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Spencer Levy
I'm Spencer Levy, and this is The Weekly Take. The CBRE research team recently published a report on trends in the life sciences space. Simply put, the report concluded that the sector has never been stronger. Life sciences has hit all-time highs in funding job growth, demand for lab space and new construction – much attributable to the pandemic, of course. But there's more to it as well. On this episode, we'll talk about the trends and why the future could be even brighter.
Ted Jacobs
It's such a newer asset class that was not even really talked about until the pandemic, and now you have every single property owner, investor trying to get into this asset class.
Spencer Levy
That's Ted Jacobs, a CBRE vice chairman who specializes in life sciences. Ted’s spent his entire 15 year career working in the sector and is based out of San Diego, a market that's one of the most important life sciences hubs in the world.
Tim Schoen
All lab buildings can be office, but not all office buildings can be lab.
Spencer Levy
And that's Tim Schoen, CEO of Biomed Realty, a REIT that's also based in San Diego. Biomed is a Blackstone portfolio company with holdings of more than $20 billion in assets ranging from the company's hometown to other leading innovation markets in the U.S. and the United Kingdom. We'll examine Biomed’s, portfolio and platform, and all that goes into creating specialized state of the art life science real estate. We'll discuss the intersection of life sciences and technology as we put the whole sector under the microscope to look at how and why – not to mention where – it has been surging. Coming up will blind you with life sciences. Biomed, and what's potentially the dawn of an industry's new age? That's right now on The Weekly Take. Welcome to The Weekly Take, and joining us today are two folks in San Diego, starting with Tim Schoen. Tim, thanks for joining the show.
Tim Schoen
Thanks for having me, Spencer. Happy to be here.
Spencer Levy
Happy to have you. And Ted Jacobs. Ted, thank you for joining the show.
Ted Jacobs
Thank you, Spencer.
Spencer Levy
Ted, for the benefit of our listeners, I mean, life sciences, as I mentioned, along with maybe data centers, are the hottest subsectors within commercial real estate today. Just describe, What is life sciences real estate and some of the different types.
Ted Jacobs
Sure. Yeah, so a bit different than other facets of real estate. We're, at life sciences. it's not just the brick and mortar. The actual building functions as part of the company where they need a different design, different air flows, different equipment in order to function their business. If that's taking a drug to market drug discovery for a CMO, for academia, studies, what have you. And obviously, it's been a big part of the last two years of everyone's life with the pandemic in the life sciences industry has been at the front of it and been able to get us a vaccine in a record time and get us out of this pandemic, hopefully very soon.
Spencer Levy
Tim, this is actually a question I was going to ask later, but since Ted opened the door to it: We all work hard. We all are real estate professionals. And, you know, I'm proud of what I do and I'm sure you guys are too. But boy, in the last two years, did it change your perspective of just how important it is, what you do? And did you get anybody come up to you on the street and just say thanks?
Tim Schoen
Yeah, I mean, listen, we've always had the benefit, Spencer, of living vicariously through our tenants and following the innovation. It’s not only their profession, it's their vocation. It's what they do. And they spent their life working on conditions or trying to solve a problem or create a device to improve people's livelihood. We're just really proud to be able to provide the infrastructure and make that infrastructure available so that cutting edge science can be done in it. We think we're one of the main pillars in any of these markets that helps to grow and succeed. And really, for those of us like Ted, that we've been in the industry a long time, the speed of innovation and what can happen when everybody rolls in the same direction ias pretty impressive.
Spencer Levy
Well, the speed is remarkable. The vaccine, I guess, the first vaccine took about nine to nine months or so. I remember my grandmother telling me a story about when she would send my father swimming during the summers in the 40s and 50s. I'm terrified she was because of polio. And until there was that polio vaccine, so Jonas Salk literally saved the world, literally. And I think that the same thing could be said for many of your tenants in your buildings today. Ted, let's go into just a little bit more detail if we can, because there's all different types of life sciences, manufacturing, R&D. I would also say that every suburban office owner that I know wants to convert to life sciences. So tell us about the types and what do you tell those suburban office owners?
Ted Jacobs
There's so many different types of life sciences companies and types of sciences that need different infrastructure that go into the buildings, what have you. But you know, not every office building can be converted to life sciences, I would say to your point, Spencer. Almost every office owner at the start of the pandemic reached out to an architect, to a broker, to a project manager and try to do a case study, feasibility study, what have you, if their building can be converted to it. But as Tim knows much better than myself, it's the location. You're not going to just convert a lab building where there's no talent, no one in the number two. You have to have the ceiling height, the appropriate power, the floor load is critical as well to support the equipment, but the most important facet for real estate beyond location, location, location is how are you going to attract talent to support your business?
Tim Schoen
If I can build on what Ted said, Spencer Ted is exactly right. All lab buildings can be office, but not all office buildings can be lab. I think that was the first point that Ted made, But I put a little different spin on it, which is the sort of – and I'm not going to be too cheesy here – but the anatomy of a life science building. If you think about it, it's got to have the bones that Ted mentioned. And then you think about, you know, the circulatory system that has to go into one of these with robust mechanical systems, HVAC and, you know, gasses and waters and things like that, deionized water. And then the third thing is the higher level of tenant improvements. So I think conversions do happen, but somebody really has to have the conviction that one, they've got the right bones and then they really ready to make the investment. So somebody really has to make a serious financial commitment to convert a building.
Spencer Levy
Well, let's talk about a building and correct me if I'm wrong, Tim, but Biomed just bought the John Hancock office building in Boston. Tell us about the John Hancock deal and what you're planning to do with it.
Tim Schoen
Right. Well, the John Hancock building that you mentioned, it's now the Seaport Science Center. It's located 601 Congress. It’s in the seaport submarket of Boston, a great building. It's example of a building that had great bones, some amenity space in it that we really liked. It had sort of a winter garden, if you will, that's within the building. It was a platinum LEED designed building. It had the ability to have the clear heights and the weights and do some really impressive floor plates. And we thought that we could take the or we know that we could take that building that's under renovation right now, put the mechanical systems in which are going in and attract tenants in a location where there is a lot of need for additional lab space. Seaport is an established life science market. And then taking the building with the juxtaposition – as Ted mentioned location – and being able to get that online as early as next year really appealed to a wide swath of tenants. The renovation is well underway and as we deliver that building next year for tenant improvements. So we're starting to talk to tenants here as we start the new year here in 2022.
Spencer Levy
Let's stay with Boston for just a moment. When I think of Boston and life sciences, I think of Cambridge Sports about four or five miles from there. After the Big Dig, it's a whole lot easier to get there. I remember you used to take me an hour to get from Logan to to Harvard. Now I can get there in like 25 minutes. But tell me about that. Tell me about the expansion of the life sciences space in Boston, beyond Cambridge, .
Tim Schoen
Cambridge, obviously, you know, Kendall Square is sort of State and Main. It's grown out from there, you know, into seaport, into places even further out, like Watertown, even into some parts of South Boston. But really, that Boston, Cambridge ecosystem has continued to grow whatever it's been adjacent to, Cambridge has really benefited Somerville, Seaport without a doubt, the Bay Area and the West Coast are very strong, but Boston is a very, very, very strong ecosystem
Spencer Levy
Tim a number that I've thrown around quite a bit. Or maybe Ted, you can answer this as well. Of the total amount of life sciences assets in the United States is somewhere between 150 and 200 million square feet. Is that number about right? And how big is the biomed portfolio?
Tim Schoen
Ted, I'll let you go first to the market.
Ted Jacobs
Sure, I mean, that number that can be debated a little bit, but that's about right. And I mean, we're still in such early infancy stages of the industry. Just in San Diego, we're about a 20 million square foot market, if you can buy in Carlsbad. And then we're having new development going on downtown, which is new to San Diego. And there's an excess of five million square feet being developed just in San Diego. Biomed’s the second biggest owner in San Diego. In some cases, the biggest owner in the different submarkets that they're at. It's such a newer asset class that was not even really talked about until the pandemic. And now you have every single property owner investor trying to get into this asset class.
Tim Schoen
Yeah, we run about $22 billion worth of value of real estate. It's about 18 million feet, including active development. Beyond that, we can build another seven or eight million square feet in our pipeline, and it's really a national portfolio in all the core markets I've mentioned before the U.S. And that's by definition San Diego, San Francisco, Seattle, Boston. We still have a campus in suburban New York and Cambridge, UK, about forty five minutes outside of London. It's about 18 million feet and we serve about two hundred and seventy five clients. Folks, that you would expect the names, the Takeda's, AstraZeneca’s, the Pfizer's, the AbbVie, the Amgen's of the world, as well as technology companies. We have a fair amount of technology companies in the portfolio, including one that you may have heard of recently, which is a competitor to Tesla. Lucid Motors, who is developing cars now in Arizona, has started production. We've been with them since they were a $20 million company. And also research institutions, places like the Salk. Places like Sanford Burnham. The Broad Institute. And the research institutions, you know, UC San Diego on the left coast and on the right coast at MIT and Harvard. So it's a real combination of tenants that we serve, you know, with different needs and different uses.
Spencer Levy
My understanding is that manufacturing of pharmaceuticals is still largely offshore. What's coming here now as a much bigger thing? Ted, you see that in your tenant base?
Ted Jacobs
Yeah, you know, being in San Diego, most companies are doing manufacturing outside of California. Of course, there are a lot of companies doing manufacturing already in San Diego. It's a very, very big investment that the tenant has to make in addition to what the landlord is providing. We are seeing a lot of companies due to supply chain issues do a national search to build out a new manufacturing plant. A lot of those transactions happened last year. I would say it slowed down just a little bit at the start of ‘22, but there's definitely a need to have better supply chain and have in the United States and control the workforce a bit more as well.
Spencer Levy
It's hard to say there's any silver lining in COVID 19. It was such a tragedy, but maybe one of the silver linings longer term is that we will see some manufacturing coming back to the United States. If anything fell down during the COVID crisis, or one of the many things that fell down there in the crisis was the supply chain. And so, Tim, talk to me a little bit about how that goes into Biomed’s thinking about where it's going to locate its real estate.
Tim Schoen
We like to be in the shadow of research institutions, but I think, you know, Spencer, we are still seeing the effects of the supply chain. If you see the inflation in the economy. People have really started to question their supply chain. It's a great thing, I think, for the United States as we bring manufacturing back from overseas and put it more regionally, as you put it, it's definitely a demand driver for the U.S. and folks are thinking about that. I know we've thought about it as we're building buildings and we do have an international supply chain, but we did source more materials domestically. I know in the life science industry, folks are thinking about that. And in terms of manufacturing, you have an approved drug in its fulsome manufacturing. That's probably a different calculus than doing some smaller manufacturing. Probably some of Ted's tenants that are CMO's and things like that, they want to be, you know, relatively close to these innovation hubs of Cambridge and San Diego and San Francisco. So I think that manufacturing probably needs to be in, call it, 30 minutes plus or minus from some of the innovation hubs, the larger manufacturing for approved drugs. I think those companies probably have a wider swath of the United States to look at where they would want to put manufacturing based on the talent base in the labor pools and things like that.
Spencer Levy
So even if manufacturing comes back – and I do believe it is going to come back for the reasons we just described – I think we all agree the life sciences space, particularly R&D, is small in the United States. And because of that and because of the great demand, the value has gone up tremendously. And I want to do is back of the napkin math and what Tim just said. He's got a little bit less than 20 million square feet, a little over $20 billion of value. That's over a thousand bucks a foot. It may not be enough to get yourself a decent three bedroom apartment in Manhattan, but that is about as high as office buildings have ever traded anywhere. And so, Ted, what are you seeing now in terms of rents? I had heard that Cambridge rents were over a hundred bucks, but in some places. But what are you seeing?
Ted Jacobs
Yeah. Rents have really skyrocketed since the pandemic. The industry was very strong before the pandemic hit, and rents have gone up, in some cases 30 percent across the board. And it's really hard to do these negotiations with rents are climbing, sometimes on a monthly basis. And that's a trend that we're seeing throughout the country due to obviously supply and demand and more. So all the major markets, if you need lab space to occupy now until 2023, it almost does not exist for any size range. So you're seeing a rush from all these different developers to build out space because a company typically chooses a property to go to for the obvious reasons of location and the way it lays out. But the timing is one of the most critical aspects, and that's why you've seen this kind of gold rush of office to lab conversions to see if that's faster than doing a traditional ground-up lab buildout, which is a superior building but saving just six months in occupying and running your business versus waiting for that purpose built lab building could literally mean billions of dollars to a company, or if they're able to achieve some milestones for a new financing or for getting their drug into the clinic, what have you.
Spencer Levy
Tim, you mentioned many of the key hub markets for life sciences: San Diego, San Francisco, Seattle, New York, London. But I am aware that there are a lot of new developments happening in some secondary markets like Midtown in Atlanta, like in Dallas, Texas, even here in Baltimore, Maryland. And what do all those three have in common? They're all attached to a major research university. So Tim, how important are these research universities to the future growth of the industry? And would you look outside of some of the major markets are to tap into that?
Tim Schoen
Yeah. You know, we made a conscious decision to focus on the core markets and grow. We were about an $8 billion portfolio in 2016 to give you an idea of how we grew. We recycled a fair amount of capital to come out of some markets to focus on the growth that we saw coming in these core markets and really benefited from that to the $22 billion we are today. But you're right. Having a research institution is really important. I was in the medical office business for a long time and there you wanted to be in the shadow of a hospital. In this space that helps to be in the shadow of a research institution, one or two of them, or be in a city like San Diego, where you've got both the research institutions and the institutes. That obviously exists in Boston as well. But you do want to be in the shadow of a research institution in a place like Baltimore, Johns Hopkins. Houston has been mentioned as well, you know, with MD Anderson and some of the other Texas based universities. They are really important and they're part of the ecosystem that exists. There's the venture capitalists. There's the researchers. And then there's the entrepreneurs that can help advance some of the research that's being done. And I would argue we're the fourth pillar in the infrastructure. And when those four things exist, that creates a strong ecosystem and that's what you've got in these core markets. You can go to these other markets, but you want to make sure the rest of that ecosystem exists.
Spencer Levy
So let's go to the capital question. What's happening today in the real estate capital markets is that many of our traditional real estate investors now have infrastructure funds. As a matter of fact, many of them will buy data centers and say, Well, that's infrastructure. So Tim, are you infrastructure?
Tim Schoen
Yeah, if you think about what the real estate side can do is we can provide the real estate, capital and investments so that the companies can focus on science and innovation. And if you think about a building being in its base form infrastructure, we can help this industry grow and help the United States have a competitive advantage and help grow the economy without any help from the public sector. I know there's been a lot of talk about infrastructure, but I think if you widen that definition and you include innovation economy into that, we're at our essence providing that infrastructure to help grow the U.S. economy.
Spencer Levy
So let's stay on the capital question now, Ted, when you're looking at your clients or potential clients, how much are you speaking to them? How much are you speaking of venture capital or both?
Ted Jacobs
Yeah, definitely both. I mean, the industry is very fortunate to see a lot of these funds be able to raise tremendous amounts of money. About a year ago, the public markets in the start of ‘22 essentially almost cratered for life sciences. So if you're able to stay private, it's pretty helpful if you’re a life sciences company, unless you have really strong data to go public right now. Unfortunately, if you went public the later part of last year or any time last year, most of these companies valuations have been cut in half. And so we're hopeful that there's going to be more positive momentum going into ‘22. Valuations were kind of out of control at the end of ‘21. Biomed’s partner Blackstone, they have a fund as well, and they're heavily invested in the life sciences industry and it's a lot different. Opposed to a decade ago, where there were very few VC partners that you could go to. And now almost every VC arm has a life sciences segment within it. And they had to get up to speed and they had to invest in this industry during the pandemic, because it was one of the only things that were very vibrant and that were not shut down.
Spencer Levy
So Tim, Ted mentioned your partner, Blackstone, which took you private a few years ago, but before that you were a public company. Tell us a little bit about that relationship, if you don't mind and what kind of flexibility it affords you.
Tim Schoen
I like to describe it as we've got an international portfolio with a world class sponsor in Blackstone. Ted touched on it, but it really is a conviction industry for Blackstone. We're in a long term fund. We are a REIT. We’re a long term holder. Blackstone, used to have said the tag line, Jon Gray used to have a tag line: Buy it. Fix it. Sell it. I would say in our case it’s: Buy it. Fix it. Build it. And it really has become a conviction industry for Blackstone. We are in an evergreen fund, so we're much like a public company. We're in this for the long haul. Then they went ansd backed and put investments in companies like Ted just mentioned through Blackstone Life Sciences. So they're investing in the companies in the industry and then being part of the larger Blackstone ecosystem in companies, in folks around the world have really allowed us – and I'm going to borrow a tech term here – has allowed us to really create a killer app because we're providing the real estate and working to grow the real estate in the core markets while our colleagues are working to invest in the industry and in the companies, and then using the larger Blackstone platform to provide the best service that we can. And it really is a very powerful app, and it really is: But it. Fix it. Build it.
Spencer Levy
The last two words you use “Build it” are disfavored words in the publicly traded REIT business, but I would say that one of the things that you can do as a private enterprise is in fact build it when public companies not as easy in the REIT space. Would you agree with that, Tim?
Tim Schoen
That's a dangerous question, Spencer. I've been a public guy for two decades and now on the private side for six or seven years now, and I always like to thank the colleagues, no matter what their ownership structure is, makes the right real estate decision, and you want to make sure that you manage your development exposure, whether you're public or private. I will say on the margin, it does allow us to take a longer term view and make sure that we're making investments in the right places. And we want to make a return for our investors ultimate success. But it does allow us to take a long term view and not have the quarterly reporting requirements. But I'd like to think public or private. You make the right real estate decisions, but it is nice being in the private arena, being able to plan and build for the long term.
Spencer Levy
One of the big issues that we're hearing now from tenants investors all over the world but led from European investors in particular is ESG and the importance of that in buildings in which they're going to occupy people who are going to do business with. How much is this coming up today, Tim?
Tim Schoen
Yeah, listen, I think you're right. For a long time, the United States was behind or is behind some of the European efforts. But ESG has been an important part of the public climate. It is an important part of the Blackstone platform as well, and it's important to our investors. And it's really important for our team and the Biomed team, from our operating folks to our leasing folks to our development teams, that we're good stewards of the resources that we use. And, you know, with our development pipeline, about 35 percent of our portfolio will now be LEED certified. That's been a tremendous increase over the last two years. We're constantly putting in – and I’ll stay on the energy side for a moment, on the environmental and energy side – putting in new systems that utilize less energy like SmartStack technology, for example, that we're using in Boston that help monitor the amount of air and the quality of the air that's coming in and out of the buildings to decide how many fans need to be on at any one time and energy usage. So we're trying to become much more efficient at the energy we use. We're trying to use renewable energy and district energy that can be produced cleaner and also being produced more efficient. And on the social side, we've got a tremendously diverse workforce – geographically, gender wise and backgrounds. And that's something that we've really, really focused on and trying to advance the workforce in the industry. One of our folks works with GMGI, which is a workforce training group for lab technicians in Boston, to help bring additional folks and diversity into the industry. Because we need talent to come in and making sure that our teams and our boards and our executive teams are as diverse as they can be. It's something we've really focused on. When I was in the public arena to give you an idea. I haven't been in a public company now for six years, but we wrapped our ESG report around our 10-K. So it's coming. There's a lot more to do. And as an industry, we're really finding ways to get these buildings to operate as efficiently as we can.
Spencer Levy
Ted, one issue that we talk about the office space more than perhaps any other is the change of use – not the adaptive reuse that we talked about before, but work from home. And one of the reason why people like life sciences is it’s pretty tough to do life sciences research from home. But you can do some life sciences work from home, maybe writing papers or the like. So Ted, give us a sense of how occupiers have changed their outlook toward space needs because of the crisis.
Ted Jacobs
Yeah, it's definitely something that's talked about with every single one of my clients. The clinical side that could all happen from home, and it seems like they're happy doing that from home. But it's so challenging when you're onboarding new people. And this is all so new. It feels like forever, but you know, going on two plus years. And so if we're still in two early stages where people are comfortable making long term, you know, lots of these leases require a 10 year type of lease commitment due to the capital investment that's going in to them. So we're still seeing, for the most part, a pretty general 50/50 lab to office build out. And then that would typically in the past get pared back in terms of more of a higher office to lab ratio. If you're deeper in the clinic or if you're a major pharmaceutical company, it's moreso 50/50 or moreso on the lab side. We are seeing more companies who might have leased more office space, downsize that and look to do more hoteling or to do more collaboration meeting rooms. It's too early to make a statement about general trends. I think we're never going to go back to every person working five days a week in the office. But to that advantage, the lab is actually one of the safest places to be with the single pass air. And we were already kind of prepared for this pandemic in terms of the safety protocols that go on at these buildings. And a lot of the scientists, they want to be able to bump into each other and have these spur of the moment conversations about the science that they're working on that you really can't get during a Zoom call, Tim.
Spencer Levy
Ted mentioned a ballpark ratio there of office to lab space, he said 50/50. Would you agree with that ratio? And if and to the extent you're seeing some pushback on the amount of office space or issue people take other options, such as flex space where they may share office space in your buildings?
Tim Schoen
Yeah, 50/50 is a good breakdown because you've got folks that are working in the lab and then they'll go out and work in their offices, so their back and forth. Having the proximity to office to the lab is more important. It depends on the user. It could go 60/40 where it's 60 percent office, 40 percent lab or 60 percent lab, 40 percent office. But 50/50 is a good proxy. Not just because that sounds good. We will see, I think, a more of a hybrid schedule. But we've always said and I think if you've been around Biomed over the decades, you know, innovation happens in proximity, not in isolation. So having these folks together and bump into each other and we see it in our culture too, we want our teams to be able to come back into the office and really pass on the knowledge from each of our teams to the other teams and work together. We've got 25 percent of our team that's new as we've grown over the last couple of years during this COVID environment. We really need to be back together and you need that in the life science industry as well. You need your teams back together, as Ted mentioned, bumping into each other and collaborating. I think we will see a hybrid schedule and some more flexible schedules. But you know, at least in our economy and in the life sciences, people will continue to get together and share knowledge and advance the research. You can't do it from your kitchen, right?
Spencer Levy
When I'm speaking to a traditional office developer owner, we're recommending to them that 10 to 20 percent of the workspace be flex so that tenants in the building can work together, or at least in the same space at the same time. And I could certainly see that for the office component of your business, but I don't see any reason why it couldn't be for the lab component to for the right kind of lab. So do you have any of that today, and do you see any of that in the future?
Tim Schoen
Yeah, I mean, we build flexible lab environments. And really when I mention that we talk about everything being above the grid where we can move labs around as needs change or tenants change in and out. So we've built that flexibility of Flex Labs, we used to call it into the infrastructure of the building. So that's there already. But I think once you're running a program, you pretty much want your lab set for the specifications that you need. But it's making sure you have the flexibility in the zones really above the grid in a building. And again, that goes to making sure you design and put the infrastructure in right the first time.
Spencer Levy
Let me ask a technical question because you use the term “above the grid” a few times for our listeners who don't know what the grid is, including me. Tell us a little bit of what the grid is that you're describing.
Tim Schoen
Really above the ceiling tiles. It's the plumbing and the data systems and wiring that you have above your ceiling tiles in your typical office building or above the ceiling if you're in your house. So it's really what happens up above there that allows us to have some flexibility. So you're building as much flexibility as you can to be able to move the labs around or increase the lab potential over time.
Spencer Levy
Well, in terms of that flexibility, Ted, you mentioned the uniqueness of these buildings and the redundant systems you need for things like air conditioning or power. Tell us how much more expensive – maybe not from the dollars and cents – but what types of redundant systems might you need in this type of building, what you would need in a traditional office building?
Ted Jacobs
There's going to be tremendous investment on the MEP side.
Spencer Levy
I'm sorry, what does MEP stand for?
Ted Jacobs
Mechanical, electrical, plumbing and these companies are running critical equipment. I mean, millions and millions of dollars of equipment. So they're going to want that backed up by emergency generator. And then some of these companies are going to require specialized type of water, such as de-i water or gas or vacuum to run these different experiments or to help facilitate different types of equipment that they have. And then you actually could even have very clean type of areas, different classifications of ratings of, you know, ISO 7, 8, what have you, which could be very expensive. And that's a number of air changes per hour, which you would not see in a traditional office building. So we're going to have single-pass air, and that's where a lot of the infrastructure goes into and makes it very expensive. And what we were talking about earlier makes it more of a safe environment to breathe in because if there's an unfortunate spill in the lab that there's a number of changes that actually gets recycled outside of the building opposed to an office building versus recirculating there,
Tim Schoen
It really starts again with the structure and the bones of the building that you're building to a higher floor to floor height. So you're creating room where you can put the ducting and things like that, becuse as Ted mentioned, the air that needs to pass through the building, you need bigger ducting. So it starts there, but it's really increased investment in the mechanical, electrical and the plumbing systems. The best example I can give you is, you know, you look at the air handling systems and you go up on the roofs of some of these buildings, or maybe a utility yard by some of the low rise buildings. They're just unbelievable air handlers. You could walk into these sort of large air conditioners or air handlers. They're huge because they're processing so much air. Ted mentioned some of the other things you're putting in some fume hoods, possibly we're doing some experiments and biosafety cabinets. You're putting in the benches, the benches that we would traditionally see in an academic environment or high school or college environment. If you think about your biology lab, you're putting those benches in. So all those investments, you know, add up to a building that costs more than your traditional suburban office building where you're basically focused on the core and shell and the lobbies. And then you're fitting that out with drywall offices and things like that. Here you've got advanced plumbing and advanced systems.
Spencer Levy
Well, gentlemen, I think it's fair to say that there is no sector that's more attractive today to the real estate community than life sciences for all the reasons related to COVID. But five years from now, when the world is, please God, past COVID, what do you see as the life sciences industry that how much bigger is it will remain as popular as it is today? Ted, do you first than Tim? I'd like your crystal ball as well.
Ted Jacobs
Yeah, I touched on this earlier. I think we're just only in the early stages of the industry five years from now. I'm not sure if if it doubles in size, it's going to be a lot bigger. I hate to make those types of projections, but there's always going to be a need for life sciences. People are getting older. There's new diseases that are always being found. And it's this industry that is on the forefront of attacking disease and trying to solve cancer. So there's always going to be a need for this industry. Unfortunately, it took a pandemic to really put a spotlight on it.
Spencer Levy
Tim, your point of view five years from now, how do you see the industry evolving?
Tim Schoen
We haven't cured the human condition yet, Spencer. I think it'll continue to expand the types of novel approaches that are being taken to, you know, Ted mentioned oncology. Almost 50 percent of all research dollars go to some type of research related to cancer. So, you know, a lot of novel approaches – using your immune system, for example. I think we'll continue to see unique ways of treating disease with more efficacy. And as a result of that new innovation, they're obviously talking about CRISPR-Cas9 technology now that didn't exist years and years ago. You're talking about liquid biopsy, which is a way to see markers in your blood. So there's a lot of new innovation that's going to continue to come out of new therapies and that will create a way to grow. And I think you'll see engineering and biology and science coming together along with technology, data and science. And as those two converge, I think technology and science is probably the most powerful wave in the industry today, and that's going to continue to come together and drive demand. Other than that, it's hard to be really specific, but we definitely have a lot of room to grow to improve the efficacy of the treatments that we have today. And ultimately hopefully keep people out of hospitals and out of acute care settings and will reap benefits to, you know, the price of our health care system over the long run. I really believe the innovation helps our health care spending go longer and help people live better lives.
Spencer Levy
All right. Well, on behalf of The Weekly Take, stay classy San Diego and thank you for joining us with Tim Schoen, the CEO of Biomed. Ted, tank you so much for joining us.
Tim Schoen
Thanks for having me. Appreciate it.
Spencer Levy
And then Ted Jacobs, Vice Chairman, CBRE. Ted. Well done. Thanks for joining the show.
Ted Jacobs
Thank you very much.
Spencer Levy
For a deeper look at life sciences and more on our show, please visit CBRE.com/TheWeeklyTake. We'll post a link to the in-depth research I mentioned at the top of the show. CBRE’s recently published report called U.S. Life Sciences Trends The Century of Biology Lifts Off. We'll be back next week, shifting gears from bio to branding for a conversation with some creative thinkers who are working to reinvigorate commercial real estate. And we've got a lot more creative and interesting programs in the works as well. So stay tuned for all that. And in the meantime, as always, please share the show, subscribe rate and review us wherever you listen. Thanks for joining us. I'm Spencer Levy. Be smart. Be safe. Be well – and stay classy.
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