JLL’s Pete Briskman in the Montgomery County Life Sciences Market – Commercial Observer

With the highest concentration of doctorates in the country – plus proximity to government, leading medical universities, and numerous biomedical companies – the life sciences industry in Montgomery County is poised to pick up steam in the years. future.

Building owners are also increasingly interested in convert assets into laboratory, research and biotechnology space throughout the DC area.

Pete Briskman, Executive Managing Director of JLL and Co-Head of the Mid-Atlantic Life Sciences Practice, told Commercial Observer why the field is so popular and his belief that demand will continue in the months and months. coming years.

Business Observer: How would you describe Montgomery County’s life science activities as we are here in the first week of August?

Pete Briskman: Life Sciences in Montgomery County are Growing in Demand. The market fundamentals are in place for continued growth. Venture capital is pouring into the area and attracting companies from outside of Maryland. Fueled by IPOs, funding for public offerings has already surpassed the figures of the previous year. [National Institutes of Health] funding tends to be higher than 2020, which was already a banner year. M&A activity is increasing and a record development boom is underway. These fundamentals are validated by new institutional investors entering the market. The lab market is approaching a record vacancy rate of less than 3.5%, with rental rates rising rapidly.

How does this region compare to the rest of the country?

Maryland is now considered one of the top four clusters nationwide by [Genetic Engineering & Biotechnology News’] annual ranking of the 10 main life sciences centers in the country. There are a few contributing factors, including a high concentration of educated workers; targeted manufacturing tax credits; increased private investment in local businesses; availability of R&D and manufacturing space at affordable prices; federal agencies, such as the FDA and the NIH; and a group of similar businesses that are thriving.

Montgomery County also benefited from Operation Warp Speed ​​and [Biomedical Advanced Research and Development Authority] countermeasures, which have provided Maryland businesses with more than $ 6 billion in financing over the past 18 months. Low vacancy rates have led Montgomery County rents to rise nearly 50% over the past three years, but rents are still about half of those in Boston, New York and San Francisco. Maryland is poised for continued growth, particularly in areas such as cell therapy, vaccine development, biodefense, medical devices, quantum computing, and AI.

What Makes Montgomery County Ripe for Business? What do businesses like about the region?

In my experience, there are three critical factors when bihealth organizations choose a location. The first is access to an educated workforce and talent. Montgomery County has the highest concentration of doctoral students in the country. Equally important, the workforce is plentiful. Another key factor when considering a location is access to available R&D and manufacturing space. Montgomery County has over 10 million square feet of laboratory supply comprising both R&D and manufacturing space to house growing businesses and meet their expansion demand. Finally, access to capital is important for growing businesses when choosing a location. [In the county], 16 companies have raised over $ 10 million in venture capital to date, and venture capital has doubled from 2020 and increased more than 700% since 2016.

Are there specific cities or clusters that are more popular? What are the most popular places?

Historically, bihealth companies have settled along the I-270 corridor with a strong concentration centered around the Shady Grove Life Sciences campus. Over the past couple of years, we’ve seen growth shift north as local businesses have moved from pre-marketing to manufacturing. This created a demand for different types of products, not only for R&D, but also for manufacturing buildings, of which there are more in Frederick. In addition, with demand for space increasing rapidly, he opened up the Germantown market, due to supply constraints in Rockville and Gaithersburg. As the local market continues to mature, I predict we will see more growth in urban submarkets, such as Bethesda and North Bethesda, with more trophies and multi-tiered products on the market.

Where else in the Washington, DC / Baltimore area is popular for the life sciences?

The Howard County, Baltimore County and City of Baltimore submarkets are on the rise, driven by organic growth and an influx of capital, as well as access to talent and synergies with universities playing an important role. Port Covington is developing a world-class life sciences campus and is set to change the face of Baltimore. Basically, they are building a city within a city.

Tell me about some of your recent notable offerings in this space.

I am very grateful to be very busy working with some of the most important companies in the region, which are playing a vital role in the fight against [the] coronavirus. We have recently supported groups like Novavax and Ellume, advising them on their real estate strategies, including site selection, negotiation of their campus headquarters, extensions, construction of their technical facilities and purchase of incentives. municipal.

How has the pandemic impacted the sector?

Operation Warp Speed ​​and the BARDA medical countermeasures portfolio have provided Maryland-based companies with more than $ 6 billion in funding over the past 18 months. Four of the top 10 recipients of BARDA funds reside in Maryland.

What type of development is being done to meet the demand?

Historically, Montgomery County has not developed or delivered any real estate related to life sciences on a speculative basis. Things change. The region is now experiencing a record construction boom underway. Due to the increase in demand, things are changing rapidly as landlords step up their efforts to meet the specific demand of different types of tenants, ranging from start-ups to more mature pre-market and beyond. .

For example, the current supply of laboratories is around 10 million square feet. Over the past two years, 246,000 square feet of new offering has been delivered. In addition, 364,000 square feet of conversion space (office to lab) was delivered to market. In addition, 853,000 square feet of laboratory space is currently under construction and will be delivered to market over the next 12 months. There is still 662,000 square feet of office conversion space under construction. If all of that doesn’t meet the first wave of demand, there is still 1.8 million square feet of land approved ready to begin construction to accommodate the next wave. This could represent a 34% increase in lab / manufacturing space.

How do you project the future of the sector?

The bihealth sector is expected to continue to thrive as the region evolves from early stage to commercialization. I predict that we will continue to see a higher speed of venture capital investments, M&A activity, FDA approvals, NIH funding, and public offerings. These fundamentals will lead to tenant growth and the need for more space. This will result in more speculative construction, with outside institutional investment in our local economy, and businesses outside of the Maryland region continuing to relocate to Montgomery County and beyond with a higher concentration moving to more areas. urban.

We should continue to see the delivery of different types of products to meet tenant demand. Specifically, owners will become more adept at delivering turnkey lab / office suites for start-ups entering Phase 1 and Phase 2 clinical trials. We will also see delivery of more Manufacturing buildings for more mature tenants who require increased operational control of their facilities for pilot plant and large-scale production. The buildings will house a combination of manufacturing, environment-controlled clean rooms, mezzanine space to house essential infrastructure and equipment, higher ceiling heights for specialized equipment, higher ground loads, more electrical power and dock doors for daily product delivery.

It will be important for state and local jurisdictions to continue to be forward thinking and develop policies that align with our growing businesses and create meaningful incentives to attract and retain businesses – both start-ups. and start-ups.

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