Posts

Building Sales And Medical Growth Boosts Property Along Dallas’ Stemmons Freeway

/in , , , /by

One of Dallas’ first business districts is seeing a robust revival.

Construction of Stemmons Freeway, which started in the 1950s, sent office development northwest of downtown Dallas.(PHOTO CREDIT: Tom Dillard / Dallas Morning News Photographer)

Starting in the 1950s, office construction spread northwest of downtown along Dallas’ new Stemmons Freeway. By the 1960s, the Interstate 35E corridor between downtown and Dallas Love Field was seeing a building boom with dozens of new business addresses popping up along the highway. But the Stemmons Corridor was loslifeing its shine by the 1990s, with many of the big office employers headed to newer pastures in North Dallas, Irving and Plano.

Now the area is seeing a rebound, with multiple property sales and plans for construction.

 “It’s amazing how things have transitioned over there — it’s all of a sudden gentrified,” said Gary Carr, vice chairman of Newmark Group.

Newmark has recently handled several office building lfie sciencessales along Stemmons Freeway and Mockingbird Lane The commercial real estate firm is marketing the two Mockingbird Towers, one of the largest office properties in that area.

“The growing interest in the area is due to the local boom in medical and life science operations,” said Carr. “A big part of it is the hospital district and the growth at Parkland Hospital, UT Southwestern and Children’s Medical. They’ve taken a ton of office square footage over there. Development is also a result of Love Field expanding and everything moving in that direction.”

The centerpiece of the Pegasus Park project is this 18-story office tower that was once the headquarters of jeweler Zale Corp. and, before that, Exxon Mobil.(PHOTO CREDIT: Elias Valverde II / Dallas Morning News Staff Photographer)

Redevelopment of the former Exxon Mobil office tower on Stemmons at Commonwealth Drive has spurred other investments along the highway.

Small Investments and Lyda Hill Philanthropies converted the vacant office high-rise into a mixed-use office campus for biotech firms and nonprofit organizations called Pegasus Park. UT Southwestern Medical Center, Massachusetts-based BioLabs and Taysha Gene Therapies along with other firms have taken space in the building.

“Pegasus Park is growing as we expected and attracting lots of new activity,” the owners said in a statement. “It is truly becoming the center of the life sciences cluster here in North Texas, and we are excited about continuing to build the ecosystem.”

Small Investments acquired a second office tower for redevelopment at 2525 North Stemmons.

A Wisconsin-based medical real estate firm, Hammes Partners, has purchased the largest office building in Dallas’ Stemmons Freeway corridor northwest of downtown — the 20-story Trinity Towers at Stemmons and Inwood Road.

Ricchi Tower along North Stemmons recently sold to the city of Dallas for more than $14 million.(PHOTO CREDIT: Shafkat Anowar / Dallas Morning News Staff Photographer)

The city of Dallas spent more than $14 million to buy the Ricchi Tower at 7800 North Stemmons to be used for “city services and operations.”

And a California-based medical real estate firm, Alexandria Real Estate Equities, bought a vacant block at the northeast corner of Mockingbird and Harry Hines Boulevard where it’s planning a medical campus, real estate brokers say.

The Alexandria site is across the street from Exchange Park, where UT Southwestern is eyeing a major expansion.

“What’s happening in the area is truly exciting,” said Kolby Dickerson, vice president of TXRE Properties. “When I got down there 10 years ago, it seemed like nobody else wanted to work there. You have new and well-capitalized owners putting money into the buildings and providing great quality office space at a discount to the overall market. It’s probably the most affordable office space in Dallas. The activity is growing as people are getting priced out of Uptown, Las Colinas and even buildings on Central Expressway.”

TXRE Real Estate has bought and sold offices in the Stemmons Corridor and still has properties in the area. Dickerson said developers are taking a look at the locations for building sites for apartments and other projects.

An Austin-based apartment builder is buying a vacant office at 8001 Stemmons that will be demolished to make way for rental units.(PHOTO CREDIT: Shafkat Anowar / Dallas Morning News Staff Photographer)

OHT Partners, an Austin-based apartment builder, is buying a vacant office building at 8001 Stemmons Freeway and plans to demolish the property and put up rental units.

“You can get a lot of land down there that is already zoned at prices that are way less,” said Jake Milner, who is working with J. Scott Lake of Davidson Bogel Real Estate to broker the property sale to OHT Partners. “We are already getting calls from other owners in the area saying, What is my dirt worth?’ ”

 

Source: Dallas Morning News

Life Sciences More Than Doubles Sector Investment After Pandemic Upheaval

/in , , /by

After more than a year of grappling with a historic global pandemic, and the ensuing upheaval that impacted every established economy and industry across the world, one sector of commercial real estate has prospered so effectively that venture capital funding more than doubled from first-quarter 2020 to the same period in 2021.

According to a new report by CBRE, “U.S. Life Sciences: The Biotech Revolution Emerges Even Stronger Post-Covid-19,” this is exactly the state of the life science sector today, and it may be the salve that helps heal an industry in the wake of an unprecedented public health and economic crisis.

“While there’s so much upheaval in commercial real estate — whether it’s offices, retail, hotel, what have you — life sciences, laboratory R&D space, and manufacturing have only strengthened,” said Ian Anderson, senior director of research for CBRE, who authored the report. “I don’t think there’s one element in the data where we haven’t reached a new record as we speak, and it just continues to get stronger.”

In addition to the massive increase in venture capital funding, CBRE reports that the demand for life sciences space across all major markets has grown by 34 percent since mid-2020. And, while more than 15.6 million square feet of speculative space is currently under construction, it is exceeded by tenant requirements being driven, in part, by massive increases in the sector’s employment.

“U.S. life sciences employment reached a record high in March 2021, driven by the revolution in biotechnologies and other industry advancements,” read the report. “Industry job growth has jumped nearly 15% since March 2017, surpassing growth in the technology sector.”

As venture capital, employment and general demand grow, so have rents throughout major life sciences markets. The report’s findings include a close to 50 percent increase in lab and research and development rents in the Boston-Cambridge cluster, and almost 40 percent for the same sector in San Diego since the end of 2017. Life sciences rents in Philadelphia, meanwhile, have increased by 35 percent since the middle of last year.

All of these drivers have combined to position life sciences as a dominant sector in commercial real estate in 2021 and beyond, as investors clamor for involvement and seek investments that provide stability in the midst of widespread market volatility.

“The COVID-19 pandemic fueled some of the alternative sectors, so health care, data centers, and life science centers were some of the beneficiaries of investors moving away from more traditional product types and into more purpose-built facilities,” said Chris Bodnar, vice chairman and co-head of Healthcare & Life Sciences Capital Markets at CBRE. “The investor pool is looking for that stickiness of the tenant going forward, especially in light of what’s happened in the office sector and concerns about how work-from-home will impact renewal probabilities.”

The evidence is especially strong in New York City, where “ … lab leasing activity has already reached a record high for a single year, at 257,000 square feet through May 2021,” according to CBRE’s findings. As contributors to the increase in activity, CBRE highlighted the Icahn School of Medicine at Mount Sinai’s recent lease of 165,000 square feet of research-focused space at 787 Eleventh Avenue, and also noted C16 Biosciences’ 19,000-square-foot lease at the Hudson Research Center, where the Bill Gates-backed startup will relocate from its incubator space at BioLabs New York.

According to Anderson, the explosion in demand for life sciences investments over the past five to six years marks the coalescence of numerous trends, including the fading effects of the 2008 recession leading to greater economic optimism, more accessible capital, insurance companies pressuring corporations to find more cost-effective solutions, rapid advancements in technology, the pandemic-driven decline of other sectors, and the extraordinary investment in the search for solutions to the COVID-19 pandemic.

“In many cases, the fact that so many other industries were in distress caused investors to look for brighter opportunities,” said Anderson. “Real estate developers and venture capitalists all of a sudden saw a new industry in the spotlight.”

Bodnar also sees three other reasons investors are going all-in on life sciences.

“One is, you can’t do research from home. Putting lab space in your home is not a viable option,” Bodnar said. “No. 2, we don’t anticipate [National Institutes of Health] funding for this sector slowing down anytime soon —we only see it accelerating. And No. 3 is that venture capital funding is accelerating. Capital flowing into this sector from private equity and venture capital is growing exponentially, and this doesn’t go unnoticed by real estate investors, some of whom are even making investments as venture capital partners with biopharma companies.”

Given all of these market forces, it’s unsurprising to see owners converting real estate initially dedicated to other sectors into life sciences facilities.

“You’ve got a lot of commercial real estate holders — could be owners of suburban office buildings or even downtown office buildings — looking for some type of silver lining; some type of better exit for themselves. So, they’re looking at converting to labs,” said Anderson. “Office owners have been through such a troubled time over the past year, and some of them have been carrying buildings in distress for many years. So, they see a potential opportunity to make a quick and easy out, and convert their office building to laboratory.”

“We’ve even had some groups talk to us about converting medical into life sciences,” said Bodnar.

And, while life sciences is now pulling from other sectors, it’s also spreading into geographical areas beyond traditional clusters like Boston-Cambridge, the San Francisco Bay Area and San Diego.

“Raleigh — one of the hotter markets — is more traditional, but that market is just so impressive,” said Anderson. “Not only have we seen huge demand for laboratory R&D space, but also for biomanufacturing and high tech. So that market continues to impress. Pittsburgh has also been impressive. And a few that are emerging that we haven’t talked about in the past as much are Portland, Salt Lake City and Dallas. They’re probably in the beginning stages, but we’ve seen a lot of venture capital go into those markets.”

Taken all together, the report’s findings indicate that while life sciences has been the notable winner in commercial real estate throughout the pandemic, it’s possible we still haven’t scratched the surface of how strong the life sciences sector will become.

“I’ve been tracking this space for years now, and it just continues to get stronger and more intense each year,” said Anderson. “The demand for laboratory R&D space by the life sciences industry is stronger than ever.”

 

Source: Commercial Observer

Life Sciences Space Continues To Be In High Demand, With Low Vacancies And Rising Rents

/in , , /by

Expansion in medical research around DNA is driving growth in the biotech sector and boosting demand for life science space.

Advances in technology over the last decade changed the way medical scientists work, first modeling their theories or ideas on computers before taking them to the bench, according to Steve Purpura, vice chairman of the Boston consulting practice and lead/director of the life sciences practice group with real estate services firm CBRE. As a result, the allocation of lab space in research facilities decreased from a 50:50 office to lab ratio a few years ago to 60:40 today, he notes.

This trend is likely to continue, according to Roger Humphrey, executive managing director and leader of the life sciences group with real estate services firm JLL. Commenting on JLL’s “Journey to the Next Gen Lab,” a report citing a trend toward greater agility in research space design, he noted that wet lab space in research facilities is shrinking, while flex and office space for computational science is growing as scientists spend more time analyzing data. The report shows that flexibility in lab space design and location is required to allow sudden shifts in research priorities and access to talent.

But aggregated demand for highly sophisticated lab space and cutting-edge pharmaceutical production facilities has exploded with expansion of the industry into personalized medicine and increased capital flowing to life science research and development. According to the most recent CBRE life science report, venture capital investments in life science are up 53 percent compared to 10 years ago.

The advent of personalized medicine has spawned a subset of life science industry incubators and early-stage companies focused on developing and manufacturing “small batch” pharmaceuticals, adding pressure to the demand for lab space within or nearby life science clusters, according to Frank Petz, managing director of JLL’s Boston-based capital markets group.

As a result, core life science markets—Boston-Cambridge, San Francisco, San Diego, the Raleigh-Durham Research Triangle and Seattle—are enjoying construction booms and growth in rents, which have escalated more than 50 percent over the last three years, according to the CBRE report.

The boom in funding has also increased competition and furthered the talent war between life science companies.

“The cost of rent is low on the list of their concerns,” says Petz. “It’s all about talent.”

Therefore, locations with premiere research universities and teaching hospitals outside core life science markets are also seeing construction of new research facilities, as life science firms seek STEM talent to fill the growing number of job vacancies.

According to the CBRE report, life science employment soared 23.5 percent to nearly 1.7 million workers between 2001 and 2016, compared to 10.2 percent for overall U.S. employment. Additionally, the rapid pace of technological advancement in the life science sector generated a 26 percent surge in biotech jobs between 2013 and 2016.

Urban markets with premiere universities and teaching hospitals, such as Philadelphia and New York City, have growing life science clusters because they offer the largest STEM talent pools, according to Purpura. While developers are replacing obsolete buildings in these markets with 10-story research facilities, office and industrial buildings in suburban markets, specifically San Diego and Raleigh-Durham, are being converted to lab space.

Humphrey also stresses the need to build flexibility into research space, so scientists can easily reconfigure workspaces to accommodate different types of research and facilitate collaboration with colleagues.

Mobile benches and unassigned workspaces, for example, allow for fast changes in personnel and type of work performed, he notes. In addition, hanging retractable electrical cords from the ceiling, so users aren’t limited to placing equipment against walls, and hiding technical infrastructure behind facades can allow easy movement of people and equipment.

 

Source: NREI