News
Pitfalls In Life Science Development
September 11, 2012
| It's not rocket science. But it is science. The niche market of life science companies is complex, requiring CRE execs to understand how science affects a property's infrastructure. That's what we heard at Bisnow’s Philadelphia Life Sciences Summit, which covered local trends in real estate leasing and development. |
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| Our expert panel included Liberty Property Trust VP and city manager Brian Cohen, Hankin Group director of commercial sales and leasing Stacy Martin, ProTecs president Chris DiPaolo, The Science Center SVP Curt Hess, and Wexford Science & Technology leasing director William Hunter. McCausland Keen & Buckman attorney Stephan Pahides moderated. |
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| Not every facility lends itself to lab or light manufacturing, the panel notes. Purpose-intended buildings are ideal, but many existing facilities can be repurposed. Philadelphia has an advantage over many other markets, with its ample supply of second and third-generation space, as well as specialized developers like Wexford, which builds lab-ready product and can provide substantial TI dollars to accommodate specialized fit-outs. Philadelphia also has a significant number of clusters from the Route 202 corridor to the west Philly Science Center market in which companies can collocate with leading academic institutes and medical centers. |
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| One major trend is big pharma shedding its R&D space and walking away from huge blocks. Large vacancies are always a concern, but when the space is fit-out for a lab space, it's more challenging. Landlord hope they'll be leased by other big pharma companies, so they'll wait for that one large one, such as Dow leasing all of Pfizer’s large facility in Collegeville. The other option is to be creative and create suburban versions of the University City Science Center. |
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| Another impact of big pharma shedding its R&D capabilities is the creation of new biotech companies by the scientists they let go. The biggest barrier to entry for these scientists is finding affordable research labs. Renovating a building and constructing a new lab facility could cost $300/SF, which isn’t feasible for a startup. There’s a need to develop existing or second-generation lab space cost effectively to allow these companies to grow. ProTecs, for instance, has an innovation center in Montgomery County with extensive infrastructure and existing lab space that can be leveraged to reduce the renovation costs to a quarter or an eighth of a new lab. |
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| The panel also discussed the Innovation Center @ Eagleview, a good example of a reuse of left-behind lab space. Johnson & Johnson left behind a 40k SF lab and office facility, already fit out in a way that could accommodate small lab users (1,500 SF plus), and leaving the landlord with fully furnished offices and labs with benches and fume hoods. |
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| It isn’t easy leasing traditional space to small companies, so the “incubator” model needs to come into play. Yet not many landlords are willing to make the investment or take the risk. But it’s a viable option that back-fills the vacancies, grows companies organically, and creates a cluster of life science companies. (And by clustering the companies, we can find out what happens when we mix the red pill with the blue pill.) |
