Editor’s Note: This WRAL TechWire’s Commercial Real Estate special report “Follow the Numbers” is supported by commercial real estate firm CBRE Raleigh.
RALEIGH – While the competitive posture of the Research Triangle’s life sciences industry was prominent before the pandemic, the region’s abundant talent has made it a leading national destination for companies in gene therapeutics, clinical discovery and biomanufacturing in the early 2020s. Private property investors and development firms are also taking note.
“We are considered one of the top life sciences markets in the U.S.,” says Elizabeth Gates, senior research analyst at CBRE | Raleigh. Though the region lacks the population base of Boston, San Francisco or other major biotech hubs, the Triangle is competitive in drawing life sciences jobs, firms and research funds. Raleigh-Durham drew $5.5 billion in funding from the National Institutes of Health (NIH) from 2020 to 2022, for example, about 82 percent of North Carolina’s total NIH draw in those years. Private venture funding into Triangle life sciences firms spiked to more than $350 million in 2021 before falling back to a more typical $100 million a year later. “We don’t necessarily punch in the same weight class as Boston or California, but we’re up there,” Gates says.
The region’s affordability is a key hook for life sciences professionals. “Salaries in the industry don’t vary that greatly from market to market. Since our cost of living is significantly lower, our market stands out,” explains Gates. “It makes us a hotbed for talent.”
Part three in this series
Supply vs. demand
The region’s emergence as a global life sciences player has, in turn, impacted supply and demand for biotech real estate here. CBRE | Raleigh, a joint venture by Dallas-based CBRE and local principals, tracks the industry’s space in two categories: R&D labs and biomanufacturing facilities. As of Q1 2023, the region’s inventory of lab space totaled 9 million square-feet, with an additional 680,000 square-feet under construction. Investor-owned lab space in Raleigh-Durham, in fact, has doubled since 2016, CBRE | Raleigh’s data show. The region’s biomanufacturing space has long been dominated by large owner occupants, but the supply of investor-owned space has grown rapidly in recent years to 1.4 million square feet with another 1.3 million square-feet currently under construction.
Regulatory compliance and management needs account for the difference between the two segments, explains Lee Clyburn, executive vice president at CBRE | Raleigh. “R&D lab space can be smaller with lower ceilings. It doesn’t have the same security needs, and it can be shared,” says Clyburn, a 22-year veteran of the Triangle’s commercial real estate industry who has represented both landlords and tenants in deals. “When you’re dealing with manufacturing, there’s a larger footprint and nothing is shared. You take the entirety of the building,” he says. Regulatory protocols govern security, power, cooling systems, water management and other operations. Biomanufacturing facilities typically offer comprehensive on-site amenities for employees such as food service, training space and break areas. “You’re creating your own work environment,” Clyburn says.
Part two in this series
Much of the region’s R&D lab space has been converted from other uses. Some previously served as flex-space, the low-rise properties that can be configured as assembly shops, warehouses, offices or customer showrooms. A 447,000-sq.-ft campus near RTP known as the Triangle Business Center once housed flex-space. Recently sold by TPG Real Estate to a partnership between Goldman Sachs and Lincoln Harris, the property is now home to various medical technology and nutritional science firms. Clyburn says from 50 to 60 such buildings in the region have been converted for life sciences R&D tenants in recent years, most of them near RDU International Airport.
Some RTP-area life sciences properties have been re-imagined after one-time local industries like telecommunications lost their dominance. In 2019, a partnership among Trinity Capital Advisors, Starwood Capital Group and Vanderbilt Partners, respected names in life sciences real estate, acquired the 95-acre property that once housed Nortel’s bustling campus. Today, the 675,000-sq.-ft. property known as Park Point boasts sought-after amenities like athletic fields, walking trails, a fitness center and conference facilities. CBRE Investment Management acquired the property in September 2022. Grail Inc., a California-based developer of cancer detection diagnostics, and Charles River Laboratories, a contract clinical trials provider headquartered in Massachusetts, are among the tenants at Park Point, which is now 88 percent leased.
“That’s a perfect example of the type of re-purposing that goes on in this region,” Clyburn says. “Trinity sensed a burgeoning need in the marketplace for large chunks of life sciences space.”
Part one in this series
Prospects for growth
Economic development professionals also are working to build on the region’s success with life sciences firms, in some instances partnering with private developers to create speculative space tailored around the industry’s needs. Chatham County leaders, for example, are working with Beacon Partners and the Town of Apex to build Apex Gateway. Nestled at the junction of U.S. Highway 64 and N.C. Highway 751, the property is convenient to RDU Airport, UNC Chapel Hill and many other assets. Life science R&D operations are included in Charlotte-based Beacon’s vision for the million-square-foot mixed-use complex.
Biotech firms are among the clients exploring Triangle Innovation Point West, according to C. Michael Smith, president of the Chatham Economic Development Corporation. The 300-acre property is adjacent to the site that was selected by Vietnamese EV manufacturer VinFast in March 2022. “We continue to have a lot of activity at TIP West, and some of that has been in life sciences,” Smith says. Formerly home to a textile plant, the rail-served Brownfield site sits just 12 minutes from I-540 and has significant power capacity. “Nowadays, that’s another major plus,” Smith says. He anticipates the property also will benefit from its proximity to the new E. Eugene Moore Manufacturing and Biotech Solutions Center at Central Carolina Community College’s nearby campus in Sanford. The training site will support the growth of major biotech names like Pfizer, Abzena and Astellas when it enrolls its first students in Fall 2024. “All of that makes this corner of the Triangle a great place for life sciences companies,” Smith says.
Last month, BioRealty Inc. unveiled plans to spend at least $27 million developing a 67-acre biosciences park in the Johnston County town of Clayton. The San Clemente, Cal.-based developer of life science and technology real estate will begin with the construction of a 100,000-sq.-ft. shell building at the intersection of Little Creek Church and Ranch roads in Clayton. The community has been a longtime outpost for Grifols, the Spanish manufacturer of synthetic plasma, and Novo Nordisk, the Denmark-based leader in insulin and diabetes therapeutics.
“This project takes our life sciences sector to the next level,” says Clayton Mayor Jody McLeod. “We’re eager to partner with BioRealty and Johnston County in creating a world-class bio-manufacturing space that will complement our community’s exceptional location, outstanding talent assets, modern infrastructure and compelling quality of life.”
Clayton’s town council joined the Johnston County Board of Commissioners in supporting the project with financial incentives that include performance-based investment grants and a two-year leasing guarantee. BioRealty will design, finance, build, operate and market the campus. “We’re not only excited about the project but we’re really excited about attracting what we think is very likely going to be biomanufacturing users to this park,” says Stan Wendzel, BioRealty’s founder and managing director. “We could have probably done this in a lot of places. But for us, the real driving factor behind this has been the lease program that Johnston County has in place, as well as the economic development investment grants,” Wendzel says.