Because it closes in on probably the most invaluable land offers in Seattle historical past, Alexandria Real Estate Equities is betting that biotech can thrive in an actual property market dominated by large tech.
The actual property agency lately reached an agreement with the town of Seattle to purchase the Mercer Mega Block, a trio of improvement websites that lie between Amazon’s campus and the cluster of life sciences establishments round Lake Union. It’s the newest in a protracted line of bets made by Alexandria on Seattle’s life science trade.
“You most likely couldn’t discover a website that was extra importantly positioned — not solely within the coronary heart of the cluster, however actually on the middle of the life science effort in Seattle,” mentioned Joel Marcus, founder and govt chairman of Alexandria.
Alexandria plans to pay $143.5 million for the location, roughly 40 p.c above the unique bid. The provide additionally got here with a one-time $5 million contribution to assist the town tackle homelessness and a pledge to develop reasonably priced housing and a neighborhood middle on the location.
Actual property for all times science corporations, notably biotechs, has traditionally been severely restricted in Seattle. Of all of the life science area within the metropolis, simply 1.5 p.c is vacant, in line with a current report from actual property agency CBRE.
“Area has been tight, and it’s gotten tighter over the past couple of years,” mentioned Chad Robins, CEO of Adaptive Biotechnologies, which lately signed a lease with Alexandria that can triple the scale of its Seattle headquarters.
That would quickly change. Life science actual property in Seattle is about to develop 44 p.c, including round 2.2 million sq. ft — nearly all of which needs to be delivered by 2022, in line with CBRE. Alexandria is chargeable for round 830,000 sq. ft of that.
These figures will develop with the lately introduced Mega Block deal, which Alexandria has proposed might add 740,000 sq. ft of workplace and lab area. The increase in actual property for biotech corporations is among the many causes that CBRE ranked Seattle the No. 1 emerging life science hub earlier this yr.
It’s straightforward to have a look at the Mega Block immediately and see why Alexandria would have an interest. The undertaking is a stone’s throw away from the Google Cloud campus, an Amazon constructing, and Fb’s engineering workplace — to not point out the Allen Institute and a UW Medication analysis middle.
However it took quite a lot of creativeness for Alexandria to foresee what the Lake Union space might grow to be within the late Nineties and early 2000s when it first started buying properties. “Most of what we have been was vacant land or gross-looking industrial buildings,” mentioned Marcus. However Seattle additionally had distinctive experience in immunology, and Alexandria was satisfied it will grow to be an early biotech hub.
The life science trade in Washington State has outpaced job development within the personal sector since 2001, in line with a report from Life Science Washington. Seattle is dwelling to 40 p.c of all life science corporations within the state.
“Clusters take a few 25 yr interval to essentially develop,” Marcus mentioned. “We’re into the tip of the primary technology.”
That long-term pondering has paid off. Alexandria’s Seattle historical past began in 1996, when it purchased the previous headquarters of the Fred Hutchinson Most cancers Analysis middle and leased it again to the establishment. Alexandria would later do comparable “sale-and-leaseback” offers with the Gates Basis and Zymogenetics.
The bet on a biotech cluster round Lake Union has pitted Alexandria towards the area’s most land-hungry tenants — specifically, Amazon.
However Marcus thinks Amazon’s presence could possibly be a boon for the life science trade. “No person fairly is aware of what’s going on but, however Amazon has constructed a reasonably attention-grabbing healthcare crew,” mentioned Marcus, referring to Haven, Amazon’s healthcare three way partnership with JPMorgan Chase and Berkshire Hathaway.
One main hurdle to Alexandria’s Seattle plans is buyers. “Seattle is on the weaker finish of enterprise capital,” mentioned Marcus. Regardless of being dwelling to Alan Frazier’s Frazier Healthcare Partners and ARCH Venture Partners, the town lacks the “deep pool” of life sciences buyers that may be discovered within the Bay Space and Boston.
Enterprise capital investments within the Seattle space totaled $1.25 billion over the previous three years, in comparison with greater than $18 billion in San Francisco and $13.6 billion in Boston, in line with PitchBook knowledge.
Alexandria plans to create an incubator in Seattle referred to as LaunchLabs by early subsequent yr, increasing on a program already in place in New York Metropolis and Cambridge, Mass. The corporate additionally operates an funding automobile referred to as the Seed Capital Platform. Alexandria retains most of its investments secret, however Marcus mentioned it was an early investor in Adaptive, which went public earlier this year.
Alexandria now owns 1.5 million sq. ft in Seattle, and has a number of tasks below development, together with the Atrium at 188 E. Blaine St. (204,000 sq. ft), 1165 Eastlake (106,000 sq. ft), and 701 Dexter (217,000 sq. ft). The corporate lately filed a proposal for a 13-story constructing at 219 and 225 Terry, the present dwelling of biotech startup Kineta. It additionally has plans for a 303,000 sq. foot undertaking at 1150 Eastlake and has bought land at 601 Dexter.
The Atrium is predicted to finish this fall and has tenants such because the Seattle Most cancers Care Alliance and Sana Biotechnologies, a stealthy startup based by former Juno Therapeutics executives. Cambridge, Mass.-based Bluebird Bio officially moved into the Atrium final week, and Life Science Washington has additionally rented area within the constructing.
One other main Alexandria undertaking is the historic Lake Union Steam Plant, the previous dwelling of biotech firm Zymogenetics. The Fred Hutchinson Most cancers Analysis Heart has taken over the lease on the steam plant constructing and plans to maneuver in subsequent yr.
Why construct lab area in costly, crowded city areas? For one, life science corporations see lease as a comparatively small expense in comparison with different investments, Marcus mentioned. They’re additionally keen to pay a premium to land the appropriate personnel.
Adaptive’s Robins echoed that sentiment. “We don’t wish to be out within the boonies. We wish to be within the metropolis. That pulls the expertise we’re on the lookout for,” he mentioned.
Alexandria builds actual property based mostly on a cluster model that locations corporations in areas with analysis establishments, robust ranges of enterprise capital, and worker expertise. South Lake Union tenants have shut entry to main scientific establishments such because the Fred Hutch, the Allen Institute, the College of Washington and Seattle Kids’s, amongst others.
Past Seattle, the corporate additionally operates giant actual property holdings in San Francisco, San Diego, Boston, New York Metropolis, Maryland and the analysis triangle in North Carolina. Alexandria reported internet earnings of $364 million final yr on revenues of $1.3 billion.