The life science sector, long burgeoning as a formidable economic and social force, took on new momentum during the COVID-19 pandemic, creating geographic pockets of economic activity when many industry verticals in the United States, such as retail and entertainment, were in a state of stasis in 2020 and well into 2021.
Tenant representation firm Hughes Marino, and its co-founder David Marino, are in all of those geographies, and it isn't by chance that they operate there.
While the biotech sector continues to grow, Marino believes there's a cap to the potential biotech market size. This is partly because of the total possible government, insurance reimbursement, and consumer spending for pharmaceutical products and services and partly because there aren't that many metro areas capable of developing the necessary corporate facilities infrastructure and educating and attracting the large concentration of talent needed to do the work.
When the full brunt of the pandemic took hold for most of the country in March 2020, predictions about the dire consequences that distancing restrictions and public health issues would create were rampant. The withering of stock markets, the closing of tens of thousands of small businesses, the loss of millions of jobs, and the temporary collapse of the commercial property market were just a few.
While most of those predictions came true to some degree, though mostly not to the cataclysmic end some feared, the life science vertical managed to continue strong growth in the face of those headwinds.
Hughes Marino Recognizes the Small, Exclusive Market
David Marino has been in the commercial real estate game for over three decades and has seen the emergence and growth of the life science industry firsthand.
Under Hughes Marino's leadership team's direction, the company set up shop in Raleigh-Durham, North Carolina, Boston, Seattle, San Francisco, and in the company's hometown of San Diego - all of the major biotech clusters in the United States.
Marino said those five markets are the prime locales for life science work for a few different reasons. He's also seen other geographic regions attempt to get in on the action with marginal success.
"Having done this for three decades, I've seen other fits and starts in other places. Florida and Texas have tried. And you'll get a handful of companies that go there, but they tend to be more medical device, materials or diagnostics companies than true biotech," Marino said.
He explained that even if growth has happened outside of the five prime markets referenced above, that growth is often fueled by outside factors rather than created organically.
"They'll use government incentives, discounted land, or other financial inducements to try to get someone to come there," he said. However, this is an industry that likes to cluster and collaborate and that takes critical research institutes, educational institutions, and existing players to [cooperate with] in order to germinate and grow.
"But the reality is the biotech industry, if you think about it, it's a big industry and affects every person, but it's relatively small in the context of the total economy," Marino said. "We don't need 20 biotech clusters around the country. In fact, I would advocate it's not in the interest of science to have a fragmented industry, because, unlike the insurance industry or the legal industry, life science companies recruit a very specific type of person and share more information between companies that you see in any other industries. For example, not-for-profit research institutes and universities that have strong scientific programs are constantly spinning out life science technology to form new companies. It's one of those things where momentum builds over decades, and success builds on top of more success."
Even with limiting factors like a modest number of viable hubs, the industry has seen outsize growth over the past 20 years.
According to a 2022 report by one real estate services and investment firm, the number of individuals engaged in life science research increased by 79% between 2001 and 2021. The overall growth for all occupations in the United States grew by 8%.
The report went on to say that the number of new graduates with biology and biomedical degrees totaled more than 163,000 in 2020, more than double what it was 15 years ago.
But even with that explosive growth, it's hard for life science companies to find enough of the highly skilled talent necessary to do the job.
The unemployment rate for life, physical, and social science occupations were the second lowest of any U.S. occupation, sitting at 0.6% as of April 2022.
"These people are Ph. D.s in chemistry and biologists," Marino said. "These are people that are very, very highly educated and trained in the life science area."
Pipelines and Demand
The specialization of the labor force means, among other things, that companies looking to retain that talent will need to be close to the pipelines that produce them.
"It's not like you go to law school and then show up and work in a lab," Marino said. "All these people come out of the local universities and then tend to stay in that community."
Marino said he and the Hughes Marino team watched firsthand as the educational institutions in and around the firm's headquarters started producing appropriate talent. The companies that wanted to utilize that talent followed. As companies went public or were sold, or even failed, that scientific talent pool moved on to start new companies, and the growth of the number of biotech companies in the region became exponential over time.
"Here, for example, you have the UCSD, and you have the Salk Institute and all of the other research institutes around there that have been there for 40, 50 years," he said. "That has attracted more Ph. D.s and more Nobel Prize winners than you could ever imagine. They all have now built companies around that in this area."
That scenario has played out in the other life science hubs as well.
The San Francisco area often called the "birthplace of biotechnology" or "Biotech Bay," benefits not only from the strong startup and entrepreneurial culture that has fostered many technology companies' growth but, like the San Diego area, has the educational foundation to produce the necessary talent.
The area is served by premier life science programs at schools such as UC Berkeley and Stanford University.
That fertile talent pool has led the area to continued growth - growth it may not be equipped to handle.
Marino said that due to the high costs associated with building out space for life science work, landlords and investors are often more resistant in their expansion efforts outside of established markets, like those where Hughes Marino has offices.
"The amount of capital you have to put in to build out lab space can cost $250 to $350 a square foot," Marino said. "And just to put it in comparison, your typical office space might cost, depending on where you are, $80 to $120 a square foot. So you're talking about a step function of three times what it takes to build out lab space versus office space."
Marino went on to say that if a landlord is going to undertake that sort of capital investment, they're going to want assurances like the ones that come from working in an established market.
"When a landlord makes that kind of investment, they want to know that when that tenant moves out or if that tenant gets acquired and goes out of business, they want to know what's going to happen next, when that space comes back, and that there's going to be a demand for it," he said. "They don't want to tear it out and say, 'Well, let's turn it back into office space.' They've got to repurpose those improvements for the next guy. And so that means that landlords are only going to make those investments where there is established, strong demand. So it's become a little bit of a self-fulfilling prophecy that strong lab markets become even more dominant over time."
As the established markets continue to build out, it makes it less likely, per Marino, that companies and landlords will look outside these markets. Ultimately, biotech tenants can only go where commercial biotech landlords are willing to make the capital investments in the improvements.
"As these five markets started to grow, developers like Longfellow [Real Estate Partners] and BioMed Realty and Alexandria [Real Estate Equities] and Healthpeak [Properties] and all these other big players around the country, they're all in the same market," Marino said. "They don't say, 'Hey, I'm going to be pioneering. I'm going to go build a lab building in Phoenix.' It would just be disastrous financially."
Hughes Marino Reveals Potential Hot Spots
That isn't to say that there aren't potential markets for expansion.
The report goes on to state that certain "pockets" of talent exist in places in and around the Denver/Boulder area, Dallas/Fort Worth, and Minneapolis/St. Paul. It also pointed out that there are emerging markets in secondary cities such as Salt Lake City; Nashville, Tennessee; Columbus, Ohio; and Tucson, Arizona. Marino added that the San Fernando Valley region of Los Angeles is also beginning to flourish.
Nashville, in particular, seems poised to make a move. The city saw a growth of over 35,000 life science jobs between 2015 and 2020. More recently, Nashville has been the recipient of some pandemic-fueled migration from larger, more expensive cities.
In addition to the imported talent, Nashville also has a strong bedrock of educational institutions capable of producing the appropriate workforce, such as Vanderbilt University Medical Center and National Institutes of Health, the latter of which grew its funding by 50% between 2016 and 2021.
According to labmanager.com, life science companies are "often looking for a home where they can be part of a larger community of shared interests and goals - an innovation hub."
Labmanager.com also stated that life science companies, in addition to that sense of community in innovation and having access to a deep talent pool, will look for regions that have regulatory requirements that are not an impediment to their business, a reliable water supply, and affordable power.
So, there are a number of factors that influence whether a certain area is ripe for life science growth, and not that many check all the necessary boxes.
Marino and the Hughes Marino team believe that the industry will continue to expand. But despite some tailwinds in secondary markets like Nashville, it's more likely that the existing, established markets will be the recipients of that true biotech growth, he said.
"In San Diego, for example, in the last three years, there's been 5 million square feet of life science leases signed," he said. "These biotech lab developers can't build it fast enough. So literally, they're tearing down one- and two-story office buildings to build six-story lab buildings."
That mindset has driven Hughes Marino's growth strategy, which Marino says has long been tied to the life science sector.
"Our firm has been representing life science tenants for our whole careers, for 30 years," he said. "As we have grown, we think that's a really important part of the economy and an important part of our practice. It's a very specialized base of knowledge as well as to what those companies and what that industry requires. And so it's been a big focus of ours as we've expanded into initially San Francisco and then Seattle. We're hiring some of the top office and industry professionals as well. They know what manufacturing and supply chain companies require and what corporate headquarters and traditional office tenants require."
Hughes Marino recently opened offices in Boston and Raleigh-Durham, further leaning into the established biotech markets.
"We've been looking in those markets for a long time for the right people," he said of recruiting Hughes Marino's expanding team. "For us, it is all about the right people."
Marino said that attracting the best team members in the right markets has become more achievable now that the firm has seen proven success from its expansion efforts, with the market taking note.
"If I go back 10 years ago when [Hughes Marino] opened [in] Orange County and we were only a San Diego company, it was a little bit of a struggle," he said. "A lot of people that would've been really good to work here pooh-poohed the idea that we had any legitimacy or that we could actually pull it off. I am sure people wondered how a few brokers from a secondary market like San Diego, with no outside capital, would ever have a shot at success. You have to have tremendous self-confidence, a tolerance for risk, be willing to work very hard, and be very brave to join a startup company."
But they did pull it off. Now, Hughes Marino has a presence in each of the primary life science markets and several that are not. Marino doesn't see the firm's growth stopping there.
"So now we're truly a national company," Marino said. "We have a footprint in multiple states with nine offices and more to come. I'm really so excited about where this ends, because it's just going to be more of that [growth], and we have proven that we can scale our culture and technology. It's going to be more amazing people in more wonderful communities around North America."
* This is a contributed article and this content does not necessarily represent the views of sciencetimes.com
![Earth's Quasi-Moon Kamo‘oalewa Could Originate From Lunar Surface Not Asteroid Belt [Study]](https://1721181113.rsc.cdn77.org/data/thumbs/full/53275/258/146/50/40/earths-quasi-moon-kamo-oalewa-could-originate-from-lunar-surface-not-asteroid-belt-study.png)
