Life science companies see low vacancy in lab space, need to prioritize talent

The Frederick News Post | Brandi Bottalico

Frederick (October 14, 2016) — The suburban Maryland and metropolitan Washington area is the country’s sixth best life science cluster, a new report says.

The report, by Jones Lang LaSalle, an investment management firm that offers specialized real estate services, was based on employment, funding, market occupancy rate, rentable lab supply and other factors.

The Maryland-D.C. area had a weighted score of 53.2. The Greater Boston cluster was on top with 87.5, followed by the San Francisco Bay Area at 75.2 and the Raleigh-Durham, North Carolina, cluster with 60.7.

According to the report, the Maryland-D.C. area is unique with intellectual resources such as the federal government and large educational institutions. Access to universities and concentration of government research facilities contributes to research and development opportunities in the region, the report states.

There are 39,145 life science employees in the Maryland-D.C. cluster, with 67 percent in research and development, which is listed as using laboratories. Other employment categories for the area are:

  • 13 percent in medical and diagnostic laboratories.
  • 9 percent in pharma and medicine manufacturing.
  • 7 percent in electromedical instrument manufacturing.
  • 2 percent in testing laboratories.

About 2 percent in medical equipment and supplies manufacturing.
Craig Reed, of Inspirion Biosciences, said Frederick County is great for his company because it’s near the federal government and Dulles International Airport. His company does international work, primarily with the Department of Defense.

Inspirion conducts biorisk management program reviews, biosafety risk assessments, laboratory validations and compliance audits. It provides operations and management guidance for clients with high (Biosafety Level 3) or maximum (BSL-4) containment laboratories.

Reed said his six employees are among only 400 biological safety professionals in the world credentialed by the American Biological Safety Association. The pool from which he can hire is even smaller because most people are unavailable or not interested in traveling internationally for the work his company does.

That’s why employees are so valuable to the company, he said. He provides a 401(k) plan with a percentage match and immediate 100 percent vesting. Employees travel and work from their homes, wherever they are in the U.S.

“They’re an absolutely essential component,” he said. “Without them, none of this would work.”

The report found that prioritizing talent is critical to life sciences companies’ growth and that the demand for highly skilled labor has led to sustained wage growth for life sciences employees. Annual wages have grown 7.6 percent since 2011, it stated; that trend will continue due to the small labor pool and need for candidates with advanced educational degrees.

The Maryland-D.C. cluster was at the top of the list for pay, with the average science, technology, engineering and math (STEM) salary at $100,787. Salaries, which averaged $80,000 in the U.S. in 2015, increase the already high cost of doing business for bioscience companies.

The area is among the largest clusters by rentable lab space, with 9.5 million square feet in Maryland, the report found.

Low vacancy for lab space is a trend in every market, but companies find new real estate solutions, such as building new space and converting office space to fit their needs. In Frederick County, companies typically lease flex or industrial space, in which lab space can be constructed.

“There’s a low availability of already built-out lab space,” said Matt Holbrook, a managing partner for St. John Properties, which rents flex space to several bioscience companies in Frederick. “However, I think there’s a lot of space that can become lab spaces. I think that’s the distinction. There’s a healthy supply of space that can become bioscience.”

Sandy Wagerman, a Frederick County Office of Economic Development business development analyst, said bioscience space has become difficult to find in Frederick County.

Frederick County had an average of more than 1 million square feet of flex space available for lease in the last five years, but now has 768,517 square feet, according to a Costar analysis through the Frederick County Office of Economic Development.

The county had an average of 1.7 million square feet of industrial space available for lease the last five years, and now has 1.3 million square feet.

While the industry growth has decreased vacant space in the market, the report indexed Frederick as “emerging” and made note of the city of Frederick’s loan package that will continue work on MedImmune’s planned expansion in Frederick. The biotechnology company can expand on Solarex Court and add 300 jobs with the expansion of its manufacturing plant.

In the city of Frederick, there is 6.4 million square feet of flex and industrial space across 215 buildings, according to a Costar report run through the city’s Office of Economic Development. Of that, 493,015 square feet is available and would support the construction of lab space for a bioscience company.

Frederick is home to the U.S. Army Medical Research Institute of Infectious Diseases building, a six-story laboratory facility expected to be fully occupied in 2017. It will contain the largest block of BSL-3 and BSL-4 laboratory suites in the world, according to the report.

Holbrook said St. John Properties has seen a slow, steady increase in bioscience companies renting flex spaces.

In Frederick County, the company has more than 1 million square feet of flex space and more than half a million coming soon, Holbrook said. It takes a certain type of landlord for life science companies that need “modern office space to full-scale wet labs and everything in between,” he said.

“They traditionally need a lot of money for tenant improvements, and when they’re more in the startup phase, they don’t have long track records of profitability, so there’s a higher risk with them,” Holbrook said. “We love when we can help bio companies find a new home in our portfolio.”