Phoenix Rises: Megaprojects And Medical Hubs Symbolize Growing Biotech Sector

During her State of the City address April 12, Phoenix Mayor Kate Gallego touched on a myriad of metro issues, from water and homelessness to sustainability and development. As she praised the city’s economy, she made sure to highlight a sector that’s become increasingly important to the city’s future: biotech.

“Healthcare education, life sciences and research are crucial and the impact and leadership of the Phoenix Medical Quarter will accelerate the work that is already happening in the region,” she said, introducing a new development as she extolled the impact of medical and life sciences innovation on the fifth-largest city in the country. 

Phoenix, long touted as an emerging biotech market, continues to expand its infrastructure and ecosystem, despite the current economic landscape, priming itself for more spinoffs and startups. Roughly $3.5B has been spent on new life sciences and healthcare facilities between 2019 and 2022. While the city is not yet a significant center of venture capital investment, it's comprehensively laying the groundwork to attract more attention.

Sharon Harper, CEO of Plaza Cos., a partner of the $1B redevelopment of the former open-air Park Center mall a few miles north of downtown into a mixed-use center with biotech and medical facilities, said the number of different institutions and development taking place nearby is really creating a critical mass. The ongoing mall redevelopment, the base of the Phoenix Medical Quarter, already includes Creighton University's medical school. The Barrow Neurological Institute sits across the street. 

“The difference with our project is that so much is in place,” Harper said. “We’re not starting from ground zero.” 

The Phoenix Medical Quarter is just one of a constellation of significant life sciences properties under construction or recently opened in the Phoenix region, which has nearly 2,000 companies in various bioscience subsectors. S3 Biotech just broke ground on a $762M innovation and medical center in near suburban Maricopa. Wexford’s 850 PBC, which includes 240K SF of lab space, opened last year in the Phoenix Biomedical Campus, a 30-acre city-owned site with three major research universities. Stockdale Capital Partners is spending $20M to retrofit the Ilume Innovation Center in nearby Scottsdale into biotech labs. And the Mayo Clinic plans to start work on the Discovery Oasis, a 120-acre medical and research campus on the north fringes of Phoenix.

One of the nation’s largest and fastest-growing cities, Phoenix has long offered a more affordable alternative to traditional biotech hubs. Development has often followed the same blueprint that built other biotech hubs, as well as a long-gestating local plan, the Arizona’s Bioscience Roadmap.

Local institutions helped attract talent and innovation, and developers slowly built the lab space and infrastructure to support spinoffs and commercialization. Schools like Arizona State University and the University of Arizona, which announced the creation of a new Center for Advanced Molecular and Immunological Therapies downtown, and the Translational Genomics Research Institute, or TGEN, which was founded in 2002, have been magnets for researchers and advocates for more comprehensive economic development strategies for the entire sector.

There’s also lots of experience in the market from related industries such as medical tech, biology, design and engineering that can help support startups, Wexford President Thomas Osha said, all aided by the area’s relative affordability and business climate.

Leo Divinsky, managing director at Stockdale Capital Partners, said the Ilume redevelopment was an ideal investment. It’s a strategically located site, near lots of medical and health centers, within an emerging life sciences market where the availability of lab space is pretty low. The unique asset — formerly the home of the German firm that made Dial Soap — in a rising market with a supply shortage seems primed to take advantage of substantial growth.

It also helps that the emerging core of downtown lab space and medical centers is taking shape at roughly the same time that a downtown apartment building boom has created walkable neighborhoods, housing and commercial options. Osha says there are 7,000 apartments within a half-mile walk of 850 PBC, and the population of downtown has nearly doubled in the last five years.

Wexford’s 850 PBC has attracted tenants such as Calviri and Regenesis Biomedical and the smaller accelerator inside the site, the Bioscience Growth Accelerator, holds roughly 10 startups. Wexford Director of Development and Phoenix Market Lead Kyle Jardine said there’s “good momentum.” 

But that’s not to say Phoenix isn’t seeing the same slowdown impacting leasing in other markets, especially smaller cities and emerging biotech hubs.

“It is not immune to the same macroeconomic forces hitting the rest of the country,” Osha said. “You're not going to see spec projects here. You're gonna see the same kinds of pre-leasing requirements. People like the market because there’s positive momentum but it’s not flying in the face of the same dynamics impacting the rest of the country.”

Osha does believe the region may bounce back faster than others. “The future of Phoenix is very bright, and we're very proud to be a player in this growing dynamic bio ecosystem,” he said.