Friday, December 5, 2008

Inside Real Estate

Alternative energy companies present new real estate challenges

By James M. Connolly

Video Gallery

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MHT reporter Efrain Viscarolasaga on NECN: Green tech brings jobs back to Mass.

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Interactive map of Bedford's Crosby Drive tech hub

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Letter to the Editor: A stimulus for clean tech applies to VC-backed firms [March 20, 2009]

Clean-energy companies are settling into locations throughout New England, presenting a range of special real estate requirements. They are coming into markets looking for special labs and feedlots, wood piles and access to universities and seacoasts.

The requirements are as varied as the firms’ approaches to developing and delivering clean energy.

For example, Greenfuel Technologies Corp., which uses algae farms to recycle carbon dioxide from fossil-fuel power plants, set up in Cambridge in large part because that is where its founders were based. Greenfuel’s requirements included specialized labs that combined indoor and outdoor work. “If you are going to build a bioreactor like we do, you are going to get the local people involved with things like permitting. We’re more of an algae farm, when you look at it,“ said Cary Bullock, vice president, business development, at Greenfuel.

Greenfuel’s approach means that its Cambridge facility serves as a corporate headquarters and development center. Most of its production work gets done far away, at customer sites such as power plants in the Southwest, where there is plenty of sun and land.

Greenfuel’s approach is largely a co-location strategy. It is one of three basic location strategies used by clean-tech companies, according to Nick D’Arbeloff, executive director of the New England Clean Energy Council. While Greenfuel does much of its work at customer sites, others need to be near their energy source, whether it is a supplier of materials such as feedstock, or the ocean. The third strategy is a more traditional manufacturing model, where energy companies, like any other manufacturer, look at factors such as access to a skilled workforce and transportation.

D’Arbeloff also notes that clusters are developing, with companies settling in proximity to each other in the way that biotech companies cluster in areas such as Cambridge. In some cases companies with like technologies end up near each other, while in other cases the clusters feature a mix of technology, often because of regional development efforts. “For example, here in New England we have biofuel and wind clusters. They are feeding off the infrastructure that has emerged.” said D’Arbeloff. That infrastructure includes the knowledge base at the region’s universities, he said.

One mixed technology cluster surrounds Fall River on Massachusetts’ South Coast. Clean-tech companies in that area include firms involved with tidal, wave and wind power, as well as microbial fuel cells, notes John Miller, a University of Massachusetts Dartmouth professor and director of the Marine Renewable Energy Center. The university’s Advanced Technology and Manufacturing Center is one of two local incubators that house energy companies. Seed funding is offered on a one-to-one match basis, and there are several other economic and infrastructure benefits offered through the university, the city of Fall River and other agencies to attract companies.

“We just put in a clean-energy lab. Developing power-generating systems requires a certain amount of capital infrastructure. We’re working with National Grid to develop test parameters to make sure these companies meet their standards for plugging into the grid,” said Miller.

A lot of the clean-tech companies setting up shop in New England are small, backed by angel investors, and still in the research stage. For many, their special real estate needs haven’t taken shape.

“The companies I deal with generally are very early stage. They typically are in the research and development stage, and companies at that stage tend to locate close to where their founders come from or a university,” said David S. Miller, executive managing director of the Brookline-based Clean Energy Venture Group.

For such companies, lab space is a concern. “As the companies get a little bit larger, they start taking into account the cost of space and maybe look out in the suburbs,” he said. As those companies grow and take in more venture capital, one thing that doesn’t necessarily happen is to have the VCs bring companies close to the investors. “The VC wants to see the company conserve their capital as much as possible. They don’t want to see the company locate in an expensive area where the VC is,” he said.

Attracting staff is always a concern, and Deerpath Energy Inc. in Marblehead has found that its location provides one benefit. “An office in a cool place like Marblehead is attractive for bringing in people and getting them to work long hours,” said CEO Kelly Warner, who launched the company in the town because he lives there. Deerpath is a wind power developer that uses small wind turbines to power systems such as street lights and parking lot lights. Warner rents 1,800 square feet and has attracted employees who do a reverse commute north from the Boston area and from throughout the North Shore.

As Deerpath grows, the bulk of growth will be in branch locations, close to customer sites.

However, other growing companies face another consideration, according to D’Arbeloff. Other states are trying to lure them to their areas, and it all comes down to jobs, and the other states are offering financial incentives. “Probably one of the most pressing issues is that these organizations are being wooed heavily by other states. They are sending high state officials, even governors and lieutenant governors, to talk to them. We do have an advantage though because of our strong financial sector and universities. That makes it hard to steal companies. They can’t woo them away with just money,” D’Arbeloff said.