Obsolescence Equals Opportunity_final (002)

The issue of creditworthiness and tenant financials is also enormously important with life sciences tenants, because many of the early stage firms have no or very little operating history. These firms can be run by scientists who may, or may not, have any training or experience in running a business, and may be dependent on outside funding sources that can fluctuate with political winds and federal, state or local budgets. Chart 22 features the top 10 markets that have attracted the strongest inflow of VC funding, broken out by stage of company growth. In addition to demonstrating strong life-sciences markets from a growth perspective, the chart can provide indirect evidence of the types of firms gaining funding and likely seeking space. Each type of company seeks a different space profile. Boston, Raleigh-Durham, Philadelphia, and Greater Los Angeles, for example, have seen more capital focused on revenue generating companies who will likely be able to seek longer lease terms and larger leases. This contrasts with the San Francisco Bay Area, Seattle and London, which are more focused on startups (likely targeting smaller, multi-tenant lease structures). • Considerations on mix of office and lab space: Project scope can also vary based on target clientele and ideal office to lab mix. For example, spec labs of around 7,500 – 15,000 sf can often find companies that can work with a 50/50 mix, but larger life sciences companies increasingly want a 70/30 mix. Cushman & Wakefield’s Life Sciences Project Development Services team continues to see spec labs and small labs (generally leased to startups or small size companies) shifting more towards the 60/40 to 70/30 ratios, whereas bigger companies are closer to the 50/50. Against the context of the slowing macroeconomy, the office/lab mix for larger companies is also shifting towards the 60/40 and 70/30 mix, as some companies try to consolidate and maximize their portfolio in the lab intensity direction.

CHART 22: TOP 10 MARKETS

Clinical Trials Other

Generating Revenue Startup Pre-Clinical Trials

100%

80%

60%

40%

20%

0%

Boston

Seattle

London

Bay Area

New York

San Diego

New Jersey

Philadelphia

Raleigh/Durham

Greater Los Angeles

Source: PitchBook Data, Inc. *Data has not been reviewed by PitchBook analysts.

36 | OBSOLESCENCE EQUALS OPPORTUNITY