April 6, 2022

Blackstone Picks Boulder to Expand Its Life Science Portfolio

BioMed Realty, a unit of Blackstone, is acquiring a sprawling life-sciences and office campus in Boulder, Colo.—the latest sign that the city at the base of the Rocky Mountains is emerging as a hub for the biotechnology and pharmaceutical industries.

BioMed Realty acquired Flatiron Park, a one-million-square-foot, 22-building life science and office campus that is currently 90% leased to a mix of industry-leading technology and life science firms.

The campus traded for $600 million, according to the Wall Street Journal, and BioMed Realty has plans to invest another $200 million to in part convert some of the offices to life science space.

Always a stable real estate sector, life science has exploded since the start of the pandemic, drawing investors new to the space.

“Now that the cap rates on multifamily and industrial have fallen below many investors’ required yield, alternative property types such as life science move to the front burner,” Joseph Rubin, consultant, Eisner Advisory Group, tells GlobeSt.com.

An Opportunity to Expand

Flatiron Park provides BioMed with the opportunity to expand its portfolio beyond its existing core markets and invest in emerging markets in this sector. “Boulder has always been a market to watch, driven by highly educated talent, robust capital flow, an existing base of life science and tech pioneers and great quality of life,” Mike Ruhl, vice president of leasing at BioMed Realty, said in prepared remarks.

Indeed, the deal is a testament not only to the burgeoning life science market but also the growing number of alternative cities where such investments are being made—such as Philadelphia, Atlanta and now Boulder.

The seller was a joint venture of Crescent Real Estate, Goldman Sachs Asset Management’s Real Estate Business and Lionstone Investments. JLL Capital Markets represented the seller in this transaction.

BioMed Realty owns and operates more than 13.7 million square feet of high-quality lab, technology and office real estate across seven leading markets in the United States and the United Kingdom.

Coordinated Public-Private Research Accelerating Growth

Joe Euphrat, managing principal, GreenRock, tells GlobeSt.com that continued growth in new products and technology, coupled with continued capital flow, has allowed for the life science industry growth of the last decade.

“The thrust of coordinated research between public and private institutions during the pandemic in the last two years has only accelerated this growth in products and technologies, including mRNA technology,” Euphrat said.

“More than $140 billion of combined capital from private equity and public National Institutes of Health (NIH) sources has poured into life sciences in the last two years. From a real estate perspective, there is continued significant strength in life sciences real estate.

“Healthcare, including life sciences, does not take a break whether the economy is hot or cold. Healthcare is always needed and life sciences, and the discoveries therein, serve as a key part of the healthcare delivery foundation.

Atlanta’s Net Rents Half of Boston’s

Kyle Smith, Vice President of Life Sciences at Stream Realty Partners’ Atlanta office, tells GlobeSt that many cities such as Denver and Atlanta offer access to talent, a high quality of life, and a pro-business environment at significant savings relative to primary life science markets in the Northeast and on the West Coast.

“For example, stabilized net rents for Atlanta are nearly half those of Boston, and the discount is even steeper when you consider a tenant’s total occupancy costs, which include real estate taxes and other operating expenses,” Smith said.

“This is a huge value proposition for companies and investors. However, like established life science markets around the US, Atlanta’s existing supply of wet lab space is 100% occupied, with tenants waiting on sidelines for space to be delivered. Emerging markets are witnessing conversions of all kinds to meet the demand of life science tenants who are relatively price inelastic.”

A Burgeoning Subset of the Larger Healthcare Industry

Jeff Cox, Northmarq Managing Partner, tells GlobeSt.com that the life science sector has been a quiet but powerful force during the past two decades.

“It is a burgeoning subset of the larger healthcare industry, and many of the investors we work with appear eager to get their foot in the door as life science companies play increasingly critical roles in the economy and our everyday lives,” Cox said.

“The Cambridge submarket of Boston is home to the largest national concentration of life science real estate, but with a scarcity of space and soaring rents, landlords in other markets—especially in the Northeast—are looking for opportunities to attract owners and occupiers in the sector.”

Cox said that one of the current trends in the space involves the conversion of traditional office properties to bio and lab facilities, and metro areas including Philadelphia, Washington, D.C., Raleigh-Durham and San Francisco, among others, are seeing their inventories of this product type grow.

“In the coming years, we expect to see demand for life science real estate increase from tenants and investors as well, as genomics, biotechnology, pharmaceutical companies and others continue to expand,” Cox said.

Florida Another Market to Watch

For investors looking to break into the booming life sciences asset class, location is king—at least for now.

JP Bacariza with Ryan Companies, tells GlobeSt.com to watch Florida because it has all the ingredients that are needed to become the next big player in life sciences.

“It’s been the big winner from the population boom and domestic migration patterns that have only accelerated since the pandemic, and we’re already seeing major companies begin to follow the crowd by planning expansions in markets like Tampa and Orlando,” Bacariza said.

“Major research universities such as the University of Florida, UCF, Florida Polytechnic University, and USF have invested heavily in life sciences and are producing the caliber of top-tier talent that companies want to be in close proximity to as they look to leverage the workforce of the future.”

One example of the life sciences boom in Florida is a project Ryan Companies is developing, designing, and building for International Flavors & Fragrances at Florida Polytechnic University in Lakeland.

When considering where to build, Bacariza said three key factors any company will look for are a strong infrastructure network to support specialized systems, flexibility to adapt the space to specific R&D needs and close proximity to multiple colleges and universities that emphasize life sciences.

“Florida has it all and is well-positioned to capitalize on the next wave of development,” Bacariza said.