Amgen Pharmaceuticals

San Francisco, CA 1,100,000 sqft https://www.amgen.com/

Services Provided: Site Selection Services Tenant Services Asset Management

Amgen Pharmaceuticals is a global company leading the way in several key areas of medicine: oncology, cardiovascular disease, nephrology, inflammatory disorders, bone health, and neuroscience.

IPG Services Provided

Real Estate Review
Lease Buyout Analysis
Sublease Analysis

Overview

AMGEN hired IPG to lead a nine-month detailed real estate review in partnership with Lend Lease for AMGEN in three major life science markets: South San Francisco, Seattle, WA, and Cambridge, MA. Each market had unique challenges and independent business case.

Assignment & Process

Amgen Pharmaceuticals instructed the team to look at their real estate portfolio from a broad range of perspectives. We were to identify strengths, weaknesses, opportunities, risks, and put programs into action to drive operational efficiency. Our project goals for the various properties were as follows:
Cambridge: Maximize Capacity – We needed to understand the viable options for maximizing capacity in the most efficient and profitable way possible. Amgen needed both short and long-term facility solutions for their Class A 600,000-square-foot research facility in Kendall Square.
San Francisco: Minimize Exposure – Explore lease efficiency strategies on a 1,200,000-square-foot building via the minimization of current, onerous lease-related economic exposures.
Seattle: Divest/Abandon – Determine the most expedient, sound, and profitable strategies to abandon a 900,000-square-
foot asset.

All project market goals were intended to fuel Amgen’s innovation with greater speed-to- market. Amgen needed to run lean on real estate, and invest that capital into their core business pursuits of life-saving medical innovation.

In San Francisco, Amgen ideally wanted to lower their lease exposure via a single or multitenant sublease. They also wanted to explore the viability of landlord lease-buyouts versus paying the remaining term on some of their under-utilized buildings, many of which they inherited during their acquisition of Onyx Pharmaceuticals.

It was clear to us that the only positive thing Amgen Pharmaceuticals had going for them in this market was South San Francisco vacancy rates, market demand, and market base.

The Challenges

Above market lease commitments

Too much square footage

Size of buildings versus average tenant size in SF

Above market lease commitments|Too much square footage|Size of buildings versus average tenant size in SF

The Success

Amgen consolidated their west coast operations in South San Francisco.

Amgen had the chance to leverage its unused TI allowance.

Success in developing Amgen’s real estate review.

In the end, IPG advised that Amgen’s low-utilization leases were at higher-than-market rents. This put them in an unfavorable negotiating position with their landlords when it came time to negotiate their buyouts.

Large single-tenant leases were moving to Mission Bay in downtown San Francisco and away from South San Francisco. However, Amgen could leverage its unused TI allowance with its landlord(s) and the shortening term of its leases.

As a result of the team’s work developing Amgen’s real estate review, they decided to shut down their Seattle location and consolidate their west coast operations in South San Francisco, and their Corporate Headquarters campus in Thousand Oaks, California.