In Search Of 'The Flywheel Effect': Chicago's Life Sciences Ecosystem Needs A Positive Feedback Loop

After a fire that badly damaged Rome hundreds of years ago, Emperor Hadrian allegedly urged his citizens to rebuild the city “brick by brick.” The emperor’s ancient advice functions as a modern blueprint for Chicago’s life sciences market: To catch up to the asset class’s top metros, the city must build lab by lab. 

The Windy City can point to plenty of accomplishments in the life sciences space over the past couple of years, like the high marks it garnered in health tech and cutting-edge scientific developments out of local universities.

But it lags the nation’s leading locations for life sciences, with Boston and San Francisco generations of development ahead of the city, according to panelists at Bisnow’s Chicago Life Sciences Summit at the Radisson Blu Aqua Hotel.

To put it into perspective, Boston has 62 new or conversion projects in the life sciences pipeline totaling about 15.8M SF, and the San Francisco Bay Area has 42 projects amounting to 7.6M SF, according to a 2024 CBRE life sciences outlook.

Chicago has just two new projects in the works totaling about 480K SF. 

Panelists said Chicago has work to do, though “comparing yourself to Boston and Palo Alto is dangerous,” DVLP Medicines founder and CEO Jason Paragas said.

“Stanford kicked off Silicon Valley," he said. "There was [venture capital] investment, they built a lot of companies. They made a lot of rich people. Those rich people now are investing back in Silicon Valley, and now you have this flywheel effect. Chicago hasn't achieved that.”

The flywheel effect is often used to describe a positive feedback loop in which momentum builds over time. Companies making homes in industry-leading metros like Boston and Palo Alto where the effect is prominent are more insulated from risk by way of venture capital investment and a network of connected companies, Paragas said.

Boston’s Kendall Square illustrates the flywheel effect, with many points of connection between key stakeholders.

“If you go in Kendall Square, you walk down the street, you're going to bump into a VC,” Paragas said. “Then you walk another block, and you're going to bump into a professor at MIT. And then you're going to go in the coffee shop, and you're going to overhear some incredible [intellectual property]. That closeness, that industrial common … has created this flywheel, and in some ways, that's what Chicago needs to do.”

To generate a similar effect in Chicago, Paragas said big metro universities with large endowments, like Northwestern University and the University of Chicago, need to invest in early stage companies, much like Stanford University has done in the Bay Area.

From there, it will take strong leadership to draw from the pool of talent in the city and begin creating a network of startups in Chicago similar to the starting points of life sciences powerhouses, he said. 

One of the key ways landlords can entice tenants to come to Chicago is going into negotiations with a different mindset than they employ when inking a traditional office lease, JLL Vice President Max Zwolan said. Landlords should focus on developing trust with tenants to dispel perceptions of risk they might harbor, he said.

Life sciences tenants don’t respond as well to a “cold and transactional” way of doing business, Sterling Bay principal and Director of Life Sciences Suzet McKinney said. Their training urges them not to trust what's right in front of them and to look deeper, searching for associations and relationships, she said. 

“These tenants really need to feel as though their landlords or their potential landlords understand their needs and are willing to provide for those needs,” McKinney said.  

Key stakeholders in Boston have organically developed the flywheel effect, and Lisa Dhar, the associate vice president of innovation at Northwestern, said the university has been working hard to institutionalize a dynamic feedback loop by giving investors a complete story of the funding process.

“When someone wants to come in and invest as an angel, they're not just throwing money in. [We're] hoping they see the whole picture that we're very systematically building,” Dhar said. “That's a huge part of the story and building that flywheel.”

The city also needs more ready-made real estate for companies to grow into.

Companies are considering spaces that can accommodate their needs from Day 1 as well as those offering opportunities for expansion in the longer term, Zwolan said. In Chicago, there is a shortage of existing space for companies to do so. 

Because some companies need to find space within a short time frame, industry stakeholders should consider developing speculative builds to capture that section of demand, IBT Group founder and President Gary Pachucki said.

Despite its challenges, Chicago has made strides. McKinney said that over the last two years, the city’s collaborative culture has spurred it up the ranks of emerging life sciences markets. The city slotted in at No. 10 in an August ranking of the top 10 U.S. biopharma clusters by Genetic Engineering & Biotechnology News. 

There has also been an increase in private funding in the space, from foundations to families to area universities, which helps to further development. Chicago scored a major coup when Facebook founder Mark Zuckerberg and his wife, Dr. Priscilla Chan, announced the launch of a new $250M biomedical research hub in March.  

A joint research effort between the University of Chicago, Northwestern and the University of Illinois at Urbana-Champaign, the facility is the Chan Zuckerberg Initiative’s second such facility nationally and is expected to speed the city's path to becoming a “thriving innovation hub,” according to Gov. J.B. Pritzker.

“One thing about Chicagoans — and I feel like I can say this, being a native Chicagoan — we are fiercely competitive,” McKinney said. “We compete with one another. We compete with those from outside of Chicago. And I think what we are seeing now is more of a widespread community or culture of collaboration across the city and even the suburban areas.”

The country’s top life sciences metros offer models for Chicago to emulate while also challenging the city to lean on its strengths, including its local elite universities, to differentiate itself, said Shyama Majumdar, director of data science accelerators for the Polsky Center at the University of Chicago.

“Boston and the Bay Area have given us somewhat of a road map and a goal, and we have all of the talent. We have the resources, the real estate, we have amazing science coming out,” she said. “We can take all of that and create something really amazing and unique as we bring the Midwest flavor to it.”