Build Biotech Better: Incoming Federal Funding A 'Watershed' For Wannabe Innovation Hubs

The passage of the nearly $2 trillion Build Back Better bill in the House of Representatives Friday capped months of political wrangling and gives hope that numerous key policies around climate change, paid family leave and the social safety net will be enacted. 

It also represents a new, potentially significant part of a massive upswing in federal investment in the nation’s innovation economy, which would have lasting impacts on the explosively growing life sciences industry.

“It’s an incredibly exciting time, some might say a generational moment, for any institution or collaborator building an innovation ecosystem,” JLL Executive Managing Director and National Practice Leader for Life Sciences Travis McCready said. “There’s a baseline of [National Institutes of Health] and [National Science Foundation] funding, and the Biden administration has been extremely aggressive in deploying funds to support the innovation economy.”

While the recently signed federal infrastructure bill and Build Back Better Act have generated extensive headlines for their sizable investments in numerous sectors of the economy, both pieces of legislation, and additional initiatives by the Biden administration, have analysts and economic development professionals excited about the possibilities. A consensus that has emerged that the nation needs to invest more in research and development, which will be a boon for lab development. 

“Everyone has their eye on the Build Back Better bill, but what makes this a generational relevant moment is just about every relevant federal agency is looking to deploy capital for innovation, including the life sciences,” McCready said. “Every state in the U.S. has a shot to muscle up their life science and science-based ecosystem and participate in the life sciences in a way they never have before. This money and these funds will be very important for geographies not thought of as hubs to engage in soil preparation, if you will.”

The federal government’s $9B investment in Covid-related technology has already proved a catalyst for life sciences and lab real estate. Additional funding sources include the $1B Build Back Better Regional Challenge, which will provide $500K planning grants next March to up to 60 communities to create innovation ecosystems — up to 30 metros will be awarded between $25M and $100M to execute their plans (despite the name, funding for this program has already been appropriated). More than 500 cities have submitted.

The NSF is expected to spend hundreds of millions of dollars on basic research, and the Small Business Administration, which just had its Innovation Ecosystem Summit, plans to invest more in startups and new companies. Senate Majority Leader Chuck Schumer has signaled that he may add a proposed innovation act and its place-based tech funding to the coming National Defense Authorization Act.

”We have a moment where there are some very large, place-based economic development in the works, including tech hubs,” said Brookings Metropolitan Policy Program Senior Fellow and Policy Director Mark Muro, who specializes in economic development policy. “There’s a recognition of the inequity and challenges and an unprecedented array of programs in the works. It’s a watershed.”

The potential for ARPA-Health, a new multimillion-dollar health and tech research agency included in the Build Back Better Act, as well as manufacturing subsidies and a focus on equity in terms of where the funding is being directed, may be a boon for smaller markets looking to level up their life sciences offerings. Association of University Research Parks CEO Brian Darmody pointed to programs in the Department of Commerce and even NASA focused on increasing biomanufacturing capacity, which is in high demand right now among life sciences startups. 

“I think you’re going to see new tech and bio hubs emerging in nontraditional places outside Boston and San Francisco,” Darmody said. “Next March, you’ll see an explosion, and even those that don’t get all the funding will have blueprints for development.”

But even with this generational investment, there are skeptics who doubt that completely new hubs sprout up amid all the competition from markets with some existing capacity and the educated workforce needed by the industry. This transformative investment perhaps can be best seen as “de-risking” initial investments, Darmody said. It is still asking universities and developers to take a chance, and the odds of success still matter. 

“Starting from ground zero is going to be difficult,” Darmody said. “The strategy will be infill development or expanding existing places.”  

Examples of the kinds of cities that already have momentum include Lincoln, Nebraska, where the University of Nebraska is developing an Innovation Hub, and St. Louis, which already has life sciences and agriculture tech investment and CORTEX, a nascent startup hub, Darmody said. Muro also called out St. Louis as a great example of utilizing existing university resources and talent to create new hubs.

“It’s about looking at the starting points and a place's ability to establish itself,” he added.

Atlanta may be an example of a market that isn’t necessarily on the map as a top life sciences destination, but which has existing strength, including top-tier colleges and the Centers for Disease Control and Prevention, that can use these funds as a catalyst. 

“Innovation hubs make sense when they’re built around existing strength,” said Transwestern Senior Managing Director Clark Dean, founder of the firm’s Transaction Sciences program. “There are lots of places around the country that want to be life sciences hubs and focus on public funding. But I think it’s better to have private entities working with the government — that doesn’t require the hundreds of millions of dollars to work. The business model around these districts already works.”

Tony Zivalich Jr., associate vice president of real estate at Georgia Tech, views the opportunity for his university and city in life sciences as similar to the way Big Tech has expanded and opened satellite offices in cities across the country, including Atlanta.

The overflow and need for more talent will inevitably mean expanding to smaller cities and hubs, and Georgia Tech, which has a top biomedical engineering program, makes Atlanta a promising destination. Top researchers have been recruited out of the school for years, so a program that created more research and startup lab facilities in Atlanta would help keep the talent, ideas and profit in town. 

“We’re better than we’ve ever been in terms of stepping up,” Zivalich said. “We have a pipeline of real estate development focusing on the life sciences space.”

Zivalich and the school have already embarked on the kind of expansion project with developer Trammell Crow, Technology Enterprise Park — the first phase of which will cost $325M and include 370K SF of lab space — that could benefit from federal investment. Zivalich said the local development community traditionally lacks the risk appetite and specialization to do the kinds of projects that can help the city’s life sciences market reach critical mass.

Zivalich would welcome federal support, and he has already seen NIH grants do great things for the city’s researchers. But his needs go beyond money for lab space. He said he would rather see more traditional infrastructure investments, including walkable streetscapes and transportation that would knit different lab buildings and facilities together, as well as housing investments to create affordable living spaces for the lab assistants needed for any new influx of lab space.

Today’s model of innovation — more Kendall Square than traditional suburban research park — requires cities, institutions and developers to focus on a place where people can work and live. 

“How do we better connect our campus to the community?” Zivalich said. “We see the opportunity for those mid-range jobs for lab technicians. You don’t need a college degree to go get it.” 

While federal investment as currently envisioned can be a game-changer, adding workforce and equity elements can make it more effective and help more cities and metros take advantage of this funding, as Zivalich sees it. Money spent on new labs and biomanufacturing plants may not make as much of a difference if the workers needed to operate them aren’t there. 

“Money only buys time, not the ability to execute,” McCready said.