We do not see this real estate activity as a one-off solely tied to the pandemic. There is increasing talk within the industry of the need to “on-shore” pharmaceutical supply chains and bring back domestic drug manufacturing capabilities. As this sentiment grows—which we’re confident it will—the implications for Life Science and bio-manufacturing real estate are likely to be profound, and long lasting.
As the broad economy embraces the “hybrid work” and remote work models, Life Science and biotech companies are far less able to conduct vital research and development from home. Scientists need to collaborate, and they need labs.
It follows that the concentration of Life Science investment volume as a percentage of total office volume reached a record high of 16.4% in 2020, as nearly $15 billion of fundraising activity and over $10 billion of closed real estate deals was recorded:
According to Newmark Research, “the lack of built and available lab inventory in a handful of top life science submarkets, such is Cambridge and South San Francisco, has accelerated the growth in pricing and rental rates in those markets, and Boston/Cambridge remains the tightest and most institutional life science market in the country, with high-water mark pricing reaching nearly $1,900 PSF. The San Francisco Bay Area and Seattle recorded high-water mark pricing in excess of $1,000 PSF.”
It is also true that the Life Science ecosystem has never received the current levels of funding. Capital is flowing to key markets and shows little sign of abating. Healthcare venture capital funding in the U.S. reached $29.9 billion in 2020, representing a 36.1% increase year-over-year and a cycle high. Globally, life science, drug and medical device companies have raised over $103 million year to date in 2021 – up from $63 billion in 2019. An estimated $87 billion is being directed for life science real estate globally.
For the Boston/Cambridge market, where Capital Hall Partners is positioned, fund flows have followed a similar pattern to what we’re seeing across the country:
How Medical Breakthroughs are Made: Genome Sequencing
About 20 years ago, scientists had yet to map the complete human genome sequence, but they were desperate to succeed. The Human Genome Project (HGP) was their key.
The success of the HGP has transformed researchers’ ability to easily and quickly read the complete genetic codes of viruses, as well as genetic blueprints for humans, animals, plants, and microbes. Innovation has moved very quickly—gene sequencing that only 20 years ago cost $100,000 per human genome now cost about $600 per genome. And these costs are still falling.
In the public health realm, the efficiency and reduced cost of gene sequencing gave way to a big breakthrough in 2014, with the Ebola virus. Scientists from M.I.T. and Harvard were able to sequence samples of Ebola and use contrasting genetic codes to identify hidden pathways of transmission. This information would ultimately be deployed to slow the spread of the virus, in what is known as genetic surveillance.
More recently, Crispr—which is a technology driven by sequencing—has been giving scientists the potential to fix disease-causing mutations in our genomes. The possibility of analyzing a small amount of blood for DNA markers can open the door for cancer diagnoses, for instance, before symptoms ever appear. We are perhaps only years away from being able to identify a problematic mutation 20+ years in advance of it becoming a serious health issue. According to Harvard geneticist George Church, “one day sensors may be able to ‘sip the air’ so that a genomic app on our phone can tell us if a pathogen is lurking in the room.”
History-making breakthroughs in Covid-19 vaccine development also would not have been possible without gene sequencing. When the virus’s gene sequence was initially mapped and posted publicly, Moderna used the sequence to launch work on the first ever mRNA vaccine. Pharmaceutical companies normally need virus samples to begin tackling the complex problem of developing a vaccine. With gene sequencing, Moderna simply treated the disease as a software problem.
The ability to treat rare diseases is the current and future frontier of gene sequencing. Rapid advancements in computing power and data analytics have drastically reduced the cost of developing treatments, and by 2025 the FDA estimates that 10 to 20 new cell and gene therapy products will arrive each year. In Massachusetts specifically, the drug development pipeline covers a wide array of therapeutic areas:
