Pandemic Kicks Life Sciences Demand in Suburban Maryland Into High Gear

Owen Rouse Jr., vice president of investment sales for MacKenzie Commercial Real Estate, reflects on 2021

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The life sciences sector was one of the Washington, D.C., region’s most active segments in 2021, thanks to the concentration of federal laboratories, world-renowned medical universities and the availability of funding and resources. 

Suburban Maryland is a large catalyst for the demand and Lutherville, Md.-based MacKenzie Commercial Real Estate, which is involved in the life sciences industry through brokerage, property management, construction and capital markets, noted the sector was especially hot in 2021. 

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Owen Rouse, Jr., vice president of investment sales for the company, noted Maryland has two bio-tech spines within its borders. First, the I-270 corridor connecting Frederick to the rest of Maryland is widely regarded as having the highest concentration of life sciences companies in the country.  More than 500 biotech firms and an additional 2,300 life sciences companies call this area home. All of that has only been heightened by the impact of the pandemic and the need for vaccine development and testing.  

Second, the I-95 corridor is home to the esteemed Johns Hopkins Hospital and its research arm on the north end, accompanied by the National Institutes of Health’s presence at Bayview in Baltimore and the significant southern presence of Walter Reed National Military Medical Center in Bethesda, Md. 

Rouse spoke with Commercial Observer about what the sector experienced in 2021. 

Commercial Observer: Looking back at the last year, how would you characterize what we saw with the life sciences market in the D.C. region?

The D.C. region and Montgomery County [in Maryland] in particular saw an increase in both leasing velocity for existing bio space [short term], a continued delivery of buildings under an office-to-lab conversion strategy [medium term] and a pivot by some developers, scrapping plans for traditional office and replacing them with plans for lab space [long term]. Demand drivers were primarily pandemic-related as drug developers, basic research and manufacturing kicked into high gear.

What role did the pandemic play in influencing the market?

According to the [nonprofit] Committee for a Responsible Federal Budget, of the $662 billion in health spending, a large swath — $53 billion — went to cover vaccine and therapeutics research,plus additional funding beyond the pharmaceutical companies. Federal spending has been priming the pump in this respect and the bio cluster of central Maryland is a direct beneficiary. 

What are your most notable life sciences properties in the region?

Montgomery County is home to companies such as Novavax, On Demand Pharmaceuticals and TCR2 Therapeutics and is the epicenter of national public health research and regulatory leadership, hosting the headquarters of the NIH, US Pharmacopeia, the National Institute of Standards and Technology, the Biomedical Advanced Research and Development Authority and the U.S. Food and Drug Administration.

Suburban Maryland and Washington, D.C., are recognized for the strength and breadth of [their]labor market and, according to the Maryland Department of Commerce, Maryland ranks first in employed Ph.D. scientists and engineers per 100,000 employed workers. The National Institutes of Health is No. 1 for the number of research and development contracts awarded, and Maryland features the highest concentration of employed doctoral scientists. Additionally, nearly 80 percent of the U.S. pharmaceutical industry is within a two-hour drive of the I-270 corridor.       

Why is this area a strong one for life sciences? What are the benefits of being here?

Proximity to the federal sector, a high quality of life for decision makers and their families, and the depth of a well-educated labor force make the region strong. The presence of federal anchor institutions and the decades-long collaboration between the development community and local planning departments has spawned orderly growth, property-funded infrastructure and a first-class school system. The MARC [Maryland Area Rail Commuter] regional train service connects bio-heavy Frederick, Md., to the capital of the free world. Residential price points accommodate the full spectrum of employees.

What do people look for in these buildings? What attracts them to a particular property?

New buildings are being delivered with 15-foot slab-to-slab clearance to accommodate the continuous movement of air that is critical for health and safety reasons. HVAC systems and processes are retrofitted to support heavier requirements, frequent air changes and maintaining suitable humidity levels for the modern bio-pharmaceutical occupier. Life sciences buildings are typically configured with thicker floor slabs to handle the load requirements of research equipment. Additionally, buildings will be designed with dual power configurations and many are equipped with clean rooms [for scientific research] of varying levels for specialized operations and the vendors to tend to their continuous operation.

Is there enough space available? What do the numbers show about vacancy and new development opportunities?

Vacancy is sub-5 percent, hence the rush to convert existing buildings and redirect planned uses in order to increase the overall amount of bio space available. Boston Properties’ announcement this summer of its acquisition of the Shady Grove Bio+Tech Campus, with a plan to reconfigure seven buildings in an office-to-lab conversion play, is emblematic of the strength of the market.

Keith Loria can be reached at Kloria@commercialobserver.com.