Where Should You Locate Your Next Biotech Facility?
Jonathan L. Sangster, Senior Managing Director, CB Richard Ellis (Biotech Location Guide 2007)

It is acknowledged that the definition of "biotech" is broad and can include the life sciences, bio-pharmaceuticals, biotechnologies, medical technologies, and more. It is further recognized that biotech projects can cross a wide spectrum, from early-stage development to commercial production. The intent of this article is to address some of the major strategic location criteria that will enable you to achieve your scientific and business objectives, regardless of your biotech focus or project type.

Where is the best location for biotech operations today and where might be the "best fit" for my operation? What factors should I consider when approaching this decision? In an environment where the development and expansion of biotech companies continues to trend upward, these are topics that are routinely debated among economic developers, business location consultants, and - most importantly - among company leadership responsible for strategic business location decisions.

The location decision is becoming increasingly complex as many states and communities are aggressively competing for and indicating that they are best-positioned to be the new home for biotech operations. A frequently asked question is whether a company should locate its operations on the East Coast, West Coast, or near a major "bio-cluster" city? The reality is.it depends. Every project is unique; every project is different; and every company is at a different stage in its product-development process. At the end of the day, a company's location decision should be one that aligns with its strategic business goals and objectives and should be based in a location that enhances the likelihood of long-term success.

The foundation for that success comes from understanding and articulating the strategic drivers and the criteria supporting those drivers: • Should you target a location where you can network with other life science and biotech programs aligned with your company's area of specialization?

• Should you locate your operations in a community where you can hire from a work force possessing the necessary skill sets that support your company's operations, or more importantly, where you can recruit and retain the talent to take your business to the next level?
• Should you locate to an area that is easily accessible to your investors, future funding sources, supply-chain network, or customer base?
• Should you consider an area where state and local agencies can assemble the best package of economic incentives to support your company's start-up and long-term operations?
• Should you look for an environment where facilities are immediately available at competitive costs that will enable your company to achieve its "speed-to-market" objectives?
 • Should you consider a community with the necessary infrastructure (electric, gas, telecommunications) to help create or produce your company's product or service?

.and the answers are.YES!

Once your business planning process has identified the need for your next business operation (concept development, research and development, product development, or production), the next step is to define the criteria that will drive your company's ultimate success. The development and the decision criteria should be unique to each opportunity and project. Each project should begin with a clean slate. It is important to remember that there is no "one size fits all" approach to evaluating and determining the best location for your operation.

A starting point for developing your location criteria is to consider the factors that fall within three primary categories: strategic, operational, and financial.

Each category is important to project success and all should be considered in the decision process. Additionally, you should consider the right balance of these categories. Similar to the importance of each leg on a three-legged stool, each of these categories should be evaluated when identifying and considering potential locations. If one category is ignored or slighted, the stool will not be balanced and risks collapse.

While all three categories are crucial to a successful location decision, we suggest that the strategic business drivers be considered initially as they are the foundation of what you are seeking to build. (Failure to recognize any of these drivers could result in a location decision that only meets short-term objectives, and thus may not position the project for long-term success as the business model changes.)

Determining your specific criteria is often best determined by exploring the following list of initial questions:

I. Strategic
• Where is our operation in the product development cycle? Are we at a point where a move is practical or cost-effective?
• As the company advances through the product or business development cycle, will the location criteria change significantly? If so, what will change and what is the impact of that change?
• How important is "speed-to-market"? Am I ahead of or behind the competition? Will this decision impact our speed-to-market?
• Where will I be able to successfully attract and recruit the "core" team of talent for this operation? Where might I be successful in convincing critical members of my team to relocate?

The second primary category involves operational factors. Operational factors are the variables that will enable you to physically conduct your operations and ultimately create or produce your product or service. Some of these factors may actually act as barriers to your success. Often, several of these variables become filters for eliminating potential locations.

II. Operational
• What factors related to the business environment are "must-haves" for my operation to be successful? Is close proximity to raw materials or technical support functions mandatory? Will the company need special-use facilities or equipment?
• Are there barriers to success, such as factors that will hinder or perhaps even prevent a successful operation? These factors can include the regulatory environment for your product or service, your ability to recruit and retain the work force needed, or airport accessibility to your investors, your board members, or your research team.
• How important is utility infrastructure (availability, cost, and reliability) to your processes and operation?
• Are there business environment factors that could support or hinder your company's success, such as inventory, franchise, or business taxes?
• Does the threat of natural disasters create a barrier to your success or create a concern for your operation?

The third category focuses on the quantitative side of the decision equation. A number of these financial factors can actually overlap with the strategic and operational categories as they relate to project funding, operational costs, cost of living, and the cost of doing business.

III. Financial
• Do you need to be located in a community or state with strong private funding sources such as venture capital, angel funds, or low-interest loan tools?
• How important is the availability of state and local financial and economic incentives, including grants, forgivable loans, tax credits, work force training, or tax abatements. Which of these programs, if any, will most benefit your operation and company?
• Will the cost of living in the considered cities have a positive or negative impact on the ability to recruit scientists, researchers, engineers, or other critical talent? This is especially important to consider, as an imbalance between competitive salaries and cost of living (housing, utilities, transportation, food) can create a barrier to attracting and retaining talent, despite other positive factors.
• In order to be cost-competitive or best utilize investment dollars, where is the "cost of doing business" most favorable? How important is the cost of doing business relative to the strategic and operational factors?

Answering each of these questions is the first and most important step in the location decision process. While this list of questions is not all-encompassing, it provides the foundation for understanding the basic factors driving a location decision. After developing a comprehensive list of criteria, the project team should determine and assign a level of importance to each variable. Individual weightings should be based on the project type, the stage or phase of the business operation, as well as the maturity of the business.

The location selection process should be viewed as a process of elimination. As communities are eliminated due to barriers to success or the failure to "match" your critical success factors, the focus is heightened on those communities that best fit the criteria determined by your operation.

Whether your operation is a small team focusing on research and development or a multimillion-dollar investment in a manufacturing operation, you have one opportunity to make a "best-fit" decision, as it is not easily reversible. By following a structured process of identifying the success criteria and then evaluating your company's options against the criteria, you significantly enhance your company's chances of finding the optimal location for long-term success.

So where should you locate your next "biotech" operation? It depends!

Jonathan Sangster is a senior managing director with CBRE Consulting, a strategic advisory consulting group within CBRE. He assists clients in finding best-fit locations that align with their strategic business objectives, addressing needs resulting from mergers and acquisitions, business expansion, restructuring, and rationalization.