Life Science: Great Promise & Rapid Growth

LIFE SCIENCE: GREAT PROMISE & RAPID GROWTH FEBRUARY 2019

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TABLE OF CONTENTS INTRODUCTION Economic Factors Impacting the Life Science Sector 4 EMPLOYMENT 5 POPULATION 6 FUNDING 8 IMPACT ON REAL ESTATE MARKET-BY-MARKET ANALYSIS Primary Life Science Clusters 14 BALTIMORE 16 BOSTON 18 MONTREAL 20 NEW JERSEY

22 NEW YORK CITY 24 PHILADELPHIA 26 RESEARCH TRIANGLE, NC 28 SAN DIEGO 30 SAN FRANCISCO EAST BAY 32 SAN FRANCISCO & PENINSULA 34 SEATTLE/PUGET SOUND 36 TORONTO 38 WASHINGTON D.C. METRO (SUBURBAN MARYLAND) 40 APPENDIX Definitions

INTRODUCTION

Life science has been touted as a future growth sector for the U.S. economy for decades. Where technology combines with healthcare, life science has become a broad and growing sector of the economy that encompasses everything from genetic engineering to medical device technology to pharmaceutical research and development, and much more. Over the past eight years, two sets of forces have been driving the acceleration of growth in this sector. • Demand for health services is soaring as the population ages. • The technology enabling life science has led to greater supply of new products, leading to historically high investment in this sector. Life Science is one of the fastest-growing sectors of the U.S. economy with many characteristics that appear recession-resilient.

3

Growth in life science is being driven by a combination of technological advancements and an aging population.

Employment During the 1990s technology boom, life science was expected to be a growth sector for the U.S. economy, but the growth was slow in coming. Much of the growth in this sector has taken place since 2000, especially in the current economic expansion. Using the Bureau of Labor Statistics’ employment in research and development in the biotechnology industry as a measure of the growth of the industry, there was almost no job growth in the 1990s. From 1990 to 2000, employment in biotechnology R&D barely changed (+0.2% per year) while total U.S. employment rose by 1.9% per year. But since the beginning of 2000, the sector has grown nearly five times as fast as the economy as a whole, adding 85,000 jobs. Roughly 70% of that job growth (61,000) has taken place in just the past eight years.

LIFE SCIENCE EMPLOYMENT GROWTH BY DECADE AVERAGE ANNUAL GROWTH RATE

Life Sciences Total Employment

-1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0%

4.5%

1.9%

1.8%

1.7%

0.2%

-0.1%

1990-2000

2000-2010

2010-2018

Source: Bureau of Labor Statistics, Cushman & Wakefield Research

RECESSION-RESILIENT? When compared to the overall economy and the tech sector, the life science sector’s recession-resistant performance is likely due to the fact that the industry is strongly driven by rising demand caused by an aging population and the nature of the industry. In turn, product development is propelled by technological change and innovation. As the technology that enables product development has advanced, the sector has continued to grow.

LIFE SCIENCE R&D EMPLOYMENT IN RECESSION

Total

Technology Life Sciences

-7.0% -6.0% -5.0% -4.0% -3.0% -2.0% -1.0% 0.0%

-0.2%

0.0%

-1.1%

-1.2%

-1.4%

-1.4%

-3.6%

-5.0%

-6.2%

1990-91

2001

2007-2009

Source: Bureau of Labor Statistics, Cushman & Wakefield Research

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Population The baby boom generation, broadly defined as people born between 1946 and 1964, is one of the largest age groups in history, surpassed only by millennials. When the first boomers began to retire in 2011, the baby boom generation totaled 76.9 million people. It is estimated 1 that since that time, roughly 10,000 people have been retiring every day in the U.S. and that rate of retirement will continue until roughly 2029.

Explosive growth in the 65-and-older population has created rising demand for drugs, therapies and medical devices to extend and improve quality of life.

POPULATION AGED 65 AND OLDER

80,000

10% 12% 14% 16% 18% 20% 22%

70,000

60,000

50,000

40,000

30,000

0% 2% 4% 6% 8%

20,000

10,000

0

2000

2010

2020

2030

65+ Population

Share of Total Population

Source: U.S. Census Bureau, Cushman & Wakefield Research

The massive number of retirees are also, on average, enjoying longer lives. In 2000, the average life expectancy in the U.S. was 76.6 years, and by 2016 it made a significant increase to 78.7 years. The combination of the aging of the population and increased longevity means that by 2030, there will be 73 million Americans aged 65 or older, equating to 20.6% of the population. In 2010, the population counted only 40.5 million people in the same age bracket.

The 65-and- over population will account for nearly three- quarters of the population growth between 2016 and 2030.

1 Baby Boomers Approach 65 – Glumly | Pew Research Center (www.pewsocialtrends.org/2010/12/20/baby-boomers-approach-65-glumly/)

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Funding In 2018, a record $16.2 billion was invested by venture capital companies into the healthcare sector, up from the previous record $14.3 billion invested in 2017. Since 2012, the amount of venture capital invested in this sector has more than doubled. VENTURE CAPITAL INVESTMENT TARGETING LIFE SCIENCE

$10.0 $12.0 $14.0 $16.0 $18.0

$16

$14

$12

$12

$11

$10

$10

$0.0 $2.0 $4.0 $6.0 $8.0

$8

$8

$7

$7

$7 $7

$7

Billions

$7 $6

$6

$6

$5

$4

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: PwC/CB Insights MoneyTree™ Report, Cushman & Wakefield Research

The amount of venture capital investment indicates that there are a growing number of private companies developing products in the life science sector. But an equally important source of research funding in the sector is the National Institutes of Health (NIH). The NIH is the primary federal government agency charged with conducting and supporting biomedical and behavioral research. NIH provides grants to support research at university and medical research centers across the U.S. According to the Congressional Research Service, NIH funding has increased from $11.0 billion in 1994 to $37.3 billion in 2018 and is projected to reach $39.3 billion in 2019. Taken together, total investment in life science in the U.S. has surged in the current expansion. Since 2013 total research funding has increased by 44.1%, or 7.6% per year, more than three times as fast as the annual growth rate recorded in the previous 13 years. TOTAL LIFE SCIENCES RESEARCH FUNDING: VENTURE CAPITAL INVESTMENT PLUS NIH FUNDING

$53.44

$52.0

$47.0

$42.0

$37.0

$37.09

$32.0

Billions of Dollars

2013-2018 +44.1%

$27.0

$22.0

$17.0

$12.0

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

2017

Source: National Institutes of Health, PwC/CB Insights MoneyTree™ Report

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Like many other industries, life science companies have tended to cluster in certain markets. These markets can be identified by taking a closer look at the funding data. While this investment has been spread across the country, several metropolitan areas have received substantial funding.

TOP METRO AREAS FOR LIFE SCIENCE VC FUNDING 2010-2018

01 Boston $15.5B 04

02

03

San Francisco & Peninsula $15.0B

San Diego $5.6B

05

06

Research Triangle, NC $4.0B

Philadelphia $2.7B

San Francisco East Bay $2.7B

07

08

09

Baltimore/DC $2.3B

New Jersey $2.1B

New York $1.6B

10 Seattle $1.5B

11

12

Montreal* $1.3B

Toronto* $455M

* 2013-2018

Source: PitchBook

Not surprisingly, most of these markets have at least one leading life science research institution - either a major research university, a major medical research hospital, or both. These research organizations act as the catalyst for innovation and product development for the life science sector and attract R&D funding, especially from the NIH.

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In key life science real estate markets the inventory of lab space is rising twice as fast as the overall office inventory.

Impact on Real Estate Life science companies have been an important driver of economic growth and commercial real estate demand in the markets in which this sector is concentrated. These companies require specialized lab space for research along with office space. The rapid growth in this sector has generally outpaced supply and kept lab market vacancy rates tighter than overall office markets. INVENTORY The life science sector generally does not constitute a major percentage of real estate space in any market. But its share has increased over time as the amount of space used for life science has grown faster than the overall market. In the major markets highlighted in this report the total life science inventory has increased nearly 10% since 2014, while total office inventory in these markets has risen at less than half that pace (4.7%). LAB VACANCY In nearly every major market where the life science sector is concentrated the lab vacancy rate is declining as the demand for this space has grown even more rapidly.

Q4 2008

Q4 2018

CHANGE

Baltimore

16.1%

9.8%

-630 BPS

Boston (Cambridge)

12.2%

0.7%

-1,150 BPS

DC Metro/ Suburban Maryland

9.8%*

4.7%

-510 BPS

New Jersey

12.3%

13.6%

130 BPS

New York

19.9%**

22.3%

240 BPS

Philadelphia

6.2%

2.6%

-360 BPS

Research Triangle, NC

10.7%

19.3%

860 BPS

San Diego

5.90%

6.2%

30 BPS

San Francisco & Peninsula

18.3%

6.2%

-12,100 BPS

San Francisco East Bay

31.1%

8.8%

-2,230 BPS

Seattle/ Puget Sound

9.4%

3.2%

-620 BPS

* 2009 ** 2014 Source: Cushman & Wakefield Research

Since the 2008 recession, the vacancy rate for lab space has fallen dramatically, especially in the core life science markets. In Cambridge, MA the vacancy rate has fallen below 1.0% while in San Francisco and East Bay (Oakland) vacancy has plunged. And in most cases, the markets that have experienced an increase in vacancy like New York City are adding substantially to inventory. San Diego for example has added more than 2.0 msf of space (+14.5%) in the past four years.

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Cushman & Wakefield is tracking approximately 125 msf of lab space in the 11 U.S. markets. Key Canadian life science markets like Toronto and Montreal do not separate out lab space from their overall inventory. Life science space is in high demand. The vacancy rate for this space is 8.4% in these 11 markets, well below the 11.6% vacancy rate for all office space in these markets and the national office vacancy rate of 13.3%. In extreme cases like Cambridge, outside of Boston, the vacancy rate has fallen to 0.9%.

Laboratory occupancy costs have been rising significantly over the last several years, consistent with the overall

LAB SPACE VACANCY RATES BY MARKET

health of the economy and the increased funding and growth of the life sciences sector.

25%

22.3%

20%

19.3%

15%

13.6%

10%

9.8%

8.8%

6.2% 6.2%

5%

4.7%

3.2% 2.6% 0.7%

0%

Source: Cushman & Wakefield Research

RENTS In an environment of low vacancy, asking rents for lab space generally command a premium in the marketplace. Overall, asking rents for lab space in the 11 markets covered in this report average approximately $36.00 NNN, significantly above the $31.29 NNN reported for office space in the U.S. in the third quarter. Extraordinarily tight markets are experiencing extraordinary rents for life science properties, including Cambridge, MA which has reported triple net rents around $85 per square foot. On a market-by-market basis the differences between rents on lab space and office space are generally small for most markets, but because some markets have very large differences, the premium for lab space averages approximately 19%. But in some markets, like Boston, the extraordinary tightness of the lab space market has pushed rents into the stratosphere. In addition, the strong demand for space and resulting low vacancy has boosted rents for lab space faster than overall office rents. Since 2008 average asking rents in the U.S. office market have increased 17%. The average rent for lab space over this time has increased approximately twice as fast at 33.2%.

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FASTER RENT GROWTH

ASKING RENTS ON LAB SPACE (PSF/NNN)

Q4 2008

Q4 2018

CHANGE

Baltimore

$23.40

$25.44

8.7%

Boston (Cambridge)*

$51.65**

$88.00

70.4%

DC Metro/Suburban Maryland

$19.49 ***

$28.64

46.9%

New Jersey

$18.72

$18.26

-2.5%

New York

$62.70 **** $79.00

26.0%

Philadelphia

$22.90

$23.71

3.5%

Research Triangle

$15.53

$25.07

61.4%

San Diego

$36.36

$48.60

33.7%

San Francisco & Peninsula

$35.88

$60.09

67.5%

San Francisco East Bay

$20.16

$34.83

72.8%

Seattle/Puget Sound

$29.06

$26.42

-9.1%

*Effective Rents **2015

***2009 ****2016

Source: Cushman & Wakefield Research

OCCUPANCY COSTS Laboratory occupancy costs have been rising significantly over the last several years, consistent with the overall health of the economy and the increased funding and growth of the life science sector. The rise in rental rates is driven by required return on landlord investment, typically a minimum target of 7-10% return on capital. As building and land prices rise, so do rents and operating expenses. When rising tenant improvement costs are factored in, there are significant occupancy cost increases. Real estate is typically the third-largest spend for a life science company, behind employment and R&D costs. While the natural inclination is to focus on base rent, there are other occupancy costs that are factored in as well (operating expenses, property taxes, utilities, common area maintenance, etc.) accounting for approximately 30-40% of the total occupancy costs.

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OCCUPANCY COSTS FOR CLASS A LAB SPACE BY TOP LIFE SCIENCE MARKETS ($/PSF)

Boston (Cambridge) Boston (Cambridge)

SF City

SF City

SF Peninsula SF Peninsula

San Diego San Diego

Seattle

Seattle

Research Triangle Research Triangle

SF East Bay SF East Bay

0

20

40

60

80

100

120

0

20

40

60

80

100

120

Base Rent Base Rent

CAM/Ins RE Tax Utilities CAM/Ins RE Tax Utilities

TYPICAL ANNUAL SPEND: LIFE SCIENCE COMPANIES

67%

67%

20%

13%

20%

Real Estate Employees R&D Expense 13% Real Estate ployees R&D Expense

Source: Data developed by Cushman & Wakefield based on surveys of local market experts.

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MARKET-BY-MARKET ANALYSIS Primary Life Science Clusters

12  CUSHMAN & WAKEFIELD

PHILADELPHIA

BOSTON

SEATTLE/ PUGET SOUND

MONTREAL

TORONTO

SAN FRANCISO & PENINSULA

SAN FRANCISCO EAST BAY

RESEARCH TRIANGLE

NEW YORK CITY

SAN DIEGO

NEW JERSEY

WASHINTON D.C. METRO (SUBURBAN MARYLAND)

BALTIMORE

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MARKET SUMMARY

Baltimore is home to Johns Hopkins University, the nation’s top academic recipient of research grant funding. This gives the Maryland area a huge talent pool from which to pull when attracting top talent to the life science field. The region ranks fourth nationally for its population attaining an advanced degree. Johns Hopkins is ranked the third best medical school and the University of Maryland Baltimore County ranks fifth for Most Innovative School by U.S. News and World Report. Currently, Maryland is home to 500 core biotechnology firms, 2,260 life science companies, and numerous federal agencies. Location also plays a big part in the attractiveness of the market as 80% of the U.S.

pharmaceutical industry is within a two-hour drive of the Baltimore/DC Metro area. At the University of Maryland BioPark, Paragon Bioservices—a 28-year-old contract research and manufacturing firm that started with just two people in 1990—significantly expanded its space at the research park and also leased 138,000 sf of warehouse space near the BWI Airport for additional GMP operations. Given the lack of available lab/R&D space within the two research parks in Baltimore, developers are expected to commence construction soon on new facilities to meet demand.

TOP TEN LIFE SCIENCE EMPLOYERS (BY REVENUE)

6.5 MSF MARKET SQUARE FOOTAGE AVERAGE RENT (PER SF) $25.44 14.6K TOTAL EMPLOYEES 9.8% VACANCY FAST LAB STATS

BALTIMORE COMPANY TYPE Meridian Medical Technologies Osiris Therapeutics, Inc

Medical Devices

Biotechnology

Martex Biosciences, Corp

Biotechnology

Lupin Pharmaceuticals

Pharmaceutical

Paragon Bioservices, Inc

Biotechnology

Acell, Inc.

Biotechnology

Emergent Biosolutions

Pharmaceutical

Nutramax Laboratories, Inc

Vitamin

Personal Genome Diagnostics

Biotechnology

Becton Dickinson

Medical Devices

TOP THREE NIH-FUNDED INSTITUTIONS

JOHNS HOPKINS UNIVERSITY $663M

UNIVERSITY OF MARYLAND, BALTIMORE $170M

HUGO W MOSER INSTITUTE AT KENNEDY KRIEGER $16M

14

TOP VC-FUNDED COMPANIES (2018)

COMPANY

ROUND

MONEY RAISED LEAD INVESTORS

Personal Genome Diagnostics

Series B

$75M

Bristol-Myers Squibb, New Enterprise Associates

Personal Genome Diagnostics

Development Capital

$42M

Innovatus Capital Partners

Dracen Pharmaceuticals

Series A

$40M

Deerfield Management

Cage Pharmaceuticals

Seed Funding

Camden Partners

$350K

Source: PitchBook, Crunchbase

RENT VS. VACANCY COMPARISON

SUBMARKET STATS

$21.50 $22.00 $22.50 $23.00 $23.50 $24.00 $24.50 $25.00 $25.50 $26.00 $26.50 $27.00

AVG. ASKING RENT (NNN)

16%

INVENTORY VACANCY

14%

Downtown Baltimore

$27.17

1,042,446 SF 6.5%

12%

BWI Airport

$22.59

1,438,960 SF 3.0%

10%

Greater Annapolis

8%

$28.75

288,517 SF 5.0%

6%

Harford County Howard County

$24.75

334,085 SF 36.8%

4%

2%

$24.01

2,289,673 SF 10.2%

0%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Asking Rent, $ PSF (NNN) Overall Vacancy Rate

Southern MD

$12.27

118,161 SF

18.5%

Suburban West Suburban North

494,655 SF 11.2%

$16.75

447,140 SF 14.0%

NOTABLE LEASE TRANSACTIONS (2018)

TENANT

SF

LANDLORD

ADDRESS

SUBMARKET

LEASE TYPE

Paragon Bioservices

BWI/Anne Arundel

New

151,000 SF Emerson

755 Harmans Rd

RegenxBio

North Rockville

New

132,000 SF Alexandria Real Estate Equities

9800 Medical Ctr

NOTABLE SALE TRANSACTIONS (2017 - 2018)

ADDRESS

SUBMARKET SF

BUYER

SELLER

PRICE

TENANTS

1701 Research Blvd

Biomed Realty

$40.5M

Meso Scale Diagnostics, LLC *Converting to life science building

North Rockville

105,000 SF Meso Scale

Diagnostics, LLC

704 Quince

Crown West Realty, LLC

$6.9M

Gaithersburg 77,000 SF Alexandria Real Estate Equities, Inc.

Contributor: David Spragg, david.spragg@cushwake.com

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MARKET SUMMARY

FAST LAB STATS

At its core, medicine is about saving lives. But it’s also a real estate driver. In 1977, Cambridge, Massachusetts became the world’s first city to govern the handling of genetic material through the Cambridge Recombinant DNA Technology Ordinance. At the time, DNA intelligence was in its infancy. However, it was well known that the discovery would be critically important to understanding diseases and to the future development of pharmaceuticals. Massachusetts – and Cambridge in particular – has been at the forefront of biotechnology since the field’s inception. While Cambridge benefits from proximity to academic prowess, it was the community’s early acceptance of biotechnology that enabled the industry to flourish. From a real estate perspective, the needs of the biotechnology community are drastically different from most other sectors. Unlike an office tenant, who tends to consider relocation only when a lease expires, a life science company’s decisions are based on two things: scientific discovery and funding. Once one of these is achieved, the firm is on the fast track to relocate into bigger space. Increasingly limited lab availability means many tenants must now consider new construction. Build- to-suit doesn’t typically work for these types of firms as their time frames are too short. They need space as soon as possible and existing or under-construction buildings are frequently the only sufficient options. The ongoing growth of the industry, coupled with the subsequent surge in demand for lab space, means lab rents in greater Boston are at historical highs – and rising.

18.4 MSF MARKET SQUARE FOOTAGE

AVERAGE RENT (PER SF) $52.98

70K TOTAL EMPLOYEES

BOSTON

3.6% VACANCY

TOP TEN LIFE SCIENCE EMPLOYERS (BY REVENUE)

CAMBRIDGE LAB RENT VS. VACANCY COMPARISON

COMPANY

TYPE

$40 $45 $50 $55 $60 $65 $70 $75 $80 $85 $90 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Asking Rent, $ PSF (NNN) Overall Vacancy Rate

14%

12%

Pfizer Inc.

Research Laboratory

10%

Novartis

Pharmaceutical

8%

Sanofi

Pharmaceutical

6%

Merck

Pharmaceutical

4%

AbbVie

Pharmaceutical

2%

EMD Serono

Pharmaceutical

0%

Shire PLC

Pharmaceutical

Biogen

Pharmaceutical

Quest Diagnostics

Diagnostic information services

Vertex Pharmaceuticals Pharmaceutical

TOP THREE NIH-FUNDED INSTITUTIONS

MASSACHUSETTS GENERAL HOSPITAL $395M

BRIGHAM AND WOMEN’S HOSPITAL $390M

HARVARD MEDICAL SCHOOL $213M

16

TOP VC-FUNDED COMPANIES (2018)

COMPANY

ROUND

MONEY RAISED LEAD INVESTORS

Moderna Therapeutics

Series G

$500M

Abu Dhabi Investment Authority, Bellevue Asset Management, Julius Baer Group Flagship Pioneering, Baillie Gifford, Investment Corporation of Dubai Ireland Strategic Investment Fund, Sequoia Capital China, Temasek Holdings, Yunfeng Capital

Indigo Agriculture

Series E

$250M

WuXi NextCODE

Series C

$200M

TCR2 Therapeutics

Series B

$125M

6 Dimensions Capital, Curative Ventures

Moderna Therapeutics

Series H

$125M

Merck Capital Ventures

Kaleido BioSciences

Series C

$101M

Invus Group, Flagship Pioneering, Fidelity Management & Research

Generation Bio

Series B

$100M

Fidelity Management & Research

Stealth BioTherapeutics

Series B

$100M

Pivotal bioVenture Partners

Skyhawk Therapeutics

Early Stage VC $100M

Alexandria Venture Investments, GreatPoint Ventures, Agent Capital, Tim Disney, The Duke of Bedford

TraceLink

Series D

$93M

Georgian Partners

Source: PitchBook, Crunchbase

SUBMARKET STATS

AVG. ASKING RENT (NNN)

INVENTORY (MSF)

VACANCY

Cambridge

$88.00

10.2

0.7%

Boston

$78.00

2

1.1%

Inner Suburbs

$55.00

1

8.1%

128 Belt

$50.00

3.1

12.6%

495 Belt

$27.50

1.2

7.5%

OVERALL BOSTON

$53.00

18.6

3.6%

NOTABLE LEASE TRANSACTIONS (2018)

TENANT

SF

LANDLORD

ADDRESS

SUBMARKET LEASE TYPE

Sanofi Genzyme

900,000 DivcoWest

Cambridge Crossing, Cambridge

East Cambridge New

Alexion Pharmaceuticals 149,000 Skanska

121 Seaport Blvd, Boston Boston Seaport Relocation (from New Haven, CT)

Mass Innovation Labs

84,000 NB Development Group LLC (New Balance)

40 Guest St, Brighton

Inner Suburbs New (expanding in market)

NOTABLE SALE TRANSACTIONS (2017 - 2018)

ADDRESS

SUBMARKET SF

BUYER

SELLER

PRICE

TENANTS

4 Blackfan Circle

Brigham & Womens Hospital; Dana-Farber Cancer Institute Kala Pharmaceuticals; C4 Therapeutics; Addgene, Inc.

Longwood Medical Area

270,000 Intercontinental Real Estate Corporation

Harvard University Medical School

$272.5M/ $1,421 PSF

490 Arsenal Street (Linx)

Inner Suburbs 185,000 Clarion Partners

Boylston Properties

$171.7M/ $928 PSF

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Contributor: Ashley Lane, ashley.lane@cushwake.com; Matthew Smith, matthew.smith@cushwake.com

95 MSF OFFICE MARKET SQUARE FOOTAGE OVERALL OFFICE MARKET AVERAGE RENT (PER SF) $16.15 56K TOTAL LIFE SCIENCE FAST OFFICE STATS

MARKET SUMMARY

Montreal is a well-established global hub for life science, thanks in part to the Montreal InVivo – a non-profit group formed in 2007 that fosters innovation and the development of sector-focused private and public organizations. Today, InVivo encompasses more than 620 organizations, and generates annual revenues of more than $5.6 billion. Beyond this dynamic cluster, the city’s overall life science industry employs more than 56,000 people in some 650 organizations. Leading industry employers include drug discovery and development companies, biotechnology tools and services companies, governmental and research institutes, medical device companies, and education institutions. Current lab stock is clustered around the downtown, Laval, Saint-Laurent and West Island areas, with major manufacturing facilities located predominantly in the West End. Montreal’s life science sector, which continues to attract a substantial amount of venture capital and government funding, also benefits from generous R&D tax credits and low corporate tax rates.

EMPLOYEES 11.4% OVERALL VACANCY

RENT VS. VACANCY COMPARISON

MONTREAL TOP TEN LIFE SCIENCE EMPLOYERS (BY REVENUE) COMPANY TYPE

$12.00 $12.50 $13.00 $13.50 $14.00 $14.50 $15.00 $15.50 $16.00 $16.50 $17.00

10% 12% 14%

Pfizer

Pharmaceutical

0% 2% 4% 6% 8%

Roche

Pharmaceutical

Sanofi

Pharmaceutical

GlaxoSmithKline

Pharmaceutical

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Asking Rent, $ PSF (NNN) Overall Vacancy Rate

Novartis

Pharmaceutical

Abbvie

Pharmaceutical

SUBMARKET STATS

Merck

Pharmaceutical

OVERALL AVG. ASKING RENT

OVERALL INVENTORY

OVERALL VACANCY

AstraZeneca

Pharmaceutical

Downtown South

$18.99

12,004,760 7.40%

Gilead

Pharmaceutical

Teva

Pharmaceutical

West Island

$14.51

2,884,439 17.90%

St-Laurent

$14.10

6,795,193

20.70%

TOP THREE NIH-FUNDED INSTITUTIONS

MCGILL UNIVERSITY HEALTH CENTER RESEARCH INSTITUTE $2.7M

MCGILL UNIVERSITY $1.5M

UNIVERSITY OF MONTREAL HOSPITAL $657K

18

TOP VC-FUNDED COMPANIES (2018)

COMPANY

ROUND

MONEY RAISED (USD) LEAD INVESTORS

Milestone Pharmaceuticals

Later Stage VC $80M

RTW Investments LLC

Cannara Biotech

Venture Round $18M

FSD Pharma

Hyasynth Bio

Later Stage VC $10M

OrganiGram Holdings

Angiochem

Series C

$8M

BDC Healthcare Venture Fund

Inversago Pharma

Series A

$7M

Genesys Capital, AmorChem

Source: PitchBook, Crunchbase

NOTABLE LEASE TRANSACTIONS (2018)

TENANT

SF

LANDLORD

ADDRESS

SUBMARKET LEASE TYPE

Paladins Labs Inc.

26,000 CREIT Management Ltd.

100 Boulevard Alexis-Nihon

Saint Laurent

Renewal

McKesson Canada Corporation Orion Nutraceuticals Inc.

33,000 Conseillers immobiliers GWL

9415-9495 Transcanada Hwy

Saint Laurent

Renewal

32,000 Landmark Properties Inc.

Dorval Campus, CDL

Saint Laurent

New

Dermtek Pharma Inc.

18,000

Olymbec Development Inc

7600 Transcanada Hwy Saint Laurent

New

Laboratoires Dermadry Inc.

11,000 Olymbec Development Inc

9223 Blvd Langelier

East End

New

Otsuka Canada Pharmaceutical Inc.

9,000 BTB

2250 Blvd Alfred-Nobel

Saint Laurent

Expansion

Cannara Biotech Inc.

7,000

Olymbec Development Inc

333 Blvd Decarie

Saint Laurent

New

Spinologics Inc.

2,000 Antrev and Associates

Esplanade Loft Project

Midtown

New

NOTABLE SALE TRANSACTIONS (2017 - 2018)

ADDRESS

SUBMARKET SF

BUYER

SELLER

PRICE TENANTS

121 & 145 Jules-Leger St.

South Shore

162,000 (Est)

Avara Boucherville Pharmaceutical Services Inc.

Sandoz Canada Inc.

$19.6M

Avara Boucherville Pharmaceutical Services Inc.

8566-8580 De L’Esplanade Ave 200 Bellarmin St.

Midtown

84,000 Redbourne L’Esplanade

Gestion Multi- Services 2003 Inc.

$7.7M N/A

Properties Limited Partnership

475 Armand-Frappier Blvd.

Laval

21,000

Citoxab North America Inc.

Piramal Healthcare (Canada) Limited

$2.7M Citoxab North America Inc.

19

Contributor: Kristina Bowman, kristina.bowman@ca.cushwake.com

MARKET SUMMARY

New Jersey has historically been a life science hub, gaining the moniker of “Medicine Chest of the Nation.” The industry continues to play a major role in the state’s economy as many of the largest life science corporations are located in the Garden State. New Jersey is in an ideal location for many life science companies due to its close proximity to New York City and its central location in the heart of the nation’s Northeast Corridor, connecting Boston and Washington, D.C. via I-95. While currently home to 13 of the top 20 bio- pharma companies, the state has experienced a slight decline in the number of big-pharma companies since the recession due to both mergers and acquisitions and some firms migrating out of the state. However, since 2014, the number of life science operations has risen to over 3,280.

Many mid- and large-sized pharmaceutical firms occupy chunks of office space in Northern and Central New Jersey as either global headquarters or regional offices. Life science office leasing activity totaled over 1.7 msf in 2018. Major transactions were inked by Teva Pharmaceuticals, Integra Life Sciences, and Insmed, Inc. Additionally, Quest Diagnostics recently purchased a land site at ON3 and will build a 250,000 sf lab facility at the campus. Currently, the Northern and Central New Jersey lab inventory totals 15.2 msf, 64.3% of which lies in Morris and Somerset Counties and the Greater Princeton area. After lab vacancy peaked in 2014, vacancy declined by 790 basis points by the close of 2017. However, the rate has swelled in 2018 due to Bristol-Myers Squibb’s 1.15M sf R&D campus being vacated in Hopewell.

15.2 MSF MARKET SQUARE FOOTAGE AVERAGE RENT (PER SF) $18.26 117,300 TOTAL EMPLOYEES 13.6% VACANCY FAST LAB STATS

TOP TEN LIFE SCIENCE EMPLOYERS (BY REVENUE)

NEW JERSEY COMPANY TYPE Johnson & Johnson Pharmaceutical Pfizer Pharmaceutical

Novartis

Pharmaceutical

Merck

Pharmaceutical

Bayer

Pharmaceutical

GlaxoSmithKline

Pharmaceutical

Eli Lilly

Pharmaceutical

Bristol-Myers Squibb

Pharmaceutical

Celgene

Biotechnology

Sanofi

Pharmaceutical

TOP THREE NIH-FUNDED INSTITUTIONS

RUTGERS UNIVERSITY $53M

PRINCETON UNIVERSITY $49M

RUTGERS BIOMEDICAL & HEALTH SCIENCES NEW JERSEY MEDICAL SCHOOL $47M

20

TOP VC-FUNDED COMPANIES (2018)

COMPANY

ROUND

MONEY RAISED LEAD INVESTORS

Celularity

Series B

$250M

Celgene

KBP Biosciences

Series A

$76M

Advantech Capitall, SDIC Venture Capital

Castle Creek Pharma

Early Stage VC $72M

Fidelity Management & Research, Valor Equity Partners

Akrevia Therapeutics

Series A1

$30M

F-Prime Capital Partners, Atlas Venture

Vascular Therapies

Series E2

$12M

Undisclosed

PanOptica

Series B

$11M

SV Health Investors

Source: PitchBook, Crunchbase

RENT VS. VACANCY COMPARISON

SUBMARKET STATS

$19

16%

AVG. ASKING RENT (NNN)

INVENTORY (SF)

VACANCY

14%

$18

Greater Princeton Area

$20.86

4,968,352 26.9%

12%

10%

$17

Route 78 Corridor

$17.77

2,551,647

11.8%

8%

$16

6%

Morris County

$15.00

1,483,221

9.6%

4%

$15

Upper 287 Corridor

$14.06

634,576

14.0%

2%

$14

0%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Asking Rent, $ PSF (NNN) Overall Vacancy Rate

Bergen County

$10.15

555,066

28.9%

NOTABLE LEASE TRANSACTIONS (2018)

TENANT

SF

LANDLORD

ADDRESS

SUBMARKET

LEASE TYPE

Teva Pharmaceuticals

345,488 P3 Properties

400 Interpace Pkwy Morris County: Parsippany Office: Renewal/ Expansion

Integra Life Sciences

166,791

Black Creek Group 1100 Campus Rd

Greater Princeton

Office: New Lease

Insmed

117,022 Exeter Property Group 107,710 Powderhorn Associates

700 Route 202/206 N Route 78 Corridor

Office: New Lease

Celgene

7 Powder Horn Rd

Route 78 Corridor

Lab: Expansion

Alvogen Pharma Lonza America

84,609 Marcus Partners

44 Whippany Rd

Morris County: Morristown Office: New Lease

74,659 Keystone Property Group 63,760 Premium Capital Resources

Morris County: Morristown

Office: New Lease

412 Mount Kemble Ave

Octapharma

Bergen County: Route 4 East Corridor

Office: New Lease

117 West Century Rd

NOTABLE SALE TRANSACTIONS (2017 - 2018) ADDRESS SUBMARKET SF BUYER

SELLER PRICE TENANTS

1 & 2 Merck Dr, Whitehouse 185 Tabor Rd, Morris Plains

Route 78 Corridor Morris County

1,215,850 UNICOM Global

Merck

$25.0M Merck (leased back 2 Merck Dr)

Vision Real Estate Partners/PCCP, LLC

Johnson & Johnson

220,000

$20.5M Vacant (includes 643,710 SF of additional space which will be demolished)

21

Contributors: Jason Price, jason.price@cushwake.com; Christa DiLalo, christa.dilalo@cushwake.com

MARKET SUMMARY

Life science is an emerging component of New York City’s economy, and increased venture capital funding as well as significant tax incentive programs are helping to accelerate growth in the area. As a result, demand for commercial laboratory space is underserved, but developers are responding as the amount of lab space currently in the development pipeline will nearly double the market’s inventory. Already maintaining the largest block of commercial lab space in New York City, Alexandria Real Estate Equities is set to begin construction on the $700-million, 550,000-sf North Tower of the Alexandria Center for Life Science in 2020. This project will be the final phase of the east side medical corridor development and is scheduled to be completed by the end of 2022, increasing

its total footprint to nearly 1.3 msf. In addition to the North Tower, Alexandria has further plans to build out lab space at two recent acquisitions, Pfizer’s former 350,000-sf headquarters near Grand Central and the 175,000-sf Bindery in Long Island City. Taconic Investment Partners and Silverstein Properties are also investing in the local industry, converting a former industrial building into a life science center on the west side of Manhattan. Now named the Hudson Research Center, the 320,000-sf property already houses the new 42,000-sf headquarters of the New York Stem Cell Foundation. The project’s $20 million first stage will include 15,000 sf of commercial lab space to be completed by January 2019, and following stages may include up to an additional 135,000 sf.

TOP TEN LIFE SCIENCE EMPLOYERS (BY REVENUE)

FAST LAB STATS

1.2 MSF MARKET SQUARE FOOTAGE AVERAGE RENT (PER SF) $79.00 15K TOTAL EMPLOYEES 22.3% VACANCY

COMPANY

TYPE

Pfizer

Pharmaceutical

Bristol-Myers Squibb

Biopharma

Regeneron

Biotechnology

Eli Lilly

Pharmaceutical

NEW YORK CITY Roche Holdings Pharmaceutical Kadmon Holdings Biotechnology

Roivant Sciences

Biotechnology

Intercept Pharmaceuticals

Biotechnology

Meditata Solutions

Digital Health

Schrodinger

Digital Health

TOP THREE NIH-FUNDED INSTITUTIONS

COLUMBIA UNIVERSITY HEALTH SCIENCES $464M

ICAHN SCHOOL OF MEDICINE AT MOUNT SINAI $331M

NEW YORK UNIVERSITY SCHOOL OF MEDICINE $259M

22

TOP VC-FUNDED COMPANIES (2018)

COMPANY

ROUND

MONEY RAISED LEAD INVESTORS

Prevail Therapeutics

Series A

$75M

OrbiMed, PontifaxFund, RA Capital Management

Kallyope

Series B

$66M

Lux Capital

Gotham Therapeutics

Series A

$54M

SR One, Versant Venture Management, Forbion Capital Partners

Quentis Therapeutics

Series A

$48M

Versant Venture Management, Polaris Partners

Care/of

Series B

$29M

Goldman Sachs

Attune Pharmaceuticals

Series B

$23M

RA Capital Management

Celmatix

Later Stage VC $23M

Undisclosed

HealthReveal

Series A

$16M

GE Ventures

Angion Biomedica

Later Stage VC $15M

Undisclosed

AccutarBiotechnology

Series A3

$12M

Yitu, Zhen Partners Management, IDG Capital

MevesPharmaceuticals

Series A1

F-Prime Capital Partners, Orbimed

$11M

MouSensor

Alexandria Venture Investments, imec.xpand

Seed Funding

$3M

Source: PitchBook, Crunchbase

RENT VS. VACANCY COMPARISON

NOTABLE LEASE TRANSACTIONS (2018)

$60 $62 $64 $66 $68 $70 $72 $74 $76 $78 $80

24%

Bristol-Myers Squibb (HQ)

TENANT

20%

SF

15,000

16%

LANDLORD

Alexandria

12%

ADDRESS

Alexandria Center

8%

SUBMARKET

Madison/ Union Square

4%

LEASE TYPE

New Lease

0%

2014

2015

2016

2017

2018

Asking Rent, $ PSF (NNN)

Overall Vacancy Rate

NOTABLE SALE TRANSACTIONS (2017 - 2018)

SUBMARKET STATS

219 East 42nd St

30-02 48th Ave

ADDRESS

AVG. ASKING RENT (NNN)

INVENTORY (SF)

VACANCY

SUBMARKET

Grand Central

Long Island City

Madison/Union Square

N/A

739,434

0.0%

SF

350,000

177,000

West Side

$79.00

167,422

75.4%

BUYER

JV between: David Werner Real Estate, Alexandria Real Estate Equities, Deutsche Bank AG

Alexandria Real Estate Equities

Brooklyn

N/A

94,000

0.0%

Long Island City

N/A

176,759

77.2%

SELLER

Pfizer Inc.

Brickman Real Estate

PRICE

$205,000,000

$75,000,000

TENANTS

Leaseback

Shapeways

23

Contributors: Michael Miceli, michael.miceli@cushwake.com; Marc Kunesch, marc.kunesch@cushwake.com

MARKET SUMMARY

One of the country’s leading life science hubs, Philadelphia is home to world renowned academic research institutions, hospitals, large pharmaceutical companies and innovative biotechnology startups. The region’s rich history in medical discovery, robust biomedical employment base, and one of the largest recipients of grant monies nationally, have made Philadelphia a leader in life science research, with core concentrations in gene and cell therapy, biotechnology, medical devices, pharmaceuticals, diagnostics and health IT. All this, coupled with Philadelphia’s relative affordability and high quality of life make it a choice location for life science companies, which is why 80% of U.S. pharmaceutical and biotechnology companies have a presence in the New Jersey, Pennsylvania and Delaware corridor. The region is the third largest recipient of NIH grants nationally, with three-quarters of the $1.0 billion in annual funding going to the academic and research institutions in University City. These universities and hospitals are investing in tech

transfer and incubation programs, which are spinning off successful biotechnology and life sciences startups like Spark Therapeutics, a gene therapy company that recently announced they are expanding their R&D operations and adding 500 new jobs over the next five years. The three main life sciences clusters in the region include: University City, where the major academic research institutions and hospitals are located; the Navy Yard, a redeveloped former military facility that includes GlaxoSmithKline U.S. headquarters and lab space for other life sciences tenants; and the PA suburbs, where big pharma R&D campuses and manufacturing plants are located. About 8.6 msf of the region’s 17-msf of lab inventory is in R&D/Flex space, with a majority of that located in the suburbs. The broad range of lab facilities located across submarkets and types of space, from class A new construction office to R&D/Flex, means rents can run from $20/sf to over $50/sf full service gross equivalent.

FAST LAB STATS

TOP TEN LIFE SCIENCE EMPLOYERS (BY REVENUE)

PHILADELPHIA COMPANY TYPE AmerisourceBergen Corp. Medical Devices

17 MSF

MARKET SQUARE FOOTAGE

Pfizer

Pharmaceutical

(R&D/FLEX & OFFICE WEIGHTED) $23.71 AVERAGE RENT (PER SF)

Merck & Co. Inc.

Pharmaceutical

GlaxoSmithKline

Pharmaceutical

Astrazeneca PLC

Pharmaceutical

Teva Pharmaceuticals

Pharmaceutical

Endo Health Solutions Inc.

Pharmaceutical

(R&D/FLEX & OFFICE WEIGHTED) 2.6% OVERALL VACANCY

CSL Behring

Biotechnology

Jazz Pharmaceuticals PLC

Pharmaceutical

Incyte Corp.

Pharmaceutical

TOP THREE NIH-FUNDED INSTITUTIONS

UNIVERSITY OF PENNSYLVANIA $505M

CHILDREN’S HOSPITAL OF PHILADELPHIA $143M

TEMPLE UNIVERSITY $83M

24

TOP VC-FUNDED COMPANIES (2018)

COMPANY

ROUND

MONEY RAISED LEAD INVESTORS

Tmunity

Series A

$135M

University of Pennsylvania Health System, Gilead Sciences, Be The Match

Braeburn

Mezzanine

$110M

Wellington Capital Management

Galera Therapeutics

Series C

$70M

Clarus Ventures

Carisma Therapeutics

Series A

$53M

AbbVie Ventures, HealthCap

Velicept Therapeutics

Series B

$16M

Samsara BioCapital

Vesper Medical

Series A

$15M

New Enterprise Associates, Quaker Partners Management

Exision BioTherapeutics

Seed Funding

$10M

ARTIS Ventures, Oakhouse Partners

Scout Bio

Series A

$9M

Frazier Healthcare Partners

Proscia

Series A

$8M

Flybridge Capital Partners

IO BioSciences

Seed Funding

$695K

BioAdvance

Isoma Diagnostics

Seed Funding

$50K

Ben Franklin Technology Partners

Source: PitchBook, Crunchbase

RENT VS. VACANCY COMPARISON $14 $15 $16 $17 $18 $19 $20 $21 $22 $23 $24 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Asking Rent, $ PSF (NNN) Overall Vacancy Rate

SUBMARKET STATS

0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%

AVG. ASKING RENT (NNN)

INVENTORY (SF)

VACANCY

University City

$36.72

7,088,957 3.0%

PA Suburbs

$19.67

6,579,366 2.3%

Navy Yard

$37.00

518,000 0.0%

NOTABLE LEASE TRANSACTIONS (2018)

TENANT

SF

LANDLORD

ADDRESS

SUBMARKET

LEASE TYPE

Spark Therapeutics Inc.

53,267 Brandywine Realty Trust

3001 Market St

University City

New Lease/ Expansion New Lease/ Expansion/ Build-to-suit

WuXi Advanced Therapies

95,000 Liberty Property Trust

400 Rouse Boulevard Navy Yard

Thomas Jefferson University

25,000 MRA Group

727 Norristown Rd

PA Suburbs

New Lease

NOTABLE SALE TRANSACTIONS (2017 - 2018)

ADDRESS

SUBMARKET SF

BUYER

SELLER

PRICE TENANTS

709 Swedeland Rd

PA Suburbs

1,097,952 MLP Ventures GlaxoSmithKline $52M GlaxoSmithKline

727 Norristown Rd

PA Suburbs

591,000 MRA Group Dow Chemical Company

$10M Redevelopment

3001 Market St

University City 282,709 Brandywine Realty Trust

Drexel University $35M

Redevelopment, Spark Therapeutics Inc. signed lease after acquisition as anchor tenant

25

Contributors: Casandra Dominguez, casandra.dominguez@cushwake.com ; Vincent Planque, vincent.planque@cushwake.com

MARKET SUMMARY

North Carolina’s biotechnology industry is quickly expanding, fueled by growth in Raleigh- Durham’s life science cluster known as the Research Triangle. RTP, the largest Research Park in North America, is centrally located between the Triangle’s three Tier-1 research universities: Duke University, University of North Carolina at Chapel Hill, and North Carolina State. The Triangle is one of only seven cities in the U.S. that serves as a home to three separate leading research universities, and produces more than 53,000 graduates annually. As a direct result, life science companies can recruit top talent from the abundant pipeline of college graduates. The Raleigh-Durham market consistently ranks

among the top life science clusters because of its prolific university research base. RTP, the originator of the life science industry for the Raleigh-Durham market, houses more than 450 life science companies. Home to industry giants such as BASF Corporation, GlaxoSmithKline, and Biogen, RTP accounts for 75 percent of the region’s lab space. A favorable business climate and excellent quality of life combined with a growing entrepreneurship vibe help create a dynamic environment for entrepreneurs and high-growth companies.

(RALEIGH/DURHAM)

FAST LAB STATS

TOP TEN LIFE SCIENCE EMPLOYERS (BY REVENUE)

10.0 MSF MARKET SQUARE FOOTAGE

COMPANY

TYPE

BASF

R&D

Pfizer

Pharmaceutical

AVERAGE RENT (PER SF) $25.16 63K TOTAL EMPLOYEES* 19.3% VACANCY

GSK

R&D

Syngenta

R&D

Biogen

R&D

LabCorp

Clinical Laboratory

IQVIA

Pharmaceutical

RESEARCH TRIANGLE, NC UCB Biosciences R&D Teleflex Inc. Medical Devices

PPD

Pharmaceutical

* State of North Carolina

TOP THREE NIH-FUNDED INSTITUTIONS

DUKE UNIVERSITY $460M

UNIVERSITY OF NORTH CAROLINA, CHAPEL HILL $439M

FAMILY HEALTH INTERNATIONAL $85M

26