How Seattle Seeded A Life Sciences Growth

A little over a decade ago, Seattle’s South Lake Union neighborhood was a flat industrial area with an ocean of parking lots. Fast forward to today and the network of high-rise office buildings nicknamed Amazonia underline how the growth of Amazon and its colleague, tech giant Microsoft, has changed the city’s real estate market.

Another booming tech industry, the life sciences, is poised to accelerate this growth.

Peter Holland Photography

The upcoming development of Dexter Yard Life Sciences underscores the growth of the Seattle industry.

Check out BioMed Realty Trust’s Dexter Yards development, a 500,000 SF project with 150,000 SF potential lab space opening in the neighborhood later this year. It’s another high-tech place to work in South Lake Union, but what potentially makes it so valuable to renters are its neighbors.

A small portion of the neighborhood bordered by Roy and Mercer Streets is home to the Bill & Melinda Gates Foundation, the Allen Institute for Brain Science, the University of Washington and the Fred Hutchinson Cancer Research Center, as well as a collection of offices for big tech companies like google.

A map of this neighborhood could create a flowchart of the innovation, investment, and commercialization that helped the Seattle life sciences market thrive and one of the fastest growing life science investment destinations as ranked by CBRE and JLL has become in the USA.

More projects in South Lake Union will go online over the next few years: Boren Lofts, a USD 119 million acquisition by Oxford Properties, will transform a former office into its own laboratory in the coveted Denny Triangle. Martin Selig Real Estate’s 400 Westlake is slated to open next year, and national life sciences leader Alexandria Real Estate Equities is building 701 Dexter, a 217,000 SF project.

“It’s a much more demanding market than it was 10 years ago when I started here,” said Mike Ruhl, vice president of BioMed Realty. “We will likely have SF 6 million lab space in South Lake Union alone by the end of the year.”

Oxford Properties’ entry was in part driven by its in-house artificial intelligence investment tool, which identified Seattle as a particularly lucrative laboratory space development market, Oxford Chief Operating Officer Dean Hopkins told Bisnow earlier this month.

“When we modeled it, we said, ‘Oh, there’s something very special going on in Seattle, and we can tell exactly where in Seattle and why in Seattle,” said Hopkins.

According to Marcus Yamamoto, Senior Vice President of CBRE, there is fierce competition for both developed laboratory space and laboratory-compatible development sites. New tenants are already considering new capacity to be deployed over the next three years, and the shortage of built-in, ready-to-move-in space has led some owners of existing office buildings to build special suites to meet immediate demand . CBRE is tracking SF 760,000 of under construction lab-grade development in Seattle and an additional SF 2.6 million of planned lab-grade development in the pipeline through 2025.

“Unlike many parts of the country, we still have a lot of cranes in the sky and there are a lot of precise escalations and I don’t see any real slowdown,” said Ruhl. “The greatest growth we’ve seen in the market in the last 10 years has occurred in the past 24 months.”

Seattle’s life sciences industry, which raised $ 2.7 billion in funding last year alone, and its corresponding growth in laboratory and office real estate, have made themselves felt over the past decade for a number of reasons. A group of top research institutions, including the Institute of Systems Biology founded by pioneer researcher Lee Hood, the University of Washington, and the Fred Hutchinson Research Center (which together generate billions of dollars in research annually) are generating new ideas, particularly in the fields of cancer treatments and medical Equipment.

All have been aggressive about commercialization and new business spin-offs. “We do cancer research, but it only helps patients if they become cancer treatments,” said Gary Gillilan, past president and director of the Fred Hutchinson Research Center.

In South Lake Union, life science tenants compete for space with technology companies.

The Gates Foundation and the Allen Center act as magnets, attracting top research talents and generating additional innovations. Washington State has aggressively invested in this sector through numerous funding programs and initiatives such as the Life Science Discovery Fund, which helped startups between 2005 and 2015, and the Andy Hill Cancer Research Endowment Fund, a government program approved in 2019 invest more than USD 5 million annually in local startups over the next few years.

The parallel rise of the tech industry, particularly Microsoft and Amazon, has built a talent base familiar with the types of computational analytics and AI tools that is becoming increasingly important to life science research.

“We seek to be at the center of a convergence of biotechnology, life sciences and digital computing,” said Marc Summers, vice president of public policy for Life Sciences Washington. “With this talent pool who has the computing power to apply this to computational biology, this is one of the big trends in the field today.”

When local firms are taken over by larger firms, they usually stay in place. Many Bisnow respondents cited the example of Juno, which Celgene of New Jersey acquired in 2018 for $ 9 billion. It stayed local and created several startups including Adaptive Biotechnologies and Sana Biotechnology.

It also helps that Seattle offers the west coast technical talent and lifestyle that many workers crave at a more competitive price. The cost of living in Seattle is 37.1% lower than in San Francisco, and the lab rental is also cheaper per Newmark Knight Frank: $ 66-71.40 versus $ 55-65. According to Summers, the attractiveness of talent has been a constant concern for life sciences employers.

“There’s a cost-effectiveness in Seattle,” said Ruhl. “We have a competitive price for the west coast.”

In addition to the two major players in the market, Alexandria Real Estate Equities and BioMed, many other developers, including Trammell Crow, are joining the market as the market grows. Perhaps the biggest signal of future growth is that Alexandria is making a $ 200 million investment earlier this year in the nearby suburb of Bothell, which has already grown into a research and manufacturing center in the region and has over 30 biotech Includes companies like Athira and Just Therapeutics.

Half of the investment sales in the first quarter of 2021 were in Bothell, according to the State Commerce Department. Other suburban areas such as Redmond and Kirkland are also expanding, said Lisa Brown, director of the Washington State Department of Commerce.

It’s a shift some have compared to what propelled the top life science market in the market: Boston. Concentration and competition in the core market of the inner city lead to expansion and new regional clusters.

Other future developments include an upcoming BioMed project on 1.8 acres on Sixth Avenue North and John Street, and Alexandria’s development of the Mercer Megablock campus in South Lake Union.

Brown said she believes higher spending and investment is likely this year, especially given DC’s bipartisan support for more federal research dollars. The trends driving the life sciences, including a new focus on public health, the expansion of manufacturing and an increased focus on new technologies, have placed Seattle and the entire region in an ideal position.

“You might think that there will be a tradeoff between a focus on public health and biotechnology, but they are mutually reinforcing,” she said. “That’s one reason the sector will grow not just in the country, but in Washington State in particular.”