< PreviousCBRE’s “ U.S. Life Sciences Clusters: Markets Positioned for ‘Century of Biology’ ” report, published earlier this year, nds that three of the top regions for the sector are in California: No. San Francisco Bay, No. San Diego and No. Los Angeles. Can the state take some credit?“Yes, you can credit the state,” says Ian Anderson, director of research and analysis for CBRE and director of life sciences research for the Americas. You can also credit the power of association — as in the California Life Sciences Association. A strong industry organization — like MassBio supporting No. Boston-Cambridge in Massachusetts — “is very important to keeping some of these companies, and keeping them ourishing and maintaining that economic base.”Indeed, the strong keep getting stronger. California’s life sciences sector alone employs more than , Californians at , life sciences organizations. e strong clusters also feature another crucial layer of support from the venture capital community, still heavily concentrated in the Bay Area and metro Boston. “ e amount of new venture capital to the life sciences industry over the past year has been staggering,” says the CBRE report, with most of it going to biotech. “Since the plentiful capital also correlates to future job growth in the industry, stronger hiring and demand for commercial real estate should occur over the next year. Most of this funding is being allocated to companies in Massachusetts and California ( %), but that share has dropped over the past two years as investors seek companies in new markets.”Leading that pack of new regions is the Washington, D.C.-Baltimore market, which has seen venture capital funding jump by nearly ninefold within the past months, says CBRE. “Philadelphia, Chicago, Raleigh- Durham and San Diego also had impressive gains in attracting venture capital over the past months.”Anderson says cities like Pittsburgh, Tucson and Ann Arbor can also be included in that mix, due to “so much innovation and so many new discoveries happening in a lot of research institutions throughout the country,” namely by ADAM BRUNS adam.br uns @ site s ele c tion.c omHEAL TH TECH & LIFE SCIENCES‘Staggering’ Amount of But watch for emerging areas driven by institutions more focused on commercialization, says CBRE report.Leading U.S. Clusters38 MAY 2019 SI T E S E L E C T IO NVenture Capital Drivesplaces such as Carnegie Mellon, University of Arizona and University of Michigan. “Boston and San Francisco are the center of activity, but there is so much going on, the venture capitalists are starting to spread out.”Asked about “near-miss” markets just outside the report’s lists, Anderson mentions the Ohio cities of Cleveland, Cincinnati and Columbus, where great institutions and strong services infrastructure simply need to gain further traction. Phoenix, Minneapolis, Dallas and Atlanta fall into that next group too.“ ey have the talent and some life sciences or life-sciences-related institutions,” he says, “but for the money and services and NIH funding and some of the biotech talent, those metros are a bit behind.” Minneapolis is really heavy in medical devices. Dallas has the tech talent. Atlanta is seeing some rapid growth. “But they miss on the NIH funding and a strong research university to support it,” he says (notwithstanding the bona des of Georgia Tech, Emory University or the University of Minnesota). e Boston-Cambridge market once again attracted the nation’s largest amount of funding from the National Institutes of Health (NIH) in at approximately $ . billion, says the CBRE report. “Nonetheless, New York City, the second largest recipient of funds ($ . billion), is growing faster,” it says. “Over the past years, the amount of funding to New York City institutions grew by %, the fastest of any of the top largest markets and far faster than the % increase for Boston-Cambridge institutions.”Anderson says one reason Boston and the Bay Area established and maintain their competitive edge is that the research institutions in those regions — MIT, UCSF, Stanford, UC-Berkeley and others — historically have had a culture inclined toward commercialization of their discoveries. “So they’ve been on the cutting edge, for the most part,” he says. Institutions in some other areas with people equally as talented and infrastructure equally as strong have historically chosen to keep commercialization at arm’s length. But they’re coming around.“Now we’re seeing other institutions getting on board, with money to be made,” he says, highlighting his home market of Greater Philadelphia. “ e University of Pennsylvania has probably been a little bit behind on this, but has started to shift. ey just created a seed fund of about $ million to go into startups, and that has absolutely helped spark private industry growth,” including one rm actually named Spark erapeutics that was just bought out by Roche. “If Penn gets on that, then you get some of the local VCs and attract a whole other host of capital,” he says. e report notes that Spark emerged from labs at Children’s Hospital of Philadelphia “and has become a signi cant source of demand for Class A o ce and lab space in Downtown Philadelphia. Another similar success story can be seen in Kite Pharma, a startup that originated out of the University of California, Los Angeles, and has grown to be a signi cant o ce and lab occupier 40 MAY 2019 SI T E S E L E C T IO N 1. Seattle 2. Houston 3. Austin 4. Minneapolis 6. St. Louis 7. Dallas/Ft. Worth 8. Atlanta 9. PittsburghTOP-RANKED EMERGING LIFE SCIENCES CLUSTERSRanked by size of laboratory inventory, size and long-term growthin life sciences employment, number and concentration of key scientists,size of funding sources.Source: CBRE Research, Q4 2018. 1. Boston-Cambridge 2. San Francisco Bay Area 3. San Diego 4. New Jersey 5. Raleigh-Durham 6. Washington, D.C.-Baltimore 7. New York City (and surrounding areas) 8. Philadelphia 9. Los Angeles 10. ChicagoTOP 10 LEADING LIFE SCIENCES MARKETSRanked on the basis of recent life sciences employment growth, number and concentration of key scientists, NIH funding, quality and quantity of (1) educational institutions providing life science graduates and (2) medical research and health services institutions, and number and concentration of high-tech workers. Source: CBRE Research, Q4 2018.42 MAY 2019 SI T E S E L E C T IO Nin Los Angeles.”One more trend? e in uence of tech companies, which led CBRE’s thought leaders to observe that the emerging life sciences clusters possess “a sizeable high-tech workforce to support future convergence between the industries.” Anderson says it’s an interesting trend coming closer to reality, embodied in things like Google’s o shoot Verily.“You have these large tech companies starting to venture into the life sciences space because they see the long runway.” Convergences that on the surface might seem odd — fashion companies wanting to make attire out of plant matter in New York City, say, or manufacturers with environmental concerns that a biological solution might resolve — will start to appear more de rigeuur as time goes by. e tech/biotech convergence also is arising from a more mundane detail, says Anderson. “More of the life sciences workers are doing more of their work on computers, and less in the actual lab.”Findings Highlight VC & R&D LinksFollowing are lightly edited and excerpted ndings from the CBRE report. For more, visit www.cbre.com/research: e nation’s leading life sciences clusters are identi ed by several criteria: laboratory inventory size, number and concentration of industry scientists, NIH and venture capital funding and long-term growth of the life sciences workforce. Each of these factors was standardized, allowing CBRE to compare markets against one another and showing Boston-Cambridge and the San Francisco Bay Area leading by a comfortable margin in terms of a sizeable, dynamic life sciences market poised for growth. A second tier of markets includes the life sciences clusters of San Diego, Raleigh-Durham, New Jersey and Washington, D.C.- Baltimore. A third tier of markets exhibits various sources of strength, ranging from an attractive industry size and momentum in New York City and Los Angeles to a historical preeminence in the industry in Chicago and Philadelphia ... CBRE’s analysis suggests Boston-Cambridge and the San Francisco Bay Area will continue their lead. However, signi cant momentum, especially in New York City and Los Angeles, implies these markets will play a greater role in the industry.Rapid growth in the industry is spreading to new markets across the country. e markets emerging as prime candidates to become leading life sciences hubs exhibit an attractive combination of a substantive life science workforce, including key scientists, strong recent life sciences employment growth, ample NIH funding, top-ranked schools and medical institutions, and a sizeable high-tech workforce to support future convergence between the industries. e U.S. life sciences industry is growing at the fastest pace since . e . % year-over-year growth rate in U.S. life sciences employment ending Q is a strong acceleration from the slow, but temporary, growth in early and well-above the . % increase in total U.S. nonfarm employment over the same period. Employment in the industry has grown % over the past years ... Biotech R&D has grown % over the past years.An abundance of capital allocated to the life One of the two largest U.S. life sciences IPOs in 2018 was Moderna Therapeutics, whose new clinical development manufacturing facility is shown here in Norwood, Massachusetts.credit: Richard Hilgendorff Photography44 MAY 2019 SI T E S E L E C T IO Nsciences industry is helping fuel strong growth. e $ . billion in annual life sciences venture capital funding through Q was an % increase from the prior year ... e relationship between life sciences venture capital funding and employment growth is quite strong. New venture capital funding to the industry precedes increases in employment by about one year. Based on the recent surge in funding, employment should continue growing over the next year, supporting commercial real estate demand.Current and anticipated life sciences employment growth is supporting ongoing construction of laboratory space in most markets. In the top- ve life sciences markets, the amount of lab space under construction has jumped % in . ough the million sq. ft. of lab space under construction is still a relatively small percentage of total o ce space under construction in these markets, the in uence of labs on supply-and-demand dynamics is growing. rough Q in the San Francisco Bay Area, % of all o ce demand came from life science tenants, but only % of current construction is lab space.Talent SearchFinding the best talent in today’s market is challenging. Focusing on the top largest markets, the data show the life sciences industry is highly concentrated in two main regions: the Northeast Corridor stretching from Boston-Cambridge to Washington, D.C., and California. Most of the growth over the past three years has occurred in smaller life sciences markets like Seattle, Houston, St. Louis and Dallas/ Ft. Worth. Nonetheless, these markets, which are a fraction of the size of Boston-Cambridge and the San Francisco Bay Area, have comparable recent growth, re ecting their remarkable strength.Analysis of where key scientists — such as biomedical engineers, biochemists, biophysicists and chemists — are located reveals that not only is the talent more concentrated in the Northeast Corridor, but especially so in New York City and New Jersey. On the West Coast, the San Francisco Bay Area is the clear locus of talent for key scientists fueling innovation in the industry.CBRE evaluates and ranks markets by various factors, including the size of the talent pool they produce, the level of expertise and sophistication in the graduates they produce (number of Ph.D.s), and the quality of academic institutions (as ranked by U.S. News & World Report). By these measures, many of the usual suspects rise to the top of the rankings: Northeast Corridor markets, California and Raleigh-Durham.However, some major markets with smaller presence of the life sciences industry are creating a surprising amount of new talent each year, including Atlanta, Dallas/Ft. Worth, Sacramento and Pittsburgh. At the same time, some tertiary markets that are dominated by a major university have an impressive supply of talent, but only a minor life sciences presence. ese markets include Ann Arbor, Michigan; Madison, Wisconsin and Columbus, Ohio. is ranking, though helpful in evaluating markets on a broad basis for talent, obscures some signi cant sources of talent that can have a major impact on local market demand for lab space and industry presence. For example, the single greatest source of graduates in biomedical and biological sciences graduates in the nation, by a wide margin, is the University of California at San Diego.Notably, the top three schools are in California: University of California-Davis, University of California-Los Angeles and University of California-San Diego. Not one of the top schools producing total graduates in biomedical and biological sciences is located along the Northeast Corridor.Finally, new sources of talent emerge that are far from traditional hubs of the industry, including in Tampa, Gainesville and Tucson. In 2018, the life sciences sector generated total annual revenue of $177.1 billion in California. source: California Life Sciences AssociationBY S AVANNAH K INGINVESTMENT PROFILE46 MAY 2019 SI T E S E L E C T IO NPhoto: Getty ImagesGo West, Go GlobalGREA TER SEA TTLE INVESTMENT PROFILE:INNOVATIONAround the world, people are building on greater Seattle’s successful business legacy — most of the time without any idea they’re doing it.Consider your morning coff ee. Since getting its start back in out of a small storefront in Seattle’s famed Pike Place Market, Starbucks has become a world-wide coff ee phenomenon.If you’ve fl own recently, odds are high the aircraft was manufactured by e Boeing Company, in Everett or Renton. Perhaps you bought your plane ticket online through Bellevue-based Expedia. Going shopping? Costco Wholesale, Recreation Equipment Inc. (REI) and Nordstrom are all homegrown and headquartered in the Puget Sound region, as is e-commerce giant Amazon. e greater Seattle region – running north of Everett to south of Tacoma – is home to hundreds of global companies like those, as well as a little outfi t called Microsoft, truck maker PACCAR and thousands of small to medium-sized companies. Additionally, hundreds of foreign-owned companies have based operations in the region, including giants such as Nintendo, e Pokémon Company International, T-Mobile, Novo Nordisk, Siemens, Infosys, Alibaba Group and more. Two of the three publicly traded U.S. companies to achieve a market value of $ trillion were founded in greater Seattle — Microsoft and Amazon.Why do so many companies want to call Seattle home? For starters, the greater Seattle region is a low-tax environment and is one of only seven states without personal income tax. Additionally, the state puts a limit on increases in property tax to percent annually, which keeps the property tax rate growth lower than the rate of infl ation. Amazon’s SpheresPhoto courtesy of Jordan Stead/AmazonGreater Seattle’s talent base, pioneering spirit, and quality of life are second to none. S I T E S E L E C T I O N MAY 2019 47 ere’s also no tax on inventory, dividends, interest or capital gains. “You look at the tech industry with companies like Microsoft and Amazon, and you look at the retail industry, including Starbucks, Nordstrom and Costco, and what you have is a diversifi ed economic base of very innovative businesses founded here in Seattle,” says Kevin Johnson, president and CEO of Starbucks Coff ee Company.Of course, the region’s high quality of life and ample amenities are also enough to catch anyone’s attention. Whether it’s watching the Seahawks play at CenturyLink Field or the Mariners at T-Mobile Park, climbing to the top of Mount Rainier or any of the other stunning hikes in the Cascade and Olympic Mountains, or watching the best names in music play at local venues, the area off ers fun for all ages. And with a lower cost than similar metro areas — rating . out of stars in value based on a comparison of housing costs to median household income and annual cost of living, according to U.S. News and Market metrics — businesses are eager to move into and expand across the region. “It’s a big city with a small-town feel,” says Susan Mullaney, president of Kaiser Permanente Washington. “Seattle isn’t trying to be anything else but Seattle, and I love that about it.”The Talent EquationWhen it comes to attracting talent to a region, greater Seattle has all the right elements: ample opportunities to work with the best and brightest minds at the most innovative companies in the world, stunning natural scenery and outdoor recreation, world-class urban amenities and a uniquely high quality of life. “ e Seattle region has become an amazingly diverse, cosmopolitan and interesting place to live. Like so many people who have moved here from around the world, I can’t imagine calling any other place home,” said Brad Smith, president of Microsoft. e region has a strong and growing workforce of . million people. Greater Seattle adds , new people each year, two-thirds of which are owed to net migration. ey come from other U.S. locations, but they come from futher away too: Approximately percent of the region’s . million residents were born outside of the U.S.Homegrown talent is also easy to come by with a robust pipeline of public and private universities and community colleges in the region, including two world-class research universities: e University of Washington (UW) and Washington State University (WSU), whose main campus is out east in Pullman, WA., but which operates several satellite campuses in greater Seattle. A recent report released by the U.S. Census Bureau ranked Seattle the No. most educated big city in America, beating out San Francisco at No. and Washington D.C. at No. . According to the report, percent of Seattle residents over have a college degree. In fact, percent of the region’s residents have at least some post-secondary education and percent have a high school diploma or higher. Moreover, BLS statistics show that in the metro area was No. in the nation in STEM jobs percentage, at percent. UW was ranked as the top public university on Reuters’ Top : e World’s Most Innovative Universities. In , the university received $. Universities. In , the university received $. comparison of housing costs to median household U.S. News and Market metrics — businesses are Seattle isn’t trying to be anything else but Seattle, and I love that about it.” —Susan Mullaney, President, Kaiser Permanente WashingtonNext >