Chicago Life Sciences Works Toward Evolution Amid Slowdown

Fulton Market, west of Chicago’s loop, has been one of the city’s hottest real estate markets for the last decade. That made it all the more surprising when Mark Goodman & Associates, a real estate firm seeking to build a 16-story life sciences tower in the neighborhood, had to alter its project.

Earlier this month, plans were presented to a local neighborhood group outlining a pivot, with the 500K SF of lab space set to be replaced with two towers containing roughly 700 apartments.

“Because Chicago is a young life science market, the slowdown is expected,” said Jonathan Metzl, Cushman & Wakefield’s Chicago life sciences broker. “Activity is reliant on fundraising.”

“It was a one-off developer trying to attract life science companies into a building that was off the beaten path, trying to take advantage of the market that just never materialized,” he added.  

Chicago’s life sciences market is singular. But in many ways, it faces some of the same uphill challenges smaller and emerging life sciences markets face today: building more lab space in a financially challenged environment, facilitating an ecosystem of startups and investors and helping keep homegrown talent from moving on once they score significant funding. 

Metzl said that over the last five years, the life sciences ecosystem in Chicago has “flourished” due to a number of new developments and steady fundraising. Though the region’s biotech reputation was previously based on north suburban Big Pharma offices, the center of gravity is shifting towards smaller startups downtown.

New partnerships and academic initiatives are coming to fruition. These include the Chan Zuckerberg Initiative, which donated $250M to create a biomedical hub in the city in partnership with leading universities. New developments, such as Sterling Bay’s Lincoln Yards project, have also added needed lab space to the city.  

And a number of local startups have seen recent raises or relocations. Belay Diagnostics, which developed molecular testing for brain and spinal cancers, recently signed a 4K SF lease in Trammell Crow’s new Fulton Market project.

Cour Pharmaceutical Development, currently based in near-northwest side suburb Skokie and working on a treatment drug for celiac disease, scored a $105M Series A fund raise round in late January, with participation from Roche Venture Fund, Pfizer and Bristol Myers Squibb. Cour co-founder, President and CEO John Puisis told Bisnow via email that the company plans to focus on Chicago.

"Our plan is to continue leveraging the talented and growing biotech community in Chicago to support our mission of bringing transformative medicines to patients in need,” he wrote.

But there are still significant challenges before the city can create the kind of “flywheel effect” seen in established life sciences centers. Sterling Bay’s marquee project still has no tenants, said Metzl. He attributes that, again, to the youth of the market. New startups are signing smaller leases downtown and don’t yet need larger leases or floor plates. 

“It’ll take some time before Fulton Market comes into the scope of large users because there are not that many large users in this market,” he said. 

But in the meantime, a lack of larger tenants and relatively significant empty space suggests a turnaround is needed. About 2.7M SF is set to deliver between 2023 and 2026, roughly doubling the city’s supply during a larger market downturn.

Currently, 1375 Fulton, Trammell Crow’s first Fulton Market project, is almost fully leased, while a nearby project at 400 N. Aberdeen St. is about 80% vacant, Metzl said. A forthcoming south side space, the Hyde Park Labs building by Trammell Crow and Beacon Capital Partners, is set to open in early 2025, with the nearby University of Chicago pre-leasing 55K SF, per Urbanize Chicago.

While the current amount of vacancy and slow funding growth have been challenges, the city’s biotech ecosystem has set itself up for the future, Metzl said. Most of the growing firms in Chicago are homegrown, and now there is new lab space for when the next class of firms expands. 

“We now have state-of-the-art buildings that companies can grow out of our research institutions and into without having to go to the coasts,” he said.