Attracting and Retaining Tenants in Laboratory and cGMP Facilities
Life science tenants have distinct requirements that differentiate them from typical speculative developments. One of the primary considerations is the availability of a skilled talent pool. Market locations with renowned research institutions and highly educated workforces, such as the Research Triangle Park (RTP) in close proximity to both Duke University, University of North Carolina at Chapel Hill and North Carolina State University, thrive due to collaborations and access to like-minded, well-trained individuals. The presence of programs like the Wake Technical Community College and other Community College "biobasics" initiatives in RTP enhances the ecosystem by providing additional education and upskilling for individuals in highly regulated industries. Other factors, including access to transportation and affordable living costs further contribute to a thriving life science ecosystem.
Financial incentives also influence tenant decisions. Companies often compete for state, local, and federal incentives, which provide financial support and reduce their investment burden. Many states, recognizing the potential of bio-pharmaceutical companies, offer specific programs to attract these businesses knowing the job growth these companies can bring to the area.
Different markets have varying demands, affecting the suitability of locations for laboratory and cGMP facilities. Each market has its unique characteristics and maturity level, with only a few, such as Boston and the San Francisco Bay Area, considered "mature" life science clusters. Understanding the density and maturation level of each market is essential when considering location. For instance, a headquarters building might find its place in Boston, Massachusetts in close proximity to MIT and Harvard, while a large manufacturing facility requiring more land could be better suited for suburban Maryland or the Research Triangle Park (RTP) in North Carolina.
To attract and retain tenants, developers prioritize factors such as speed to market, competitive rental rates, and desirable amenities. Tenants place a high value on having facilities available when needed, both for financial reasons and to meet government grant deadlines. The readiness of a facility greatly impacts the feasibility of securing a lease, making timely delivery crucial.
From a technical standpoint, tenants seek building infrastructure that caters to their specific needs. They assess what the landlord offers compared to what they will have to invest in themselves. Building long-term partnerships with accommodating landlords capable of supporting their growth trajectory, providing ample space and flexibility, is a primary consideration for occupants. It is essential to have an experienced team that comprehends the necessary design and management standards to meet occupant requirements and ensure that the space and capabilities align accordingly.
Speculative laboratories, often referred to as Spec Labs, offer an interesting option for developers seeking to attract tenants with reduced initial capital requirements. By allowing for tenant customization, developers can create spaces that cater to the unique needs of individual tenants. However, finding the optimal balance between turnkey readiness and flexibility is important. While certain tenants prefer move-in-ready spaces, others value the opportunity to tailor the facilities to their specific needs. In today's financial landscape, where lending is stringent, emerging companies view Spec Labs as an attractive solution, enabling them to quickly occupy spaces while minimizing upfront capital investments.
The strategic use and careful curation of graphics and marketing materials play a crucial role in communicating the company's story and mission, reinforcing the vision within the workspace. These graphics hold significant value in attracting tenants, particularly in the research and development (R&D) sector. These materials serve as compelling visual aids, effectively showcasing how the laboratory and administrative functions harmonize with the proposed building. Through the utilization test fits and other visuals, developers can highlight the facility's potential for customization and adaptation, enhancing its overall appeal. Graphics also help create a cohesive narrative that tells the story of the building, utilizing strategies like floor naming or branding. These materials significantly influence tenants' perception and understanding of the facility, influencing their leasing decisions.
Aligning core and shell construction with tenant upfit can save time and streamline the process. Engaging the same contractor for both aspects facilitates coordination and reduces potential delays or miscommunication. By considering long lead times and maintaining a schedule-oriented approach, developers can mitigate issues during construction and provide tenants with timely delivery.
Supply chain challenges can arise in various construction phases, from delays in obtaining specific equipment to other unforeseen circumstances that disrupt the smooth flow of materials and resources. Effective coordination between the design, construction, and planning teams will aid in navigating these challenges and maintaining flexibility.
Delivering on promised commitments with open and honest communication is essential for establishing trust with tenants and ensuring successful occupancy as a landlord. Tenants rely on developers to deliver the agreed-upon facilities to specification within the specified timeframe. By effectively managing the supply chain and maintaining open communication with tenants throughout the construction process, developers can build a reputation for reliability and establish a strong foundation for tenant satisfaction and long-term partnerships.
Sustainability, operability, and resilience are now essential considerations for companies investing in facilities aligned with their mission, even if it incurs slightly higher costs. As business leases often span ten to fifteen years, companies are working towards meeting green requirements within their current lease period. Moreover, there is a growing focus on holistic employee health and wellness, driven by advancements in personalized medicine and novel cell therapies.
The quality of space and amenities also play a pivotal role in attracting and retaining top talent in the life science industry. The modern workforce seeks wellness-focused environments that offer retail options, food services, fitness & nutrition centers, and outdoor amenities like exercise trails, outdoor meeting spaces, outdoor fitness, and dining. These features have become differentiators, elevating new developments, and contributing to the ability to attract, retain, and ensure high levels of employee satisfaction and productivity.
Contributors: Chris Small, Lynne Cooper, El Sea, Inc.; Vinnie Durand, Savills; and Denis Sullivan, Foundation Capital Ventures
