AbbVie Follows Trend of Big Pharma Setting Office-Labs in Biotech Clusters

AbbVie sign outside office building

In what appears to be a trend, big pharma company AbbVie is leasing 479,000 square feet of space in BioMed Realty’s Gateway of Pacific project in South San Francisco. It is an example of big pharma companies setting up offices and labs in the midst of one of the country’s biggest biotech clusters.

The Gateway of Pacific project is currently under construction. It will be a fully integrated 1.3 million square foot campus. Phase 1 consists of 500,000 square feet of office and lab space and a 50,000 square foot amenity center. The amenity building is expected to have a café, restaurant, fitness facility and conference center.

Partly as a response to soaring Bay Area real estate prices and under-demand real estate, another trend is to go vertical rather than horizontal. The Gateway of Pacific development will include a 12-story structure at Oyster Point and Gateway boulevards in South San Francisco.

Other biotech developments in the Bay Area are reaching upward as well. Wareham Development built a seven-level, 260,000-square-foot EmeryStation West in Emeryville. Phase 3 Real Estate Partners is construction a 21-story north tower as part of its Genesis project in South San Francisco.

High-rises are common in the Boston biotech center, but until 2008, California build codes didn’t allow for chemical storage above the fourth floor.

AbbVie is taking a 10-year lease at the biotech market rate in the low to mid $60 per square foot. There is a tenant improvement allowance of $125 per square foot.

The AbbVie facilities could host 1,500 staffers.

Merck & Company is planning to set up its West Coast research center in an Alexandria Real Estate Equities site in South San Francisco. The same company is also providing expanded space for Alphabet's Verily Life Sciences.

If it’s a trend for larger pharma companies to settle in biotech hubs to be close to the talent and innovation, in San Francisco at least, the crowding and real estate prices are hinting at a shift to the suburbs.

The San Francisco Chronicle recently reported on several biotech companies that moved some or all of their operations to Pleasanton, a suburb of San Francisco in Alameda County about 25 miles east of Oakland. Serge Saxonov, co-founder and chief executive officer of 10X Genomics, which has headquarters in Pleasanton, told the Chronicle, “Pleasanton is the sweet spot where you get the talent from all across the Bay Area and rents aren’t quite as expensive as San Francisco or the Peninsula.”

Pleasanton falls into a part of the Bay Area dubbed the East Bay, and it’s no stranger to larger companies. Others in the region include Roche Molecular, Bio-Rad Laboratoriesand IntegenX, now owned by Thermo Fisher Scientific. The San Francisco Chronicle wrote, “Lately, the region—though it doesn’t have the biotech cache of South San Francisco or the newness of San Francisco’s Mission Bay—has also been drawing smaller, newer and faster-growing firms that make critical hardware, software and technology used by biotech companies.”

In September, the Chronicle noted that office space in San Francisco runs around $74 per square foot. Silicon Valley’s office space is about $52 per square foot. Tri-Valley real estate runs about $32 square foot.

By comparison, in Cambridge, Mass., the average is $63.35 per square foot as of 2017, with laboratory space typically running higher than the office space. For example, in mid-Cambridge, office space averaged $59.69 per square foot, but laboratory space averaged $76.08 per square foot.

Although it probably won’t happen, it would be ironic that just as big pharma settles into the biotech startup landscape, the biotechs move to less crowded, more affordable locations.

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