Perhaps nowhere do technology and real estate intersect more deeply than in the life sciences industry, where sophisticated technologies are integral to tenants’ operations. The life sciences industry, which was experiencing significant growth prior to the COVID-19 pandemic, has become one of the most talked-about asset classes in recent months as companies race to identify a safe and effective vaccine for COVID-19. This even brighter spotlight on life sciences companies comes amid a historic surge in investment in biotech, pharmaceutical and medical device start-ups focused on the search for innovative approaches to, among other things, health issues facing an aging population. In order to keep research, development and production on pace (and, in the case of companies developing potential COVID-19 vaccines, at an extraordinarily accelerated pace), life sciences companies old and new, as well as owners and operators of life sciences lab and office space, are fast-tracking the use of existing and new technologies.
The pandemic has also forced pharmaceutical companies to confront new and disruptive challenges to traditional methods of conducting clinical trials. Many life sciences companies have had to quickly integrate virtual engagement into their clinical trial protocols, using telehealth technologies to connect with trial participants more widely than ever before. Thankfully the need for this type of tech-based engagement was recognized by federal regulators early during the pandemic. In March 2020, the U.S. Food and Drug Administration published guidance encouraging sponsors of clinical trials to “evaluate whether alternative methods for safety assessments (e.g., phone contact, virtual visit, alternative location for assessment, including local labs or imaging centers) could be implemented when necessary and feasible.” Some industry experts believe this transition to more tech-focused engagement would have taken several more years without the momentum ignited by the pandemic.
COVID-19 has also had an impact on how technologies are used in drug development and determining appropriate drug applications. A number of companies are intensifying the use of artificial intelligence (or machine learning) in the search for a vaccine and to identify existing drugs that may be repurposed for therapeutic solutions. AI has the potential to make data collection and analysis significantly more efficient in the context of clinical trials. It also can be used to synthesize data to more rapidly determine safety and efficacy of drug candidates.
In the longer term, some in the industry see the pandemic and corresponding focus on the design and repositioning of assets for life sciences tenants as a continuing driver toward the development of “healthy buildings.” The end users of life science office and laboratory space are likely to be some of the most highly-educated consumers of real estate in any given market. For them, the management of office and lab space in a sustainable and energy efficient way has in many cases become an assumption or expectation, as opposed to a “plus.” Accordingly, owners of life sciences assets will be hard pressed to lease space that has not been developed using environmentally-friendly products and technology. Some believe that, going forward, a true competitive advantage will be found in the development of assets integrating new and innovative health and wellness facilities and technologies, and this may be even more pronounced as we enter the post-COVID-19 “new normal.” Healthy buildings with outdoor space and advanced air filtration and ventilation systems that draw in fresh air, as well as smart humidity controls and air quality sensors, for example, may be uniquely attractive to prospective life sciences tenants in the future.
The trend of converting existing office or industrial space to laboratory use has also seen an uptick during the pandemic, as real estate firms looking to acquire or develop laboratory space seek inventory with university resources and employee amenities in crowded markets like Cambridge, Massachusetts and the San Francisco Bay Area. Owners and investors in life sciences assets desiring to convert existing space to lab use for biotechnology tenants must be well-versed in the design and structural needs of lab tenants. For example, a threshold requirement for most labs is to have approximately 15-foot floor-to-ceiling clearance height to allow for the installation of robust HVAC and related power systems required for lab use. Lab tenants also generally require increased load capacity for heavy equipment, the ability to integrate chemical storage facilities, and vertical penetrations for risers, among other things. Real estate firms looking to attract life sciences tenants must understand the physical attributes of real assets that are necessary to accommodate their tenants’ and prospective tenants’ mechanical and technological needs.
Accelerated Use of Technologies by Tenants
As our colleagues pointed out in July1 , the work-from-home policies adopted by many companies are difficult or impossible to apply to much of the work done in laboratories. Life sciences companies have therefore increasingly relied on scheduling and remote communication technologies to coordinate staggered calendars for on-site employees to conduct research and other lab activities that cannot practically be done from home. Laboratory-specific calendar tools with features like native mobile applications that allow all employees access to real-time scheduling software have seen more widespread use. Some life sciences companies have also accelerated the integration of cloud-based data platforms into ongoing research and operations. This movement toward remotely-accessible research aggregation tools has been spurred by the pandemic, allowing researchers the ability to review and analyze data from home and focus their in-lab time more heavily on activities that must be conducted within an actual laboratory.The pandemic has also forced pharmaceutical companies to confront new and disruptive challenges to traditional methods of conducting clinical trials. Many life sciences companies have had to quickly integrate virtual engagement into their clinical trial protocols, using telehealth technologies to connect with trial participants more widely than ever before. Thankfully the need for this type of tech-based engagement was recognized by federal regulators early during the pandemic. In March 2020, the U.S. Food and Drug Administration published guidance encouraging sponsors of clinical trials to “evaluate whether alternative methods for safety assessments (e.g., phone contact, virtual visit, alternative location for assessment, including local labs or imaging centers) could be implemented when necessary and feasible.” Some industry experts believe this transition to more tech-focused engagement would have taken several more years without the momentum ignited by the pandemic.
COVID-19 has also had an impact on how technologies are used in drug development and determining appropriate drug applications. A number of companies are intensifying the use of artificial intelligence (or machine learning) in the search for a vaccine and to identify existing drugs that may be repurposed for therapeutic solutions. AI has the potential to make data collection and analysis significantly more efficient in the context of clinical trials. It also can be used to synthesize data to more rapidly determine safety and efficacy of drug candidates.
Other Considerations for Owners and Managers
In order to manage the more immediate impact of the COVID-19 pandemic, owners and managers of properties that house life sciences office, manufacturing and laboratory space have been able to apply many of the pandemic-related solutions that they have applied elsewhere to other asset types. Given that many laboratory assets are single-tenant buildings, landlords can often cater more specifically to a given tenant’s unique concerns than they might be able to do in multi-tenant office spaces. But life sciences tenants are sometimes less experienced than other traditional large tenants in asset operation and management, presenting landlords and property managers with an opportunity to add value by providing life sciences tenants with advice on the solutions they have seen work most effectively across the buildings they own and manage, such as sanitization and touchless access technologies.In the longer term, some in the industry see the pandemic and corresponding focus on the design and repositioning of assets for life sciences tenants as a continuing driver toward the development of “healthy buildings.” The end users of life science office and laboratory space are likely to be some of the most highly-educated consumers of real estate in any given market. For them, the management of office and lab space in a sustainable and energy efficient way has in many cases become an assumption or expectation, as opposed to a “plus.” Accordingly, owners of life sciences assets will be hard pressed to lease space that has not been developed using environmentally-friendly products and technology. Some believe that, going forward, a true competitive advantage will be found in the development of assets integrating new and innovative health and wellness facilities and technologies, and this may be even more pronounced as we enter the post-COVID-19 “new normal.” Healthy buildings with outdoor space and advanced air filtration and ventilation systems that draw in fresh air, as well as smart humidity controls and air quality sensors, for example, may be uniquely attractive to prospective life sciences tenants in the future.
The trend of converting existing office or industrial space to laboratory use has also seen an uptick during the pandemic, as real estate firms looking to acquire or develop laboratory space seek inventory with university resources and employee amenities in crowded markets like Cambridge, Massachusetts and the San Francisco Bay Area. Owners and investors in life sciences assets desiring to convert existing space to lab use for biotechnology tenants must be well-versed in the design and structural needs of lab tenants. For example, a threshold requirement for most labs is to have approximately 15-foot floor-to-ceiling clearance height to allow for the installation of robust HVAC and related power systems required for lab use. Lab tenants also generally require increased load capacity for heavy equipment, the ability to integrate chemical storage facilities, and vertical penetrations for risers, among other things. Real estate firms looking to attract life sciences tenants must understand the physical attributes of real assets that are necessary to accommodate their tenants’ and prospective tenants’ mechanical and technological needs.
Conclusion
As the life sciences boom continues in the real estate industry, owners and operators in this space must be attuned to how they and their tenants can harness technological solutions to address the obstacles posed by the COVID-19 pandemic. To successfully market their assets to biotech, pharmaceutical and medical device companies, real estate developers new to the construction of life sciences assets must be particularly mindful of this challenge, as their end users are likely to be more tech-savvy than the average consumer of real estate. Furthermore, owners of older assets hoping to reposition them as life sciences office or lab space must overcome an additional obstacle – they must convince potential tenants that they can integrate new and innovative technologies as efficiently and effectively as developers of new modern assets. As real estate owners, investors and operators move into the post-COVID-19 “new normal” with a focus on the burgeoning life sciences industry, they will need to demonstrate to the market that they have an understanding of current issues and solutions uniquely applicable to life sciences tenants, and understanding their clients’ particular needs and how technology can address those needs will be key in doing so.
1 "Envisioning the New Normal: Real Estate + Technology: Part 3 - Life Sciences and Healthcare Industries"