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Life Science Sector Sees Building Demand

12/10/2012 | By Matthew Bechard

Joel Marcus, chairman, president and CEO of Alexandria Real Estate Equities (NYSE: ARE), joined REIT.com for a CEO Spotlight video interview at REITWorld 2012: NAREIT's Annual Convention for All Things REIT at the Manchester Grand Hyatt in San Diego.

Alexandria Real Estate Equities is the owner and operator of mission-critical, sustainable real estate and technical infrastructure for the life science industry. 

Marcus discussed the positives as well as the challenges in the life sciences sector amid an uncertain economy.

"The good is that we actually have more demand than we can handle on our balance sheet, and that's really the bad side," he said. "Our tenants have had a banner year this year, so the demand has been very brisk. Their demand is inelastic, so it really does not depend on the macro economy."

In terms of trends, Marcus said he has noticed that the large pharmaceutical companies are coming back from their "suburban silos" where he said they have been working for years and are now investing in the core central business district (CBD) clusters. 

"Also the second cohort of bio-tech companies that have been around for 10 or 15 years now have blockbuster products and are looking to double and triple their size," he said. "That's where we see our biggest demand from, primarily east coast, west coast, CBD coastal cities.

Marcus said the suburban-to-urban move is prevalent in the life science sector. The stronger markets have been the Bay Area, San Diego, Seattle, Cambridge, Boston and New York.

The migration from suburban to urban is due to a number of factors, according to Marcus.

"It's really simple. They are the knowledge clusters. You can recruit the big and medium companies the best, because it's harder to recruit in the suburbs," he said.

Additionally, Marcus said the "work-life amenity lifestyle" has its tenants looking to attract the young intellectual workers.

"That's where the base of our employees are. Either young technicians or scientists," he said.