Bowling for biotech-or how real estate is changing to meet tight space, labor markets
Source: San Francisco Business Times:
By: Ron Leuty
Date Posted: February 4, 2016
Biotech real estate developers are rolling with the times, designing space for young, cash-flush companies desperate to hold on to talented employees who want more than a bench and a place to hang their lab coats.
Take HCP Inc., which is breaking ground on the second phase of its massive Cove at Oyster Point development in the sterile-and-scrubbed heart of the life sciences industry in South San Francisco. Along with two lab and office structures totaling 230,000 square feet, HCP’s next stage of the potential 884,000-square-foot project includes 20,000 square feet of retail, attempting to fill a desperate need among the thousands of biotech workers.
The first two-building phase, which will open in the third quarter, includes a marketplace-like food area on the ground floor as well as pool tables, table tennis and a two-lane bowling alley.
Yes, a bowling alley.
“It’s really taking an urban-type downtown environment and bringing it to a suburban market,” said HCP Executive Vice President Jon Bergschneider. “It’s large space for people to break out and team build.”
In the tech industry, such “amenity space” is commonplace in the tug-of-war to keep and attract fresh, young talent. Yet despite occasional events at individual companies — South San Francisco-based biotech granddaddy Genentech Inc. is well known for its bi-monthly “Ho-Hos” get-togethers — biotech has mostly maintained a buttoned-down focus on its benches and beakers.
Yet biotech executives and the developers who build space for their companies say that is changing. Employees can be in their labs at any time of the day or night, and the east side of Highway 101 in South San Francisco is largely a food and entertainment desert, so they often jump in their cars at break time. But the growing millennial workforce is different, they say, wanting services within walking distance.
BioMed Realty Trust, recently bought by Blackstone Group LP (NYSE: BX), is building out amenity space at a potential 595,000-square-foot campus in Foster City for Illumina Inc. (NASDAQ: ILMN). Across Oyster Point Boulevard from The Cove, BioMed has drawn up plans for similar amenities space at its Gateway of Pacific towers, which is entitled for 1 million square feet.
Companies are paying up for the space, too, in a tight real estate market. The first two tenants in the 250,000-square-foot first phase of The Cove — newly public cancer drug developer CytomX Therapeutics Inc. (NASDAQ: CTMX) and Denali Therapeutics Inc., which scored the largest startup round of venture capital for its focus on neurodegenerative diseases — will pay in the mid- to upper-$50 range after they move in the third quarter.
And for the next couple of years, The Cove and Phase 3 Real Estate Partners Inc., which last year bought the Centennial Towers project on the west side of Highway 101 and rebranded it Genesis-South San Francisco, are the main new, multiple-tenant life sciences spaces on the market.
As a result, said Rick Friday, a senior vice president at real estate brokerage CBRE Inc., the biotech real estate market remains tight. The brokerage is tracking about 1.6 million square feet of demand along the Peninsula, said Chris Jacobs, executive vice president of life sciences at CBRE.
“Ten years ago, a lot of companies could think two, three years in advance,” Friday said. “Now when companies decide they need space, they need it in 12 months or less.”
One of the first two buildings in The Cove remains unleased; the two-building second phase includes retail and a four-story parking garage — another sign of the times as developments have become denser with less surface parking.
Instead of parking, when the entire project is built out, The Cove will include a 5.5-acre open area with bocce ball, basketball and volleyball courts and a picnic area, said Scott Bohn, an HCP vice president.
The demand for The Cove’s first phase gave HCP confidence to start the second stage on time. What’s more, it helped them shape the footplates of the second phase, making them slightly smaller and more flexible for a wider variety of potential tenants, Jacobs said.
“The amenities center has really resonated as well,” Jacobs said. “Everybody we sit and talk to says, ‘It’s about time.'”
Link to article: Cove-Amenity Space