Biotech Land Rush

A glut of development is planned in Seattle, Bothell, and Rentonenough to accommodate tens of thousands of life-science researchers and other 'knowledge' workers. Are there enough tenants to go around?

The region's leaders have caught biotech fever, and economist Joseph Cortright says that can be an unhealthy obsession. "Biotech is an idea virus that has swept governors and mayors across the country," says Cortright, co-author of an influential study about how cities have encouraged biotech development. "There is a herd instinct here. Ten years ago, everybody wanted to be Silicon Valley. Now the whole economic-development fraternity has moved lockstep to anoint biotech as the next big thing."

That's fine with Maura O'Neill, CEO of Explore Life, a Puget Sound consortium of political and business leaders. She hopes biotech fever brings new or expanded development to Seattle's waterfront Interbay neighborhood, to the neighborhood south of Lake Union, and to Renton, Bothell, and other locations. "We have built the most amazing medical school and bioscience infrastructure in the world," O'Neill says. "We need some new mechanisms to jump-start those scientists out of the labs." She quotes Lee Hartwell, president and director of the Fred Hutchinson Cancer Research Center: "Not enough science is being commercialized."

O'Neill wants biotech companies here to do what Boeing did with airplanes, what Microsoft did with software, and what Starbucks did with coffee. She wants to see 35,000 new biotech-related jobs in Washington in the next decade. That can happen, O'Neill says, only if we compete as a region, against other regions, with an alliance of business leaders, developers, and elected officials. First, though, she might need to referee a fight among the present and envisioned biotech centers in metropolitan Seattle.

Explore Life estimates there are hundreds of acres of land with the capacity for 30 million square feet of development throughout the regiona glut of options, really. Conceptual work is under way by the Port of Seattle for development at its Terminal 91 property in Interbay and by the city of Renton for the future of Boeing's sprawling but decreasingly active property at the south end of Lake Washington. The state's biggest biotech campus, Canyon Park in Bothell, has a great deal of development and redevelopment capacity already on line.

Maura ONeill, CEO of Explore Life, in the molecular-imaging laboratory at the University of Washington: "We have built the most amazing medical school and bioscience infrastructure in the world.">.

(Annie Marie Musselman)

So there are fissures in Explore Life's alliance. Seattle Mayor Greg Nickels is feuding with the Port over Terminal 91. Roger Belanich, the main developer of Canyon Park, doesn't hold out much hope for Renton's ambitions to create a biotech campus. Urbanists like former Seattle Mayor Paul Schell bemoan the suburban sprawl represented by Canyon Park. While O'Neill dreams of the region competing globally, biotech fever has incubated a good, old-fashioned real- estate brawl locally.

Explore New Worlds

For O'Neill, the task at hand is both a heartfelt missionas a child, she watched her 5-year-old sister die from leukemiaand a methodical effort to replace the continuing loss of aerospace jobs at Boeing. "It's part man on the moon by the end of the decade, part jobs programs," she quips. "Washington used to be famous for lots of other things. Now we are famous for the highest unemployment in the country."

O'Neill's promotional work is backed by some heavy hitters. Former Seattle Mayor Norm Rice is chair of Explore Life's board, and the organization got startup funding from the city of Renton and the Port. O'Neill wants to help transform Washington's biotech industry from a small, fast-growing sector of the economy into a major engine of economic development.

Economist Cortright says his study of such efforts makes him doubtful. "The good news for Seattle is that it is a place that really does have a biotech industryone of the nine places in the country that does have a significant biotech presence," Cortright says. "That said, in none of the nine places is a biotech firm one of the largest 25 employers. Biotech has not been a base for employment in a region like aerospace has. Biotech is not a huge industry in terms of employment."

THERE ARE MORE than 3 million people in Washington's workforce, according to the state's Employment Security Department. The department's most recent numbers show that 7.6 percent of them are unemployed. In terms of employment, the leading industries in Washington are aerospace (including Boeing) with 62,300 workers and software publishing (including Microsoft) with 38,000. Biotech is not a big enough category for the state to track separately. The state does, however, have a category called physical, engineering, and life sciences, which has 528 employers and 16,500 workers. The Washington Biotechnology and Biomedical Association, a trade group, tracks its own employment category of biotech and medical-device companies and puts employment at 19,300 for 190 companies.

In either case, Cortright has a point. He warns against a facile comparison of biotech's potential to the growth of high-tech companies involved in the Internet, telecommunications, and software. Unlike the tremendous growth in the commercial and leisure use of computers, Cortright sees biotech as having a limited market. "It's unlikely under anybody's scenario that any of us will have a genetic-manipulation workstation on our desks in 20 years. Biotechnology is not a transformative force in the economy." Moreover, he says, biotech has not been able to cut costs in the dramatic fashion that the computer industry has. As a result, inflation of the nation's health care costs, affected dramatically by the price of pharmaceuticals, continues. Cortright thinks the sheer costliness of biotechnology will be a brake on its development. "Even if every drug turns out to be wildly successful, how much can we pay for pharmaceuticals?" he wonders.

O'Neill of Explore Life refuses to be discouraged. "If people want to be naysayers, that's their prerogative," she says. "I want to be part of making something extraordinary happen." When she moved to Seattle in 1975, she notes, the building that houses the biotech firm Zymogenetics in the South Lake Union neighborhood was a working steam plant. "Let's create global alliances so we can march forward and create a better quality of life and better health," O'Neill says.

LAKESIDE SEAT

Over the past year, the biggest outbreak of biotech fever has been in South Lake Union. Nickels, the hard-charging mayor of Washington's largest city, and Mercer Island resident Paul Allen, the fourth-richest man in the world, have allied and envision transforming South Lake Union into a biotechnology hub, with 20,000 new jobs and 10,000 new residents. Their vision has generated many headlines and much debate.

Discerning hype from real potential can be a chore, but there is no doubt that the deep pockets of Allen, through his holding company, Vulcan, are bankrolling real on-the-ground changes that will alter Seattle's landscape considerably. Vulcan has acquired more than 50 acres of real estate in the area, and in the past two years, the company has inked major deals for more than 563,000 square feet of development in the neighborhoodwhile planning for 9,500,000 more. Firm plans include a grocery store, apartments, a hotel, commercial headquarters for companies like clothier Tommy Bahama and architecture firm NBBJ, and laboratory space for biotechnology. Allen's personal interest in biotech has roots in his successful fight against Hodgkin's disease years ago. Vulcan's inspiration as a developer is the proximity of the University of Washington Medical School, which it sees as a sort of anchor tenant for South Lake Union.

In the past decade, UW's medical school has undergone a remarkable expansion by obtaining private and public grants and contracts. In 1993, the med school had grants and contracts of $186 million. This year it will bring in $433 million, according to Dr. Susan Wray, the school's vice president for industrial relations. Among public universities, UW was the top recipient of National Institutes of Health grants, and it was third among all universities, collecting more than $405 million in 2002. Wray says the med school has outgrown the laboratory space available on campus. Like most money from NIH, however, such grants do not pay for new buildings. That's where medical-school Dean Paul Ramsey's fund-raising has come in. Among other sources of help for capital expenses, Ramsey has tapped the largesse of the world's richest man, Microsoft CEO Bill Gates, who co-founded the Redmond software giant with Allen. The UW has raised enough money to close a deal with Vulcan to convert the old Washington Natural Gas headquarters, known as the Blue Flame Building, into 100,000 square feet of laboratory space. John Pettit, UW's med-school associate vice president for business and legal affairs, says the next phase of the university's South Lake Union developmentadding 300,000 more square feet of lab space on the same blockis moving forward, although it has not been finalized. After that, Pettit says, the university hopes to build another 400,000 square feet across the street.

Port of Seattle Commissioner Paige Miller: "You cant stand still and not take risks. Ask Detroit."

(Annie Marie Musselman)

VULCAN HAS SOLD Seattle in general and South Lake Union in particular as a place that can be an incredible nexus for life-sciences research and business. In addition to UW's presence and influence, the Fred Hutchinson Cancer Research Centerwhich leads the nation's private research institutions in NIH grants and is the state's largest biotech employer, with 2,800 peoplehas called South Lake Union home for years. Soon, the Allen Institute for Brain Science, with a $100 million endowment from its founder, will move to the neighborhood from temporary quarters in Fremont. Superstar scientists like Hartwell, director of the Hutch and winner of the 2001 Nobel Prize in medicine, are working in the area. The Seattle-based Bill and Melinda Gates Foundation is at the forefront of researching global health problems and supplying solutions and will likely be a funding target for biotech researchers. Add the region's famous quality of life to the mix and you have a pretty exciting package to sell.

Companies have responded. When pharmaceutical giant Amgen acquired the local firm Immunex (started by scientists from the Hutch), the parent company chose to continue to develop the Helix campus on Elliott Bay rather than pull up stakes. When pharmacological behemoth Merck bought Rosetta Inpharmatics (also started by Hutch scientists), with offices in Kirkland and Bothell, they moved the company to South Lake Union.

No wonder that with all these heavy hitters pushing big development, Mayor Nickels wants to upgrade South Lake Union's infrastructure to handle expansion. Work on transportation and utilities clearly needs to be done, but the question is who should pay for it? The public has already contributed tax dollars at the front end, to fund the NIH grants and to run and build UW. Companies like Merck and Amgen are making millions in profits from publicly funded discoveries.

TERMINAL TURN

In Seattle's Interbay neighborhood, the Port of Seattle hopes to improve its bottom line with biotechnology. The Port owns 82 acres at Terminal 91, where thousands of newly arrived Nissan cars once paused before being shipped to U.S. dealers. Now the property lies vacant. The Port has allocated $6.5 million to study how to develop 57 acres of the area, and that's not a digression from its mission. Earlier this year, the Port reorganized, elevating superbureaucrat Tom Tierney to head a new Division of Economic Development that would be equal in stature to the Port's struggling airport and marine divisions. The Port hopes to find ways to use real- estate development to improve its own fiscal future and to bolster the region's economy. Seattle Port Commissioner Paige Miller dreams of creating a biotechnology campus on the site, serviced by housing, retail, Sound Transit commuter rail, the new monorail line, and a waterfront trolley that is extended north. "You can't stand still and not take risks," she says. "Ask Detroit."

Former Port Commissioner and Mayor Schell, now a strategic adviser at the architecture firm NBBJ, has done a lot of thinking about the site. In his mind, the opportunity begins with the Magnolia Bridge, which needs to be rebuilt because of earthquake damage. He wants to see the city move the bridge a little farther north, making views from the Port land better. Next, Schell thinks, the Port should buy the air rights over the nearby railroad yard from Burlington Northern Santa Fe and put a lid on the noisy facility. At that point, the site is ripe for development of a "creative community," as Schell calls it. "You don't separate jobs from housing and entertainment," he says. Instead, in building a mixed-use neighborhood from scratch, you create the opportunity for companies from the knowledge industry to locate in Seattle.

SURPRISINGLY, WHILE the Nickels administration raves about Vulcan employing this development strategy at South Lake Union, it is distinctly bearish on the Port's efforts. Says Port Commissioner-elect Alec Fisken, who also works as a senior policy adviser for the city's Office of Policy and Management: "The mayor is fundamentally sympathetic to maritime jobs."

Mary Jean Ryan, director of the Office of Policy and Management, stresses the importance of preserving industrial land for industrial uses. "You don't give industrial land up, because you don't get it back," she says. Terminal 91 is just south of the hub of Seattle's remaining maritime-related business area, Ryan says, referring to Salmon Bay and Fishermen's Terminal, where small employers are engaged in a variety of marine businesses tugboats, barges, boat building. "They make up a sizable employment base," she notes.

Port Commissioner Miller says, "We do need small employers, but they don't pay very much, and they employ just a small number of people." Schell adds, "Where are the likely jobs going to be five, 10, 15, or 20 years from now? What is the strategy that is going to get us there? We are having that debate in a nutshell over South Lake Union and Interbay."

DREAMING DOWN SOUTH

Alex Pietsch is sure Renton's future jobs will not be in aerospace. That is why the city's director of the Department of Economic Development, Neighborhoods, and Strategic Planning has started aggressively marketing 300 acres now occupied by Boeing on the shore of Lake Washington. Although Renton doesn't own the property, Pietsch envisions the site as a catalyst for the transformation of the blue-collar, suburban city of 54,000. Ten years ago, Boeing employed 62 percent of Renton's workforce. Today, the aerospace company's share is 39 percent. The city's administration has come to terms with the fact that Boeing's employment will continue to drop, and the aerospace company is expected to sell about 80 acres in the near future.

As in South Lake Union and at Terminal 91, Renton's idea is to build a "creative community" of mixed use, anchored by a campus of a 21st-century industry like biotech. Pietsch says the site can accommodate 40,000 jobs and 15,000 residents. He thinks Renton can take advantage of relatively cheap land and proximity to Seattle-Tacoma International Airport. Passenger ferries running up the lake could overcome the city's distance from the University of Washington. The UW is bullish on the sitehigh-level administrators like interim President Lee Huntsman are enthusiastic proponents of the idea. "We are never going to replace downtown Seattle as a marquee location," says Pietsch, "but we think there is an opportunity for industries that want to build a campuslike setting."

Roger Belanich, principal developer of Bothell's Canyon Park, isn't buying Pietsch's pitch. "RentonI don't believe in that," he says. He thinks the creative-community concept is eggheaded nonsense. "The planners love that stuffit's right out of the textbookbut you have to get real once in a while. South Lake Union makes sense, but there is not that much biotech to go around. It is going to get a little thin."

Developers and brokers are decidedly pessimistic about Renton's ability to attract a biotech campus and a mixed-use community. Gary Carpenter, executive vice president of Bentall Real Estate Services, grew up in Renton and tried to do a project in the city at the height of the 1990s economic boom. "Tenants just didn't want to go, despite the fact that you could give them a rent reduction," Carpenter says. "It was almost a mental block. There's no synergy in Renton right now." Like other brokers and developers, Carpenter worries about overcapacity. "How much business is there for biotech? A company asks itself: Why would I want to isolate myself down in Renton?"

Pietsch notes that developers and brokers have vested interests in projects in existing developments in South Lake Union and Bothell. He says it's not their job to be visionaries. "What's wrong with dreaming?" he asks.

THE REAL WORLD

Belanich has already brought a dream into reality. In 1984, when he bought the 350 acres that today is Canyon Park, it was a working dairy farm. You can still see remnants of other old farms in the area. Belanich saw a tremendous business opportunity in the location near the intersection of Interstate 405 and Interstate 5. Getting there from either Seattle or the Eastside suburbs is counter to the flow of most traffic and does not involve water crossings. "Its location is strategic," says Belanich. Fifteen years ago, he started to lure biotech companies to Canyon Park. He has been very successful.

According to the Washington Biotechnology and Biomedical Association, Bothell today is home to 86 percent of Snohomish County's 5,000 biotech workers, who are employed by 35 companies like Icos, Seattle Genetics, and Epoch Biosciences. Canyon Park is the biggest location for biotech in Bothell and has a distinctly different approach to development than that envisioned for South Lake Union, Interbay, or Renton. Prototypically suburban, Canyon Park is made up of cookie-cutter office buildings surrounded by acres of parking lots. There is one restaurant, a bank, and a gym at the entrance. A couple of miles away, a huge strip-mall-style development has grown up to service the area. While there are some apartment buildings nearby, commuting by car and living in a bedroom community are the norm. There is a good deal of vacant land and office space available for lease in Canyon Park or the surrounding business parks, like Quadrant Monte Villa and Schnitzer North Creek. In addition, Belanich got the height limits raised in Canyon Park, so significant redevelopment potential exists as well.

Former Mayor Paul Schell: "Where are the likely jobs going to be? What is the strategy that is going to get us there?"

(Annie Marie Musselman)

Bill Neil, a real-estate broker with GVA Kidder Mathews who specializes in biotech, says, "Right now most of the momentum is in Bothell and the Denny Triangle/South Lake Union." He believes the two locations have plenty of capacity to absorb future biotech development. Since the urban and suburban settings differ from one another so starkly, each appeals to different companies depending on the corporate culture, according to Neil. He believes companies either have a suburban or urban mind-set. Says Neil, "People have very fervent feelings one way or the other." The broker does not, however, think there is room for the Port and Renton to get in on the action. "The market can't handle it all," he says.

URBANISTS LIKE Schell believe the land-use patterns represented by Bothell are a failure of urban planning. He wants to prevent more development from sprawling out into the great green spaces of the countryside. He also believes that the kind of mixed uses that he promotes will be most attractive to the new generation of industries like biotech.

Michael Cade, vice president of the Snohomish Economic Development Council, is sick of hearing such arguments. "When I hear comments that what they are doing in Canyon Park is not in the nature of the beast, I say, 'So what? It works.'" Cade thinks Bothell is in a much better position to compete for growth than Renton or the Port of Seattle. "When you talk to Alex Pietsch and he says, 'We have the land for the next wave of biotech,' keep in mindwe have some very phenomenal, high-end property for biotech. The buildings are ready to go. This is the next marketplace."

This whole debate makes developer Belanich recall that he nearly lured Immunex out of Seattle, to relocate in Bothell. The outcry from elected officials was tremendous. "Norm Rice and [King County Executive] Ron Sims portrayed it like Immunex was leaving the area," he says. What happened next? The Port of Seattle stepped in and gave Immunex a very good deal on waterfront property. "The Port gave Immunex the land," says Belanich. "I'm agitated by the Port because they are competing with private industry. The city and the county put $45 million into mitigation and a roadway [for Immunex]. Up here, I have to pay my own mitigation."

HIS POINT OF VIEW makes one keenly aware of the difficult task awaiting O'Neill and her organization, Explore Life. O'Neill concedes the competition for biotech nationwide is fierce. In 2001, when the U.S. Department of Commerce conducted a survey of governments around the country, nearly 80 percent of cities and states put biotech as one of their top two foci for economic development. She hopes to convince the region's leaders to pursue biotech together, but even before the starting gate has opened, the jockeying for position has already begun.

ghowland@seattleweekly.com

 
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