Tuesday, April 26, 2022

Exelixis Boitech Chose Philadelphia for Its East Coast Hub

 By Katie Burke CoStar News

It has roots in Boston and a recently expanded corporate headquarters in the San Francisco Bay Area, but life science firm Exelixis is planting a flag in the Philadelphia suburbs as demand for research and development space across the country fuels momentum in second-tier biotech markets.

The East Bay developer of cancer drug treatments is setting up a temporary office in King of Prussia, Pennsylvania, as it shops around for sites in the area that would accommodate an East Coast headquarters with up to 200,000 square feet. Exelixis said it is ultimately hoping to house between 135 to 140 employees at the location, which it is expecting to develop within the next two to three years.

The Alameda, California-based company signed a 23,000-square-foot lease at the Brandywine-owned Freedom Business Center to use as a placeholder until its "Exelixis East" hub is developed. The office — which Exelixis said it anticipates will be used for about two years — is slated to open in June.

“We’re growing and expanding our pipeline so our need to bring in talent is increasing,” Exelixis President and Chief Medical Officer Vicki Goodman said. “When we look at where the pharmaceutical and biotech talent is, there is a nexus on the West Coast, which is where the Alameda campus is, and there is one on the East Coast," she said, adding that the Philadelphia area "is an ideal place to set up a center of operations.”

And with fierce competition for space and employees in upper-tier biotech hubs such as Boston, Philadelphia's solid talent base, proximity to other major cities and universities, as well as cheaper lab space, combined to make it the choice from which to grow.

"We’re making a real commitment to the Philadelphia area, it's not a satellite campus for us," Goodman said, adding it could become a "launching pad to expand to Europe."

Exelixis was founded in the early 1990s in Cambridge, Massachusetts, and relocated to California several years later. In 2019 the company preleased a roughly 220,700-square-foot development at 1951 Harbor Bay Parkway to expand its headquarters, which is now moving through the final build-out stages.

Spillover Fuels Growth

The biotech firm is one in a string of research and development companies vying for a dwindling pool of available lab space across the United States. Advances in biotechnology and record levels of venture capital have resulted in the largest construction pipeline of life science projects in the nation's history, with about 25 million square feet of space underway in the nation's 12 largest biotech clusters.

Even with the unprecedented amount of new and incoming space, the gap between what's available and what tenants are demanding is widening, driving rents for life science space to all-time highs and pushing companies farther away from prime biotech clusters in pursuit of space that can accommodate their own unprecedented growth spurts.

In the San Francisco Bay Area, for example, about 3.3 million square feet of life science space was underway by the end of 2021, according to data from brokerage Kidder Mathews. It wasn't even close to the roughly 5.7 million square feet of space that prospective tenants were hunting for, however, and about 50% of the under-construction developments were already preleased.

With the shortage of space in top-tier biotech clusters such as San Diego, Boston, the Bay Area and Seattle becoming increasingly burdensome for tenants, some are beginning to shift their attention to alternatives such as Philadelphia in a move that has helped catapult the secondary city to the forefront of the life science sector's accelerating growth.

"Philadelphia is sitting in a terrific position both because of its own trajectory and because of its spot relative to other leading biotech clusters," Joseph Fetterman, Colliers' executive vice president of healthcare and life sciences, told CoStar News. "The Philadelphia area is proving to be increasingly attractive to companies on the West Coast looking East and those that are getting priced out of Boston. And there's a reason to look at Philadelphia since it's complimented by the fact that, relative to other markets, it offers a significant discount in terms of basic rent for space and the overall cost of living."

By the end of the first quarter this year, average rents for lab space in the Boston area were about $110 per square foot, according to CoStar and Colliers data. By comparison, typical rents in Philadelphia were less than $54 per square foot.

The city has also become popular among startups or firms preparing to graduate from incubator space. Nearly 2.25 million square feet of lab and research space is under construction in the Philadelphia area. Developers are pitching another 9.7 million square feet in order to capitalize on the swelling demand.

"We're looking at a strong pipeline here in Philadelphia that will be buoyed significantly by increased interest from outside the city that will absorb a lot of space," Fetterman said. "We're going to start seeing a dynamic shift in the market for larger spaces as companies relocate to the city and grow within it."


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