenant needs evolve.

Irrespective of location, speculative real estate for Life Sciences companies is itself
emerging. The idea that there are perfectly designed real estate spaces for every single
stage of a company’s Life Sciences journey is a relatively new phenomenon, and it has
enabled companies to spring into existence at a time when discovery and development are
faster than ever. Real estate’s limited track record demands a trusted partner, in turn, and
SGA ensures that facility programming and design correspond to the nuances of any given
market’s maturity.