In this piece, Colliers International experts Mary Beth Kuzmanovich, Michael Brown and Christine M. O’Connor examine this evolving alliance from a healthcare and life sciences commercial real estate perspective.
The alliance between healthcare and life sciences is strong and steady—and with the increasing frequency of biomedical innovations, the partnership continues to grow. The relationship between these two sectors is unique, as it necessitates a collaboration that can facilitate numerous aspects of the development, commercialization and distribution of therapy products. Ongoing innovation in medicines, devices, software and hardware will continue to drive the need for real estate investors and developers, as well as brokerage firms, to adapt to the ever-changing space requirements for sophisticated research and Current Good Manufacturing Practice (cGMP) facilities.
At the recent Urban Land Institute (ULI) Fall Meeting in Boston, significant discussion ensued on how the science behind gene therapy is single-handedly shaping the real estate needs of associated biomedical companies and other corporations advancing these technologies from their inception.
This base-level involvement means more commercial real estate professionals need to be educated about the relationship between healthcare and life sciences, and how its unique collaboration demands market qualifications that impact virtually every other sector of the economy—and therefore, commercial real estate.
What Does This Alliance Look Like?
The working relationship between healthcare companies and universities to gain patents and move drugs off the shelves and into the marketplace isn’t a new concept. For years, large hospital groups have invested in, or even launched, biotech companies to generate profit from the commercialization of their physician-sponsored research.
And while the alliance between healthcare and life sciences working together to produce research and drugs is not new, what is new are the gene therapy companies being created within a structure that allows the healthcare system or academic institution to become a more active participant in the development and commercialization of the therapeutic product. In addition to the small molecule RNA drug candidates that show great progress in the FDA clinic, gene therapy products are rapidly becoming the most prolific candidates for a variety of therapies and rare diseases.
However, these exciting advances can encounter delays if hospitals or research institutions don’t have the real estate facility specifications necessary to advance their work through the clinic. Consider the gene therapy work being done at The Children’s Hospital of Philadelphia (CHOP). Their lead physician spoke to ULI’s Fall Conference attendees about the difficulties that arose because of the limited space that housed their research and treatment centers. Their challenges were tied to real estate because the hospital only had the physical capacity to treat four patients, even though they had the funding to treat 10 people. “They ran out of space and money long before they could ever make the therapy commercial,” comments Kuzmanovich.
Because of the special purpose-built nature of these cGMP facilities, there are very few landlords prepared to take on the occupancy risks that accompany pre-revenue research tenants. Michael Brown, Christine O’Connor and Joseph Fetterman, three of the life science experts at Colliers, emphasize that additional manufacturing capacity in key markets may require expanding agreements between private developers and institutional research and healthcare systems to meet the demand.
Positioning the technology transfer within the alliance to create new revenue streams for healthcare systems and universities means that the three component pieces of the partnership—the basic research entity, the institution or healthcare system and the developer—can all benefit from the alliance. A biotech company that has a partnered research or teaching hospital as well as a life-science-friendly developer will not only have access to space with appropriate infrastructure improvements and highly-qualified researchers, but also to the hospital’s patients who are willing to participate in clinical trials.
Each member of this alliance brings unique resources and goals, and when they come together, they’re able to accomplish what they can’t do on their own in a quick, efficient and cost-effective manner.
Understanding the CRE Requirements of this Alliance
The lessons learned along the way for appropriate site selection are numerous and ever-evolving. A current site selection project for a UCAR-T gene therapy provider that Brown, O’Connor and Fetterman are working with began as a six-state search that narrowed to two East Coast regions and has produced an extensive list of key drivers to satisfy all of the prospective tenant’s requirements. The characteristics of these two areas model the ideal location scenario for this particular gene therapy provider and must include availability of the following:
- A deep scientific and technical labor pool with multiple like kind manufacturing facilities within close proximity
- Access to an international airport with regularly scheduled flights to the cities where the basic research was founded and currently located
- A life science-friendly business environment with appropriate incentives to attract other life science companies, innovators and service providers
- Access to healthcare partners and academic institutions for continuing innovation
- Access to public transportation
- Life science-friendly developers
- Near a central community that provides regular programming for collaboration and innovation
- A good source of vacant facilities that are either high ceiling flex or one-story office buildings and are adaptable to the infrastructure and cGMP sterile clean room conditions
- Appropriate zoning for commercial scale manufacturing. If there are no existing buildings that fall under the manufacturing code, then a local governing body that is open to the concept of an FDA regulated manufacturing facility
Expertise, time and money are needed to help find the right spaces to facilitate this type of research and practice. Further, there are limited markets that can support this type of partnership, and these partnerships are likely to have a significant positive impact on many other aspects of a local economy. One has only to look at the reasons the big research hubs around the country continue to grow and evolve. Kuzmanovich states, “Every tech company you can think of is now concentrating in and around the Boston area because the basic research coming out of that market is applicable in the life sciences space and offers ongoing opportunities to create even more innovation and collaboration.” Boston has led the country in National Institutes of Health (NIH) funding for 23 consecutive years, receiving $1.97 billion in funding among 3,710 NIH awards for 2018.
What has shifted the real estate needs of the alliance between healthcare and life sciences to some markets is the laboratory application. The spaces must be very proximate. Every aspect of the process has to happen in a tight geographical location because of the complicated and delicate nature of the gene therapies that are being developed and applied. For manufacturing to be close to the basic research is not just a luxury but a requirement because of the complexity of the “scale up” process.
As gene therapy and other personalized medicine becomes more accessible and easily distributed, the market needs will again shift. But until then, the eyes of healthcare and life sciences specialists will be turned to large industry centers to see how asset owners and developers adapt to fit the real estate needs at the center of this innovation.
About the Experts
Colliers’ National Director of Healthcare Services, Mary Beth Kuzmanovich leads the firm’s Healthcare service line and is a career healthcare services real estate professional, having served in both healthcare systems and commercial real estate roles. Mary Beth maintains numerous industry leadership roles, most notably with ULI, the Life Sciences Council and BOMA for the Medical Office Buildings Conference.
Colliers’ Senior Vice President Michael Brown is a dedicated Life Sciences professional with expertise in manufacturing and noteworthy laboratory R&D facilities and controlled environments experience.
Colliers Senior Vice President Christine M. O’Connor is a dedicated Healthcare Services and Life Sciences Practice Group member. As a specialist in this field, she serves clients on a local, regional and global scale for the life of their real estate and portfolio investments.