Oxford Properties' Bet on Seattle's Life Sciences Market Pays Off
A Canadian pension plan's bet on Seattle's life science real estate market appears to have paid off.
Fourteen months ago, Oxford Properties Group paid $119.1 million for a new 10-story office building, Boren Lofts, with plans to convert it to a life science facility called Boren Labs. On Tuesday, Oxford said seven of the nine life sciences floors have been leased.
The speedy pace of leasing at the project (1930 Boren Ave.) is not surprising given the strong demand.
According to CBRE, life science companies were seeking 1.2 million square feet of lab space in the Seattle region as of September. That was an increase of 138% over the prior six months, the period’s largest rate of demand growth nationally.
A spokesperson for Oxford said in an email that "there was a need for the unique product offering that Boren Labs presents" and the company is "happy to see the building become a real solution."
Oxford Properties, which is owned by the Canadian pension plan for Ontario's municipal employees, declined to provide the asking rates for the remaining two floors, saying the rate is in line with new, Class A lab product. The market average is $80 a year per square foot plus the cost of property taxes, maintenance and insurance, according to CBRE's first quarter report.
Oxford also declined to say how much it cost to convert the building to life science use.
Converting other property types to lab and R&D space is both costly and challenging, according to CBRE. Many require more specialized amenities, including but not limited to clean rooms, vivariums and negative-pressure rooms.
The cost to construct a new laboratory building in the top three U.S. life sciences markets — Boston, San Diego and the Bay Area — ranges from $675 to $1,200 per square foot compared with $600 to $850 a foot for standard office building construction, CBRE reported.
Add to this "laboratory fit-out costs," which CBRE said range from $300 to $650 per square foot versus $110 to $315 for standard office fit-outs.
According to city of Seattle records, the intake value listed on a construction permit application for tenant improvement work on the ninth and 10th floors of Boren Labs was $5 million.
Floors in the tower are around 15,000 square feet, so the cost works out to around $167 a foot.
However, Boren Labs comes with prebuilt lab suites. Oxford said this makes the building attractive to younger life sciences companies that need access to smaller spaces as soon as possible after venture capital and other fundraising.
Icosavax (Nasdaq: ICVX) is listed on the city permit as the company taking the ninth and 10th floors. It's a biopharmaceutical company that develops vaccines against infectious diseases, including Covid-19.
Oxford said Boren Labs, the company's first life science investment in Seattle, is mostly occupied by homegrown Seattle companies like Icosavax. Among the other tenants are epigenetic therapy company Tune Therapeutics and GentiBio, which is working on immunology therapeutics.
The Oxford spokesperson didn't directly answer whether the company will hold Boren Labs long term or sell it.
"With the resounding success of Boren Labs, we remain firm in our conviction in the Seattle market and look forward to maintaining our presence in its growing ecosystem," he said.
JLL is marketing the Boren Labs lab space. Other members of the project team are Lease Crutcher Lewis, general contractor; LMN Architects; DCI Engineers, structural; McKinstry, mechanical/plumbing; and Gerber Engineering, electrical.
On the ground floor is one 4,000-square-foot retail space available for lease.
Trammell Crow Co. developed the Boren tower with Washington Capital Management and sold it to Oxford.
Oxford Properties, the real estate subsidiary of OMERS, put out a press release earlier today stating it has completed a speculative 130,000 sq ft office to lab conversion in Seattle to meet market demand:
Oxford Properties Group (“Oxford”), a leading global real estate investor, asset manager and business builder, has completed the conversion of the 136,000 sq ft Boren Lofts office building in the heart of downtown Seattle into Boren Labs, a fully dedicated life sciences facility. The completed project is located at 1930 Boren Ave. in Seattle’s dynamic South Lake Union life sciences cluster. Oxford acquired the building for US$119 million in April 2021 to convert it into contemporary lab space as part of its global life sciences business’ entry into the Seattle market.
In a sign of the depth of demand for modern lab space in Seattle and the quality of space Oxford is delivering, only two of the building’s nine life sciences floors remain available due to strong leasing activity during the conversion construction period. Boren Labs is well designed to meet the needs of Seattle’s unique life sciences market, which is characterized by early stage ventures. The building’s 15,000 sq ft floor plates and prebuilt lab suites make it very attractive to younger life sciences companies, who need access to smaller operational spaces as quickly as possible following fundraising. In addition to move-in-ready R&D suites, Boren Labs provides all of the modernized building infrastructure its occupants need to work—again enabling them to occupy space immediately, while spending less capital on build outs and other real estate requirements.
Abby Mondani, Director of Life Sciences, West Coast at Oxford Properties, commented: “Delivering the much needed and highly technical real estate infrastructure to support companies creating the life changing therapeutics of tomorrow is a key priority for Oxford. Boren Labs provides a solution to Seattle’s unique market challenges where early stage companies are all too often unable to find the smaller, flexible footprints they require. By investing in the build out of spec lab suites, Oxford is enabling these companies to find the space required for their work while saving on time and capital—letting them prioritize their core activities of creating tomorrow’s life-saving cures.”
Boren Labs stands at 10-stories with nine levels of lab and support office space, ground level retail and a newly built amenity floor which features a shared rooftop deck and conferencing center, fostering collaboration between occupants. The converted building possesses 15-foot floor-to-floor heights, fully upgraded MEP systems and ample subsurface parking. Human-centric in its design, each floor enjoys plentiful natural light and a private deck with outdoor access—features proven to promote employee wellness and performance.
Mondani added: “At its heart, the life sciences industry is propelled by clusters that facilitate the exchange of research and ideas. We’ve taken that ethos into the very fabric of this building through the integration of dedicated shared amenity space. Through its design, Boren Labs becomes a place where firms all currently working to create life-saving therapies can create connections and a community.”
The building is primarily occupied by an array of innovative homegrown Seattle-area companies, largely in the biotech field, including vaccines, gene and cell therapy. Occupants include Icosavax, a firm specializing in computationally designed vaccine development, including RSV and COVID-19 vaccine candidates; Tune Therapeutics, a firm pioneering epigenome editing therapies; and GentiBio, who is reimagining immunology therapeutics via groundbreaking work with T-cells.
Dr. Andy Walker, Co-Founder, President & CTO at GentiBio, remarked: “GentiBio is developing engineered regulatory T-cells (engTregs) to bring life-changing therapies to patients suffering from autoimmune diseases. The amazing, ready-made new lab space at Boren Labs has allowed us to focus on building out our world class team of scientists and engineers, further enabling the critical work necessary to develop these novel therapeutics.”
Seattle’s life sciences industry continues to flourish. The city has emerged as a top five US market for biotech VC funding which is a key driver of company formation and growth. According to CBRE research, life sciences companies were seeking 1.2 million sq ft of lab space in greater Seattle as of the end of Q3 2021, an increase of 138% over the prior six months—the period’s largest rate of demand growth nationally.
Oxford entered the life sciences sector in 2017 and since has grown its life sciences business across 10 strategic North American markets as well as in the UK and France. Since the start of 2021 alone, Oxford has completed approximately US$3 billion of life sciences investment globally across R&D labs and GMP facilities and has identified a further US$5 billion of follow-on development opportunities. This has created substantial momentum behind Oxford’s stated goal to build a dedicated and market leading US$15 billion global life sciences real estate business.
I like what Abby Mondani, Director of Life Sciences, West Coast at Oxford Properties, states above:
“At its heart, the life sciences industry is propelled by clusters that facilitate the exchange of research and ideas. We’ve taken that ethos into the very fabric of this building through the integration of dedicated shared amenity space. Through its design, Boren Labs becomes a place where firms all currently working to create life-saving therapies can create connections and a community.”
Oxford Properties is a leading real estate firm, managing over $80 billion of assets ($20 billion net) across four continents, in some of the world’s most transformative places. You should read more about what they do here.
As stated in its press release above:
Oxford entered the life sciences sector in 2017 and since has grown its life sciences business across 10 strategic North American markets as well as in the UK and France. Since the start of 2021 alone, Oxford has completed approximately US$3 billion of life sciences investment globally across R&D labs and GMP facilities and has identified a further US$5 billion of follow-on development opportunities. This has created substantial momentum behind Oxford’s stated goal to build a dedicated and market leading US$15 billion global life sciences real estate business.
In less than five years, Oxford has built a major life sciences portfolio with key assets in key geographies:
Our Life Sciences portfolio caters to all stages and needs of industry customers. We offer an end-to-end mix of spaces, accommodating businesses new and established, scaling and built.
Our properties are in optimal geographies: we are where you are and where you want to be.
And we prioritize efficient, sustainable buildings. Across Oxford, reducing environmental impact is central to all that we do; this sector is no exception. Our properties are designed to enhance performance, maximizing outcomes for our partners and supporting critical scientific work.
You can read more about its life sciences portfolio here.
The conversion of Seattle's Boren Lofts is now complete. Only two of nine R&D floors remain available for lease as the office development becomes life sciences-ready Boren Labs.
As far as Seattle life sciences properties, if you want to understand trends in real estate, follow the leader.
When Boren Lofts went for sale in 2021, Blackstone's Biomed Realty made an offer which was confirmed by its Vice President, Mike Ruhl, who also shared this back then:
Boren Lofts "is definitely hitting the market at the right time, that's for sure. There's not a lot of space out there," said Ruhl, whose company is wrapping up development of a 500,000-square-foot office, life science and retail project called Dexter Yard in the South Lake Union district.
Ruhl added life science companies are looking to fulfill space needs both short and long term. They will start with, say, 20,000 square feet but plan to grow into five times that much space.
"Whether that's true or not, that sort of mentality is where they have to be to grow their company," said Ruhl.
It was through this lens he said his company viewed its bid for Boren Lofts as an addition of square footage to its portfolio to help tenants expand.
In April, Algota Felhazi of Commercial Property Executive reported BioMed Realty paid $127M for a Seattle life science site, doubling its footprint in this market:
BioMed Realty has acquired Denny Park South, two adjacent parcels in Seattle totaling 1.6 acres, for $126.8 million, according to King County records. An entity affiliated with Clise Properties sold the South Lake Union/Denny Triangle site. The two parcels at 2301 Eighth Ave. and 2300 Seventh Ave. are set to house BioMed’s proposed 616,000-square-foot project, aimed at tenants active in the life science and technology fields.
To make way for the new development, the new owner has already filed permits to demolish the existing buildings on the site—the Loyal Inn and the neighboring 22,764-square-foot Class B office building that has a 52-car parking lot— according to the Puget Sound Business Journal.
The Seattle life sciences landscape
The current acquisition of Denny Park South, paired with the recent purchase of T6 Innovation Center at 200 Taylor Ave. N, represents a potential 1.2 million-square-foot pipeline for the new owner. These new developments would double BioMed’s Seattle portfolio, which also includes the recently completed Dexter Yard building less than a mile away from Denny Park South. The 15-story life sciences building at 700 Dexter Ave. N encompasses 522,760 square feet and is proposed for LEED Gold certification, CommercialEdge data shows.
Based on Colliers data, at the end of 2021, the Seattle life sciences market had nearly 1.4 million square feet of projects underway. The metro had a 7.8 million-square-foot inventory at a 6.9 percent overall vacancy. The metro’s leading submarket relative to vacancy was Lake Union, with a vacancy rate of less than 1 percent.
Notable tenants occupying BioMed properties across the Seattle metro include the Seattle Children’s Research Institute, Omeros Corp. and Shape Therapeutics, among others.
BioMed Realty is also an active investor in the life sciences sector. Recently, the Blackstone subdivision acquired a 22-building life science and office complex totaling 1 million square feet in Boulder, Colo. The new owner shelled out a little over $600 million for the 90 percent occupied property.
Demand for these life sciences properties remains extremely strong despite the recent setback in VC fundraising:
Seattle’s life sciences industry continues to flourish. The city has emerged as a top five US market for biotech VC funding which is a key driver of company formation and growth. According to CBRE research, life sciences companies were seeking 1.2 million sq ft of lab space in greater Seattle as of the end of Q3 2021, an increase of 138% over the prior six months—the period’s largest rate of demand growth nationally.
Innovation will continue no matter what is going on in VC fundraising and Seattle is attracting many early stage biotech startups which have their own unique needs.
Boston remains the leading city for biotech startups and activity, followed by San Francisco, San Diego and North Carolina, but other emerging biotech hubs include Chicago, New York and Seattle:
Finally, there's the home of Amazon and Microsoft: Seattle. That city also boasts a burgeoning biotech scene thanks to the likes of Shape Therapeutics and Variant Bio. With nearly a million square feet of lab space in the works, there’s plenty of room for more to take up root in the Emerald City.
Oxford Properties has invested in most of the US biotech hubs and it has also invested in the UK and France.
In May, Oxford Properties announced that it formed a strategic partnership with Novaxia to invest €1bn in the French life sciences market over the next few years. I covered this strategic partnership here.
Its stated goal is to build a dedicated and market leading US$15 billion global life sciences real estate business. It has already invested US$3 billion globally but it is doing so very thoughtfully and meticulously.
Below, an older (2017) clip from Blackstone on why they targeted life science properties early on.
Also, an older 2020 clip where CNBC's Diana Olick reports on the interest in the life sciences sector.
Third, a CBRE forum which took place last summer on analyzing the DNA of smart real estate strategies. It is well worth watching to understand the momentum driving the boom in life sciences properties.
Lastly, from real estate to space, Seattle's tech scene is awash in A.I. Hello World's Ashlee Vance meets up with Redfin CEO Glenn Kelman and Rendered.AI CEO Nathan Kundtz for the latest. Added this last one for interest on Seattle.
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