City Wants to Expand Biotech Beyond Mission Bay

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The City and County of San Francisco hopes to encourage midsize biotechnology companies that emerge from Mission Bay incubators to move to South-of-Market, Pier 70, and other Southside San Francisco neighborhoods, even as the East Bay and South San Francisco promise lower rents and more space to expand.  “The City is looking at the success of Mission Bay and saying, “Where do we grow next?”” said Todd Rufo, director of the San Francisco Office of Economic and Workforce Development (OEWD).  “We want to keep them (biotech companies) as they grow.”

“There’s still space that’s being built in the City. We’re also looking at Pier 70, the Giants parking lot, NRG Energy, the Shipyard, and the central SoMa corridor, said Rufo. “These areas are right next door to Mission Bay. If you’re able to get on the light rail system, we think that investment will allow proximity even if the areas aren’t geographically close.”

According to Rufo, the City wants to motivate property owners and biotech companies to divide large rental spaces to create “roommate situations.” However, no municipal strategies have been developed to encourage this outcome, and the City isn’t looking to change zoning under the Eastern Neighborhoods Plan.  “If you increase the life sciences zoning, that trades off against industrial zoning. The Mayor is deeply committed to the industrial sector,” said Rufo.

“Mission Bay is substantially occupied at the present moment,” said Steve Richardson, chief operating officer and regional market director for San Francisco of Alexandria Real Estate Equities, which manages more than 3.7 million square feet on the Southside. “We’re abundantly aware of the need for space. But I think every segment is very well represented in Mission Bay, from small to midsize to large,” said Richardson.

Richardson said Alexandria has several life sciences buildings in development in the neighborhood. The firm supports roommate situations. “We work with highly professional people who are very skilled and have been able to manage that very effectively,” said Richardson.

Christopher Haskell, head of Bayer’s U.S. Science Hub, who has been instrumental in developing Bayer’s CoLaborator, a life sciences incubator in Mission Bay, said it won’t be easy to get midsize biotech to relocate elsewhere in the City. “The reason that Bayer moved here in 2011 was to be close to UCSF. This is the same reason that the startups want to be here so desperately. They often have their advisors from UCSF and they’re using core facilities. Also, the venture groups are here,” said Haskell.

Haskell said he’s witnessed companies suffer challenging circumstances to stay in Mission Bay, including doubling up on benches and renting in multiple buildings. He doesn’t see property owners and managers encouraging roommate situations. “There’s so much demand for space that they don’t need to go down the much more difficult route of breaking up large spaces,” said Haskell.

According to Brian Feth, founder and CEO of Xcell Biosciences, Inc., midsize biotech companies in Mission Bay remain there even if they have to operate in unconventional and restrictive ways. “We have every bench space taken up with lab equipment. We make a product with a bioreactor that’s stacked to the ceiling. We don’t have any storage space. We have the team spread out. The engineers, accountants, and I don’t get to meet them (the lab workers) as often as we would like. You have to go outside to make a phone call,” said Feth. Feth’s solution is “temporary and dysfunctional…but it’s the best we can get right now.”

Xcell began in 2012 in the QB3 East Bay Innovation Center, a University of California-associated incubator in Berkeley. It then moved to Illumina’s accelerator program in Mission Bay, and finally to Bayer’s CoLaborator.  Xcell started with one bench; it now has 13 full-time employees and three interns. Even though Feth wants the company to grow, he feels it needs to remain in Mission Bay.  “We do a lot of work with UCSF Benioff and UCSF. We engage in clinical studies with them on pancreatic and prostate cancer. They provide us with patient samples,” said Feth. “It’s much easier for us to manage patient flow from UCSF than from Stanford. Also, a lot of what we do is time-sensitive. We’d have to have a courier service.”

According to Feth, Mission Bay gives Xcell’s staff a manageable commute.  “…biotech employees…are split between South San Francisco and the East Bay. If you move to one location or the other, you’re putting a burden on people from the other side. Mission Bay is really nice because it’s right in the middle,” said Feth.

Kevin McCormack, senior director of public communications and patient advocate outreach at the California Institute for Regenerative Medicine (CIRM), a state agency that funds stem cell research which was initially located in Mission Bay, said many entities have no issue relocating. “We resolved the problem quite simply. We moved to Oakland. You just run up against the reality. The market is just so hot,” said McCormack.

According to McCormack, the City can’t do much to make more room for growing biotech. “There’s not much space left. I think the City in many ways is a victim of its own success. They wanted to make Mission Bay a biotech and high-tech hub. They’ve done just that. The only people who can afford to get in are people with deep pockets,” said McCormack.

Michael Caplan, economic development manager for the City of Berkeley, said biotech companies are moving to the East Bay because there’s an established corridor of life sciences companies between Emeryville and Berkeley. “There is a square footage of lab space here that exceeds that of Mission Bay,” said Caplan.

Caplan said the East Bay is facing its own lab space crunch and isn’t courting companies from the City.  “What we’re really trying to do is capture and grow our own companies on this side of the Bay. There’s a lot of small companies that are working on molecular science technology. There’s been a lot of work on biofuels, which is a legacy of the Energy Biofuels Institute,” said Caplan.  EBI is a Berkeley-based public-private partnership focused on developing new energy sources and lowering energy consumption.

Carol Mimura, assistant vice chancellor of intellectual property and industry research alliances at UC Berkeley, agreed that many life science companies that start in Berkeley remain in the East Bay. “About 42 percent of startup companies that were founded with an IP license from UC Berkeley are life sciences companies. Sixty-six of them are still in operation and employ over 1,550 Californians. Most of our 175 licensed startups remain in our region and cluster close to campus due to resources that they continue to rely on,” said Mimura.

Mark Addiego, mayor of South San Francisco, said biotech companies which began in Mission Bay incubators often want the larger spaces available in South SF.  “A midsize company can’t wait for years to build something from the ground up,” said Addiego.

He said South SF is attractive to biotech companies because it understands the industry. “I had the advantage of serving on the City Council a long time ago when biotech was just a blip on the radar. From the very beginning, instead of being frightened by biotech, we’ve embraced the industry,” said Addiego. 

According to Addiego, South SF’s 67,000 residents are joined by roughly 24,000 biotech commuters daily.  “We understand the benefit of having the workers in that industry is a trickle-down effect…The bigger issue is property. Genentech is 12 to 14 percent of the entire assessed valuation of the community,” said Addiego.

Addiego said biotech can provide a city with more property tax revenues than tech if the company has valuable equipment on-site. He added that although South SF is making more space for biotech, it may soon experience a space crunch.  “We never envisioned it would cross the 101. Now there’s an office building. Right downtown across from City Hall, upstairs in a building that was originally part of the Masonic Lodge, is office space. One half of that is a biotech company with a wet lab. There’s actually a biotech company down in Mountain View looking to relocate to South SF,” said Addiego.

Rufo is aware that there are attractive options for biotech companies elsewhere, but the City wants to see its current roster of 234 life sciences companies remain.  “If you rewind the tape back to 2000, the biotech industry didn’t exist here. Now we have nine incubators/accelerators in the City. We’re hosting BIO 2016 in June at the Moscone Center. I’m disappointed to see companies grow their jobs outside the City when they wanted to stay in San Francisco. For any company that wants to be here, we want to be able to accommodate them,” said Rufo.