Healthcare Industry Moves Into Southside
Melissa Mutiara Pandika
Development of biosciences and healthcare facilities has rapidly progressed in Southside neighborhoods. In just a little more than a decade, Mission Bay has been transformed from a desolate expanse of abandoned rail yard to a hotbed of health sciences innovation that’s precipitated the emergence of a new economic sector in San Francisco. The Center for Youth Wellness will open in India Basin in 2013, the University of California, San Francisco (UCSF) Medical Center will start seeing patients in 2015, the same year that San Francisco General Hospital will cut the ribbon on its new acute care facility, and Kaiser Permanente plans to open new medical offices in Potrero Hill in 2016.
Planning for Mission Bay started in the late-1990s, at the height of the dotcom boom. Anticipating that industry’s imminent bust, the City began looking for another economic engine, eventually honing in on biosciences. UCSF is San Francisco’s second largest employer, and is considered the birthplace of biotechnology. UCSF professor Herbert Boyer co-developed recombinant DNA technology in 1973, and co-founded the nation’s first biotech company, Genentech, in 1976. With UCSF’s Parnassus campus bursting at the seams and the swath of land in Mission Bay largely underused, the City decided to establish a biosciences hub in that north of Dogpatch neighborhood.
The San Francisco Board of Supervisors designated Mission Bay a Redevelopment Area in 1998, with the UCSF campus as the anchor. After striking a public-private partnership deal with Catellus Development Corporation and the City and County of San Francisco, UCSF broke ground for its new campus in 1999. Under the agreement, Catellus and the City donated a combined 42.4 acres of land to UCSF. The master developer, initially Catellus, now Focil, is responsible for building the estimated $700 million in public infrastructure, such as street lighting and open space, which the City pays for through tax increment financing С increases in property tax revenue as the area develops С and Mello Roos taxes, which are paid by private property owners. Twenty percent of the tax increment is set aside for affordable housing. In 2007, UCSF secured an adjacent 14.5 acres south of its main campus as the site of the UCSF Medical Center at Mission Bay.
UCSF opened Genentech Hall, Mission Bay’s first building, in 2003. Since then, it’s added eight more buildings, and will open the Neurosciences Laboratory and Clinical Research Building later this year. Construction is expected to continue over the next two decades. The campus is gradually crystallizing into a community, with student and employee housing, a child care center, 3.2 acres of open space, a plaza with a handful of small restaurants, and a farmer’s market.
UCSF Mission Bay remains largely laboratory research-centered, but will add a clinical element when the first phase of the UCSF Medical Center opens in 2014. The $1.5 billion, 289-bed integrated hospital complex will serve children, women, and cancer patients, and will contain hospital, outpatient, and related support facilities, including a helipad to transfer critically ill individuals from outlying community hospitals. It will be one of the world’s largest LEED-certified hospital complexes, and will focus on creating a healing atmosphere, with 16 separate gardens, including 1.5 acres of rooftop gardens.
UCSF Mission Bay is the center of the City’s biotechnology industry cluster, developed under an ensemble of policy initiatives. Despite San Francisco’s history of biotechnology innovation, until recently it had a negligible share of Bay Area biotech, which South San Francisco had largely captured. To incentivize companies to locate within San Francisco, in 2004 the City established the Biotechnology Payroll Tax Exclusion, which allowed biotech companies to deduct the expense of qualified employees from their payroll tax responsibility for seven years. Mission Bay redevelopment led to new, campus-style development opportunities with significantly more parking than other City locations, while co-location of UCSF research institutes С the Gladstone Institutes, the California Institute for Quantitative Biosciences (QB3) Mission Bay incubator, and the future UCSF Medical Center С offer enhanced access to academic research and collaboration.
By co-locating with UCSF, biotech companies facilitate a synergistic, “bench to bedside” dynamic, in which the university partners with industry to help advance ideas generated in research labs and ultimately apply them in clinic settings. “Mission Bay was designed from the outset to have those three things,” said Todd Rufo of the San Francisco Office of Economic Development. “It makes San Francisco very unique from other health and life science clusters.” Nearly 40 biotech companies have located in Mission Bay, including Merck, FibroGen, and Bayer, occupying in excess of 1.1 of the area’s more than 1.9 million square feet of private commercial space.
“There’s a huge crisis in big pharma right now, and they need to look at the early sources of innovation. That’s why everyone comes to us,” said Regis Kelly, director of QB3, on UCSF’s website. On average, it takes more than $1 billion and 15 years from the discovery of a promising chemical to a drug that can be administered to patients, with a failure rate approaching 95 percent, explained Kristen Bole, manager of UCSF’s Biotech News. UCSF and its industry partners are trying to expedite drug development. “Instead of the old model of a pharmaceutical companyЙ [giving UCSF] money to do researchЙwe’re working much more collaboratively,” she said. UCSF has signed master agreements with a number of companies to iron out legal and logistical details from the outset. “Instead of us doing research in a vacuum and handing it off, now we understand where that goes and what research questions we didn’t answer that might inform later research, so that we can answer those questions up frontЙand find out the most promising routes early on,” said Bole.
UCSF’s new campus has made Mission Bay not only a prime location for biotech and biopharmaceutical companies, but also a petri dish to start and grow companies. QB3, a cooperative effort among private industry and scientists at UCSF, UC Berkeley, and UC Santa Cruz, helps researchers convert their discoveries into products and services by offering mentorship, incubator space, pre-commercial funding, and seed-stage venture funding. Former Governor Gray Davis created QB3 in 2000 to speed up commercialization of basic research.
“The advances in biology are tremendous, but the delivery of that knowledge to the kinds of benefits we want in society; it’s gotten harder and harder to see the products of university research ending up as new treatments,” said Douglas Crawford, Ph.D., QB3’s associate director. “QB3 is here to help make the university more successful in its social mission.” QB3 has five incubator spaces, or “garages,” in San Francisco and the East Bay, including three located in Mission Bay; two in Genentech Hall and one at FibroGen. QB3’s garages feature wet laboratory space and access to such facilities as imaging and gene sequencing, enabling entrepreneurial scientists to lay the foundations of companies. The institute has been home to 61 companies to date, including 36 startups in its incubator system at Mission Bay.
In 2000 the City had only 1.3 percent of the total life sciences-occupied building base in the Bay Area, a figure that declined until 2005, after the tax exclusion went into effect. In 2009 San Francisco had reached 6.1 percent of the regional total, a roughly five-fold increase from 2004. About 2,750 life science jobs were located in the City in 2009, the majority of them in Mission Bay, up from only 500 in 2004.
According to the San Francisco Office of Economic Analysis’ (OEA), in 2009 biotech employees generated $7.6 million annually in payroll, sales, utility, and hotel taxes to the City’s general fund. For every biotech job in San Francisco, an estimated 1.3 jobs are created in other sectors, such as food, administrative, and accounting services. According to Angela D’Anna, Office of San Francisco Assessor-Recorder policy director, the total value of property located in Mission Bay increased from roughly $3.69 billion to $4.96 billion between 2008 and 2011.
About 3,500 employees work at the UCSF Mission Bay campus. Over the next 30 years, that number is expected to rise to 6,000. Mission Bay’s residential population skyrocketed from 676 in 2000 to 9,083 in 2010, according to the latest census. When it’s fully built-out, Mission Bay will include 6,000 housing units С with 1,900, or 30 percent, affordable to moderate, low, and very low-income households С 4.4 million square feet of high-technology, office, life science, and biotechnology commercial space, and 500,000 square feet of retail space. The Mission Bay Public library was built five years ago, and construction has started on fire and police stations. Land for a 500-student public school is ready for dedication to the school, although the district still needs to find capital funds to build the campus.
Mission Bay Phase 2, a process to plan for UCSF’s remaining undeveloped blocks north of 16th Street, was completed last year, and explored options to enhance the campus pedestrian environment, build additional housing, manage parking supply and demand, and consider the potential for increasing development beyond the current 2.65 million gross square feet of entitled space. These alternatives will inform UCSF’s next long range development plan, which will guide its physical development through 2030.
This is the first of a three-part series.
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