Whether one uses the term life sciences, biotech, or biohealth, facilities that make up Greater Madison’s “bio” market have more square footage than the same markets in several of the nation’s largest metropolitan areas, including New York, Atlanta, and Houston, according to the first Madison-focused “Life Science Real Estate Market Report” published by Broadwing Advisors.
With an inventory of 4.8 million square feet of lab space in 89 lab facilities, Madison also has a much lower life science market vacancy (2%) than most large markets, a sign that it has avoided overbuilding even though more than 40% of local industry growth has occurred during the past 10 years.
Yet there are some aspects of the local market that could be improved, especially the development of a more robust population of mid-sized companies, according to Craig Stanley, founding principal of Broadwing Advisors. Broadwing is a commercial real estate advisory service that has worked with local life sciences firms such as Aldevron, Exact Sciences, and Nimble Therapeutics.
Stanley cited two key takeaways from this initial study. First, he was surprised by the size of the Madison life sciences market because before undertaking this project, he thought it was about half that size. Secondly, the study found that 60.4% of the Madison life sciences market is made up of 10 large companies, but it has few of what Stanley called “saplings,” which are mid-sized organizations in the 5,000- to 30,000-square-foot range.
Even with a thin middle market, Madison stacks up better than expected, he said. The local life sciences market has more than 11,200 employees with a healthy supply of labor thanks to more than 1,500 industry degrees and certificates conferred annually at local colleges and universities.
“We’re basically surprised at how big of a market we are when compared to some of the others,” Stanley said. “Obviously, we’re not San Diego’s size, but for a community of our size, we are doing very well.”
The two largest life science markets are San Francisco, with 46.4 million square feet, and Boston, which has 42.1 million square feet. San Diego, meanwhile, comes in third with 23.5 million square feet, followed by Philadelphia, 19.8 million square feet, and the state of New Jersey, which is counted as one market, with 19.2 million square feet. According to the study, Madison’s #13 ranking exceeds that of Houston (4,500 square feet), Austin (4,400 square feet), and New York City (3,700 square feet).
Asked whether Madison is vulnerable with 60% of the market, or 2.9 million square feet, represented by 10 large users, Stanley said that characteristic is neither good or bad, but neutral.
“If you look at the history of each of those 10 users, Promega continues to grow and has grown in the market. They like the market,” Stanley said. “Exact Sciences continues to grow in the market … MilliporeSigma has grown and Arrowhead Pharmaceuticals has two facilities now and put in a major investment. All of these organizations have invested in Madison, and it’s been a very positive thing for Madison.”
The challenge, according to Stanley, is that while Madison has some large companies at what Stanley called “the bottom of the funnel,” it doesn’t have a lot of the medium-sized ones to expand the funnel. “That’s the thing that came out of the report that we sort of anecdotally knew because we’ve been doing this work, but the report really outlines it,” he said.
The study’s other notable findings are:
- The west side, not including University Research Park (URP), is Madison’s largest submarket, with 46% of total square footage, followed by URP (22%), east/north (19%), and south (13%).
- Forty-six percent of lab spaces have been converted from other uses, and there are opportunities for other conversions to grow the existing mid-sized organizations, according to Stanley.
- Sixty-one percent of Madison’s life sciences buildings are single-user occupied.
- Madison’s 2.2% vacancy rate represents 104,719 square feet. A large piece of that is the now vacant 40,000 square feet of lab space once occupied by Spectrum Brands’ battery division.
- In the past 10 years, the three largest life sciences building projects are: Exact Sciences diagnostic lab, 323,182 square feet in 2019; Promega’s R&D facility, 280,000 square feet in 2021; and Arrowhead Pharmaceuticals, 285,000 square feet in 2024.
Lisa Johnson, CEO of BioForward Wisconsin, said the report provides additional data on the importance of Wisconsin’s biohealth industry, especially in Dane County.
“It’s impressive to see the major expansions that have taken place during the last 10 years and validates what BioForward has been reporting through its Wisconsin biohealth economic impact reports for the last decade,” she said.
Future considerations
Broadwing Advisors plans to study the Madison market on a semiannual basis. Over the next decade, Stanley believes the market is at a crossroads as to whether it will expand further. Outside of the aforementioned investments made by large companies, he said URP has been “the only game in town” when it comes to landlords that specifically focus on life science facilities.
With a low vacancy rate for lab real estate in Madison, local companies don’t have space to grow. An effort is being made to address that with the proposed development of Velocity Station, a 159,000-square-foot lab facility that would be built on 6.36 acres formerly occupied by the now-demolished Clock Tower Office Park on Odana Road.
Dan Schwartz, vice president of SARA Investment Real Estate, which will develop Velocity Station, said in 2024 that the hope of this project is it can help cement Madison as a strong market for biotech.
