There’s a goofy quote in the movie “Almost Famous” that pretty much reflects what many, if not most, development stage life science companies experience when looking for lab space. Jimmy Fallon is courting the band (Stillwater) to be its new manager while explaining the lay of the land and where they’ve been led astray by their old manager. Pouncing upon their momentary self-doubt, he ends by delivering this cheesy nugget to close the sale - “I didn’t invent the rainy day, man. I just own the best umbrella.”
When it comes to looking for lab space for earlier stage companies, it often seems like a perpetual rainy day. Unless buoyed by enormous rounds of financing, companies with more conservative budgets can quickly feel the water rising as they seek space that won’t sink them during the critical early stages of development. When the market doesn’t bear an intuitive solution for a company’s facility needs, a sense of panic can set in and lead that company to grasp at straws. Soliciting guidance from a trusted source to separate fact from fiction is crucial to regaining focus and achieving the company’s ultimate goal – getting to work.
(I refuse to tie the umbrella analogy into this but I think everyone gets the gist, right?)
When we engage a new client with a space search requirement, we first collaborate with them to develop a space program to be used when evaluating the market for opportunities. For lab tenants, the list of necessary space components, infrastructure, and equipment can pile up pretty quickly. Coupled with pressures to occupy (and get to work) quickly, minimize capital expense, structure leases with some degree of flexibility, and not completely succumb to outrageous rents, the list of available space candidates can constrict pretty quickly. When pickings are slim, people will (rightfully) question the validity of that claim.
Finding the Perfect Sublease for Lab Space
Because subleases can meet so many of the criteria points illustrated above, they almost always enter the conversation. Finding a sublease that almost perfectly complements a company’s space and business objectives can be like finding a winning lottery ticket. Executives who successfully find and take advantage of a situation with lower rent, existing infrastructure, and shorter lease term will flaunt it like bling and tell everyone and anyone how they led their companies to facilities greatness in the face of an unforgiving market.
As much as we want clients to rub their perfect space in the face of their peers, like Jimmy Fallon, we are often left instead to explain the lay of the land and why, even in a down market, subleases are not as prevalent as one may assume and those that do exist may have challenges that are too costly to overcome. Sure, we’re party poopers, but we want people to understand exactly what they’re getting into before they invest time and money into something that is not what it seems. That is why we’ve created a guide for subleasing lab space, which can really be used both by companies looking for space and those who may consider subleasing. We hope this resource can be helpful.
Get the Guide to Subleasing for Lab Users
Last week I had the pleasure of speaking at the British American Business Council on a panel titled “Sustainability Strategies that Make Business $ense.” My co-panelists were Nick Masci of Dacon and Erin Rae Hoffer of Autodesk. We were initially asked to speak about the different factors in environmental standards such as LEED and BREEAM, but our group felt strongly that the topic of sustainability wasn’t relevant unless it could be tied back to tangible results. We each discussed ways in which companies incorporated sustainable strategies and different ways these results were tracked.
In commercial real estate, sustainability can often be a “bad word.” Some companies just can’t get over associating “sustainability” with being a “tree hugger.” As a self-proclaimed tree hugger who drives a hybrid, bikes anywhere I can and carries around my own reusable water bottle, I am frustrated when companies push the topic off as another unnecessary cost burden. However, lately I’ve found ways to turn even the most skeptical, financially-driven decision maker to be a tree hugger!
In one example, a company needed to find space for its corporate headquarters and compared three buildings. Here are the basic stats:
- Building 1: “Brick and Beam” - older systems, no LEED certification
- Building 2: “Financial Tower” - some renovated systems, Energy Star certified
- Building 3: “New Construction” - new efficient systems, LEED Gold Core and Shell
With the same program, i.e. for 500 people with the same mix of office/open space, look at how each building compares in terms of square footage required:
- Building 1: 117,000 SF
- Building 2: 108,000 SF
- Building 3: 82,000 SF (!!!)
Now you may not care about carbon footprint, but when a more efficient building saves you 20,000 SF annually in rent, even skeptical decision makers will pay attention!
Now look at cost. We modeled annual rent, operating expenses, and expected maintenance and repair based on deeper due diligence on the building systems. Here are the annual cost projections:
- Building 1: $7.2M annually
- Building 2: $6.4M annually
- Building 3: $3.4M annually (!!!)
Commercial Real Estate Sustainability Savings
A lot of the savings are due to the decreased square footage and associated rent. However, a big part is energy saving. There’s less space to heat/cool and with the newer systems you have lower maintenance burdens and less frequent cost repairs.
Finally, we worked with this company to find a way to qualitatively rank things like being close to transit stops, having access to daylight, and less tangible components that mean a lot to a company’s well-being and productivity but are often hard to capture. We created a rating matrix and matched each building up against the stated criteria and guess what? The most sustainable building won!
Who said being sustainable was all about being a tree hugger? It’s more about aligning strategies that make business sense.
Corporate Real Estate Resources
Rapidly increasing rents, bidding wars for available space, “take it or leave it” attitudes from landlords - Sound familiar? Many of T3’s clients that are expanding are facing challenging, tightening office-space markets. This is particularly true in San Francisco/Silicon Valley, Boston and areas of New York City. Smart tenants enter the office space search process armed with good data and an experienced real estate advisor by their side. With over 500 client technology companies nationally, our emerging tech sector team is focused on guiding our clients through the office space search and deal negotiation process. Download our complimentary Emerging Tech Tenant Real Estate Survival Guide to start the process. Then give us a call and one of our market experts can help you put together an effective real estate and facilities plan!
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In preparing for our trip to SXSW, and even upon return, many of our clients, partners and friends asked why a corporate real estate firm would travel down to Austin, Texas for a conference focused on startups and other emerging trends within the technology ecosystem. During the weeklong event, topics of conversation ranged from discussions about mobile technology, to opportunities in big data management, to Facebook’s IPO, to innovation in banking and the list goes on. Our Emerging Tech team felt right at home.
For us, it’s about immersing ourselves in the technology community, understanding the challenges and trends our emerging tech clients face on a daily basis and applying that knowledge when helping to create their working environment. Our success is not facilitated from the side-lines; we are truly passionate about innovation and the companies within the technology ecosystem, and our active participation in the community supports this claim. We believe the companies that we work with are not only creating new technologies, but are changing the way that people work together in the work place. The better we understand their business and the trends within it, the better and more effectively we can advise them when making a real estate decision.
T3 is now based in Silicon Valley and Boston, two of the largest startup/technology communities in the country. As we continue to grow as a firm, it is increasingly more challenging, and critical, that our Emerging Tech team stays connected with each other and with the tech community as a whole. Being aware and collaborating on what is happening from a real estate perspective, investment perspective and technological perspective on both coasts is imperative to our success and our ability to better serve our clients. The ability to bring our east and west coast Emerging Tech teams together, surrounded by a community in which we live, was invaluable.
These are the Emerging Tech shirts we made for the SXSW trip: West Coast in red - East Coast in grey!
T3 is passionate about advising the emerging technology community, it is our life blood and it is why we were founded. SXSW is a massive convergence of this community and for us there is no question about the value in being present.
SXSW 2013 here we come!
Read Our Handbooks on Winning Real Estate and Facilities Strategies for Emerging Tech Companies:
We live in an increasingly interconnected global community. Innovative U.S. based companies continue to expand internationally in search of customers, talented employees, and in some cases investors. T3 Advisors professionals have been involved with a variety of corporate real estate projects internationally. Through our GlobalNet International Real Estate Partnership, we are able to provide clients with international property searches and research into international markets.
As a continuation of our providing our clients with access to international real estate markets and information, we are proud to announce our new series, “Going Beyond the Borders”. Each piece will be focused on a specific country, and will address the common issues (real estate related and beyond) that U.S. companies face when expanding abroad, as well as matters that should be considered before making a final decision. We are incredibly excited to be able to offer this new resource, and to continue to expand the services and knowledge we provide our clients.
Get Our Guide to the UK Real Estate Market & Regulations
Recently, I was with a client in Boston helping them look for office space for their dynamically-growing technology company. As is usually the case with tech companies, the focus was on "cool space." That is, something with "character" (exposed brick and beam, open ceiling with exposed air ducts, hard wood flooring or exposed concrete) and with lots of open space, conducive to worker collaboration. We visited a number of different locations around Boston in search of the perfect office space.
I was struck by the lack of options. Available office properties in Boston are sometimes old, leftover financial services or law-firm spaces with traditional dropped ceilings and lots of hard-walled offices. In other words, pretty much the exact opposite of what my client, and most growing tech companies, was after. So I started thinking, what’s the answer? How will this demand for cool office environments be satisfied? Well, I’ve noticed one trend that should help provide some much needed options and relief to this "thirst" for creative space.
There is a significant amount of office space being vacated by various Massachusetts state agencies that have consolidated operations to 1000 Washington Street. For decades, many of these agencies had occupied office areas in low-cost buildings located in neighborhoods like the Fort Point Channel, South Station and North Station. Most of the occupied space was built 20 to 30 years ago with the bricks and wood beams—so much in demand today—being covered over. These vacancies are now providing the needed opportunities for innovative companies on the hunt for space today. As the state agencies abandon these buildings, landlords are ripping down the old buildouts and uncovering the coveted brick and beam details that are so desirable.
Boston Vacancies Available for "Cool" Office Space:
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Building
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Total Building SF
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27 Wormwood Street (Towerpoint), Boston
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153,516 sq ft
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24 Farnsworth Street, Boston
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88,556 sq ft
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One South Station, Boston
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210,228 sq ft
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One Congress Street, Boston
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287,000 sq ft
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226 Causeway Street, Boston
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193,000 sq ft
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Though this new movement is providing Boston technology companies some much needed office space supply, the renovations can take time and require lengthy lease terms.
Who knows where the next wave of cool office space options will come from, but for 2012, at least, the consolidation of Massachusetts state agencies is answering the call.
Handbook - Greater Boston Real Estate and Facilities Strategies for Emerging Technology Companies
Commercial real estate markets in the innovation hubs of the country are booming. Silicon Valley, SOMA, Boston and New York are on the top of this list. The leverage pendulum has swung deep into the corner of the landlord, and pre-revenue, early-stage startups have challenging times leasing office space with flexible terms while minimizing capital expanses (e.g. build-out, buying furniture, etc.). Enter, the Coworking world.
Early stage technology companies battle changing real estate conditions in San Francisco and Silicon Valley.
The lingo, for example, can sometimes be a little confusing. Incubator, Accelerator, Coworking, Sharing or “we-space” are terms thrown around and basically describe the idea of shared resources. Each descriptor has iterations that make it unique, often around support, investment and networking, but the common thread among almost all is the idea of sharing office space.
We shouldn’t be surprised by this movement. Lisa Gansky spells it out pretty clearly in her book, The Mesh. The same way that Netflix has allowed us to share movies, ZipCar share cars and Airbnb share, well, air beds, the same is happening in the real estate world. Pooling like-minded people and companies together to take advantage of economies of scale that create infrastructure benefits in kitchens, server rooms, larger conference rooms, and copy/printing capabilities is obvious. But, in addition, there are “water cooler chats” and “casual collisions” that occur when multiple companies are working together in a way that we’ve never seen before. Different companies employ people with different skill sets. The opportunity to access these multiple skill sets, while not carrying them all as FTEs is the secret sauce. Not only are startups benefiting from great space that allows for collaboration and fosters productivity in its own employees, but it also provides the opportunity to leverage other company’s expertise and skill sets to solve problems quicker and cheaper by someone you know and can trust. It’s a classic win-win for startups.
A unique, new tool to assist emerging companies with their search for the perfect office space!
For companies with less than 10 people, the co-working option allows for ultimate flexibility, very limited investment in infrastructure and an ecosystem that could provide significant time and cost savings.
Now, the questions are:
- How do you find these coworking solutions?
- Where do they exist?
- Who can apply?
- How much do they cost?
Small companies are underserved by the traditional real estate market. These small, co-working deals yield little, if any, compensation for the real estate broker. At T3, however, our corporate real estate company was built to serve all segments of the innovation economy, including smaller, start-up companies. We’ve started developing an online search tool that will help technology startups, VCs and business owners identify and dissect the Coworking, Accelerator and Incubator opportunities in the Bay Area, for starters.
Over the next several weeks, we’ll be updating you on the progress of the tool and encourage you to subscribe to our blog via email or RSS feed to stay tuned. In the meantime, feel free to download some helpful hints below for start-up technology companies searching for real estate in the Bay Area and Silicon Valley.
On February 12, 2012, T3 Advisors employees and spouses trekked north to Stowe, Vermont for our Second Annual T3 Winter Offsite (aka “T3 Winners Circle Trip”) to celebrate our 2011 corporate real estate successes. When we started T3 in 2001, I promised that we would never hold a sales production “winner circle" trip. They are exclusive and, in my mind, send the wrong signal to employees. Sure, life at T3 is a meritocracy like any company in a free market system. Compensation is driven largely by client projects and individual success. But T3 is a family, and once a year we celebrate this family and how much we enjoy working together to help our clients with their office space and corporate real estate needs. My second pledge ten years ago was that we will never have a “partners retreat.” While I take special pride in starting the firm, all of my colleagues are what make T3 special - not just my partners.
The trip was fantastic. We enjoyed the luxury of the Stowe Mountain Lodge again this year. Sunday night brought the annual formal team dinner where we dined on locally grown Vermont gourmet fare. I was moved when my partner, Greg Hoffmeister, presented me the “Big Dawg” trophy on behalf of all the employees of T3 for helping steer T3 through the years and our recent growth into the Silicon Valley real estate market.
Check out some of highlights from the event:
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On Monday, some skied, while others (me included) hit the spa for some much needed rest and relaxation. Later in the afternoon we all gathered for the “T3 Advisors Winter Olympics.” This relay race biathlon pitted team Bear Claw against team Wolf Pack. The race showed how out of shape some of us are. In the end, team Wolf Pack prevailed for the win! I was proud when one of the Stowe staff members said, “I don’t know who T3 Advisors is or what you do, but of the hundreds of corporate retreats we host each year, your team has the most fun and enjoys each other’s company the most.”
Monday night brought our annual trip to the Hanah restaurant. Lots of sushi, saki bombs and wonderful Japanese steakhouse food followed. The few non-T3 family members in the restaurant were watching our team have fun and laugh.
On Tuesday, our East Coast team headed south to Boston and our West Coast team headed west to Palo Alto to get back to providing the winning real estate services to clients so we can enjoy a trip together next year!
We all had a wonderful time together and were reminded of what makes T3 Advisors such a special place to work. I am convinced that the quality of our client work comes in large part from the culture of T3 and how we work together.
Learn How to Improve Your Company Culture
With all the hype surrounding the viability of Boston’s Innovation District as a cost-effective and edgy alternative for the area’s lab-seeking life science companies, comes a trend that is quietly developing in a less flashy submarket.
West Cambridge for Life Science Lab Real Estate
For cash-conservative life science companies adhering to the need for a Cambridge address, West Cambridge has often been perceived as a last resort. While the market for “lab-ready” buildings itself is less than a quarter the size of Kendall (1.7M SF versus 7.2M), many commercially available, multi-tenant facilities in and around Alewife (mostly along Concord Avenue) haven’t “shown well” versus most of its East Cambridge counterparts. Lack of curb appeal, gloomy interiors with obsolete infrastructure, accessibility concerns (fear of rotaries!), walkability to T locations, and more concerns have seemed to haunt purveyors of lab space in West Cambridge for years.
Frankly, I’ve always thought of West Cambridge as a good compromise that just needed a little more glitz, marketing, and momentum. It sounds like it may be on its way to getting a little bit of all three.
It would appear that one Kendall-based company looking for a change of scenery and culture looks likely to take a good portion of the old Curis building on Moulton Street while a new company funded by top-tier local investors is working hard to take the balance of the building. It also seems as though another Kendall stalwart is expanding by taking manufacturing space at 665 Concord Avenue.
These pending deals are reflective of the efforts Biomed Realty is making to redevelop Fresh Pond Research Park by “re-skinning” its existing facilities and structuring aggressive deals (versus Kendall properties, a significant discount) to attract some of Boston’s more exciting life science companies. With continued effort toward building up this Cambridge outpost with more investment in quality facilities, better illustration of shuttle service availability and T access, creation of a more campus-like feel among park and surrounding park buildings, the prospects of West Cambridge standing as an viable and attractive location for area life science companies is more a possibility now than it has been in the past.
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This past month T3 Advisors attended the CEO Day at this year’s Health Innovation Summit in San Francisco. The event was hosted by key sponsors Rock Health, Physic Ventures, FutureMed, Unilever and several others.
Jennifer Aaker, a current Professor at Stanford Graduate School of Business and recent author of The Dragon Fly Effect, kicked off the day discussing how companies cultivate admiration through brands. We thought this was an invaluable discussion as we are continuously working with our clients on how to use their real estate to create a brand and culture for the company which ultimately enables them to recruit and retain the top talent.
One of the key panel discussions was around the funding mechanisms for digital health startups. The panel included the following people:
Rowan Chapman Partner at Mohr Davidow Ventures
Anne DeGheest Co-Founder & Managing Director, HealthTech Capital
Zina Moukheiber Contributing Editor, Forbes (moderator)
Jennifer Shieh Science and Technology Policy Fellow at the National Institutes of Health
Halle Tecco Co-Founder & CEO, Rock Health
Anne initiated the discussion by pointing out that “mobile health is going to change the world.” Her opinions were slightly different as to the venture climate given HealthTech’s continued commitment to early stage healthcare where as Rowan and Mohr Davidnow are slowly pulling away from early stage deals. The one common theme was that they all recalled entrepreneurs getting hung up on at the sound of “healthcare IT.” The tides have certainly turned as this seems like a logical route for many investors who have been skittish to invest in medical device companies due to FDA and reimbursement hurdles.
There were three components that the panel is looking for in their next healthcare IT start up:
- Healthcare expertise and knowledge around navigating the FDA and reimbursement issues.
- Technical background whether it be social, ecommerce, mobile, etc.
- How does your product engage the customer?
It was obvious that the panel was very bullish on the future of the healthcare sector. It has also been backed up by the funding activity in 2011. According to Mercom Capital’s recent Healthcare IT Report “Almost half a billion dollars came into the sector through venture capital investment compared to $211 million in 2010.”
The last panel of the afternoon was around the notion of Moneyball for Medicine and the health business model. The panel included the following:
Linda Avey Founder of 23andMe, Curious
Dave Chase Co-Founder & CEO, Avado (Moderator)
Ron Gutman Founder & CEO, HealthTap
Jennifer Wong Founder & CEO, Alt 12 Apps
Dave went into great lengths about how our ecosystem has historically had companies that are great providers of technology but have they really thought about using technology to their competitive advantage. He discussed that although most innovation in healthcare is around ways to maximize reimbursement codes or government incentives, the companies that are more likely to get funded are those that introduce truly disruptive innovation to care delivery. The panel included many business models in which technology has played a pivotal role. Linda Avery and her team at 23andMe have revolutionized genetic testing from the ease of your own home. HealthTap has created an interactive health network that is dedicated to improving the health of people around the world.
Has your healthcare IT company recently been funded? Are you looking for an environment to recruit and retain the best talent? T3 Advisors can help enable your company to think strategically around your next real estate move. Check out our Silicon Valley Emerging Tech and Life Science Handbooks!
Winning Real Estate and Facilities Strategies for Life Science and Emerging Tech Companies
