coDesign recently had the pleasure of speaking with Mike Moran, Vice Chairman at CBRE. With over 30 years of experience in the corporate real estate world, Mike has seen it all! He has worked in both tenant and landlord representation, has assisted big-name tech companies like Nintendo, and now spends the majority of his time supporting landlords operating in the life science and innovation space. In conversation, we covered a wide range of topics regarding the ever-evolving commercial real estate industry, but much of our discussion centered around life science, and how this sector (and its real estate) has fared during the pandemic.
Many companies have downsized their real estate footprint over the last couple of years, but not all of them. In the life science industry, “There has been more demand both vertically and horizontally, meaning the companies that were already [in the Bay Area] needed more space, and a lot more companies were also coming into the marketplace,” shared Mike. Over the last 10 years, the life science industry has matured dramatically, and it’s now a big contributor to what Mike refers to as “45 of the greatest miles of real estate in the world from San Francisco to Silicon Valley.”
While the life science industry is growing, landlords that cater to this space don’t have the luxury of complacency. Mike shared with our team that to attract and retain quality tenants, these building owners must pay great attention to building systems, layouts, and amenities. About building systems, he shared, “[Building owners should understand] the chemicals and hazardous material management, from deliveries, to utility usage, to storage, to disposal, and [should preplan] that in.” Mike believes that if landlords build the necessary systems into their spaces, that their tenancies will become more desirable, and that doing so will also limit the need for future build-out adjustments, thereby saving them money in the long run.
In conversation, we also discussed how important it is for landlords to consider building layout, and Mike stressed the need for them to think about “Flow, functionality, the shell and core, where the core sits, the size of the core, and how you can go from truck, to freight elevator, to space, to lab…the entire path of travel.” Designing a workplace that looks great is important, but it’s not enough to make a life science space desirable. Why? Because for scientists, functionality and safety come first!
Our conversation also revealed that life science companies, similarly to tech ones, seek out amenity-rich spaces, as they play a key role in the attraction and retention of talent. What does this mean for landlords then? It means that they must include these amenities in their life science tenancies if they hope to generate interest. According to Mike, MAMAA (formerly FAANG) companies typically allocate 10-20% of their space to amenities including gyms, cafes, and conference centers, and life science companies, closer to 5%. In explaining the difference in these space ratios, Mike shared, “Life science clients won’t pay for over amenitized space, but they won’t go to a space that’s under amenitized either.”
Our discussion with Mike left us with one important takeaway: The life science industry is thriving in the Bay Area, but still, landlords must be active in their efforts to cater to this client group. If building owners hope to be successful, they must take the time to understand the needs of their desired, life science tenants and develop quality spaces that speak to them.