Move over Boston, New Jersey and the San Francisco Bay area. Los Angeles and the Washington, D.C., region are quickly gathering steam as established life sciences hubs. And Minneapolis, Chicago, Denver, Houston, Florida, Atlanta and Indianapolis are among the emerging hubs not far behind.
That’s according to a new study by Jones Lang LaSalle, a financial and professional services firm specializing in real estate, which recently conducted research to identify the top markets for real estate expansion among life sciences companies. The firm’s first annual Life Sciences Cluster Report ranked 16 emerging and established life sciences clusters in order to gauge where companies in the industry are positioning their facilities to gain competitive advantage.
Richard McBlaine, principal of solutions development in life sciences at Jones Lang LaSalle, said one of the surprises in the data was that all clusters seem to be growing, instead of one area growing at the expense of others.
“There was simultaneous growth among many of the emerging clusters and the established clusters,” he said. “That told us: they’re really competing more on their ability to create innovation rather than just their cost base.”
For companies looking to maximize their dollars when it comes to real estate, the emerging markets are key, said McBlaine, as square footage is cheaper. At the same time, though, locating there is a risk, since much of the knowledge base and venture capital are centered around the more developed clusters.
“There’s a balance,” he said. “It’s a trade-off to go somewhere in Florida or to Denver, where you can get a lot more space and then spend more of your dollars on discovery, versus being in the top markets where the burn rate is quicker.”
Added Bill Barrett, executive managing director of life sciences at Jones Lang LaSalle, a life sciences cluster typically develops as a result of a geographic region’s educated workforce, venture capital and economic development incentives, industry-friendly political structures, patent protection laws and ties to universities.
Though market activity is picking up in most clusters, the report indicates speculative construction continues to be rare in nearly all clusters. Nevertheless, several companies are working on large-scale, build-to-suit projects, signaling a long-term commitment to their respective clusters. These include Astellas’ 445,000-square-foot headquarters project in Chicago, GlaxoSmithKline’s $81 million, 205,000-square-foot headquarters in Philadelphia and Biogen’s 497,000-square-foot headquarters in Cambridge, Mass.
The report’s cluster rankings were based on a composite score made up of the percentage of total employment in high-tech research and hospital/medical fields; the number of science and engineering graduate students; the distribution of National Institutes of Health (NIH) funding; venture capital funding; R&D spend as a percentage of the region’s total state GDP; and square footage of academic and research facilities.
Jones Lang LaSalle defines the life sciences as pharmaceuticals, biotechnology, medical device technology, agricultural biotechnology and biofuels.
The report also looked at international markets emerging as the places to be for life sciences companies. Top markets include Canada, Brazil and Puerto Rico. Some of this is a direct result of governments pledging money for life sciences office parks and facilities.
“Internationally, we see countries like Brazil and China trying to buy their way into the market by building the parks,” said McBlaine. “They are trying to buy that tipping point. It’s too early yet to say whether or not that’s working.”