In coverage of U.S. life science activity, there is often much attention paid to the dominance of life science startup and investment activity in the Boston and California markets (e.g., Silicon Valley and San Diego). Although there is still a significant gap between Boston and California and the rest of the national markets, that gap is shrinking.
According to Life Sciences in Delaware: Momentum and Opportunity, life sciences venture capital investment in places outside of California and Massachusetts is on the rise and now outpacing those two states (see below).
Facility Logix has studied, provided economic development strategies, and delivered life science lab and manufacturing facilities in many of these maturing markets for almost twenty years and has gathered insights into the future of the industry. This blog series will highlight some of the emerging markets from Facility Logix’s perspective, starting with the Greater Philadelphia region and continuing with the Maryland, DC, Virginia, and New York/New Jersey markets.
According to the State Science & Technology Institute, a successful innovation economy contains the following:
In most life science markets nationally, there is a pressing need to create more “ready-to-go” lab and manufacturing space, creating a fierce competition among states and regions to retain and recruit these valuable economic assets. However, care must be taken to understand and strengthen the ecosystems supporting these markets so that the facilities created within them are as sustainable and successful as possible.
Before this series looks at specific regions, let’s first look at the national life science industry market and lab space demand.
Life science is a broad industry with sub-industries that include biotechnology, pharmaceuticals, medical devices, therapeutics, sensors, genomics, personalized medicine, ag biotech, among others. Whatever the sub-industry, the facility type must align with the product and/or service produced. Each sub-category typically has unique regulatory and physical requirements, and business life cycle, all which must be considered in the design, placement, and construction of such buildings.
National Demand for Lab Space
- According to Jones Lang Lasalle (JLL), there is more than 20 million sf of lab space under development nationally, almost half of which is concentrated in the Boston area.
- National vacancy rates for lab space hover around 5% nationally, as opposed to a 17% vacancy rate for office space (CBRE, 2021). This trend has been consistent in recent years and shows no sign of retreating, despite the SARS-COV-2 pandemic.
- The top three cluster markets (Boston, San Francisco, and San Diego) will not have sufficient lab space in the coming years, and the scarcity is expected to continue rising in the remaining seven markets, which include Raleigh-Durham; New York/New Jersey; Greater DC Mid-Atlantic; Los Angeles; Denver-Boulder; Philadelphia; and Seattle-Bellevue (JLL Life Sciences Outlook, 2021).
- It is important to note that, compared to the other top 10 markets, Boston offers significantly more plentiful lab real estate offerings. However, this is coupled with the highest rents nationally, as well. In fact, average asking rents in the Boston metro area are more than double those in the Philadelphia metro (CBRE, 2021).
Because the life science industry has been such a consistently strong segment of the national economy, performing well even during the pandemic, many real estate stakeholders have become interested in investing in life science facilities in recent years. As those operating in the intersection of life science and real estate understand, however, it is a unique space that requires an understanding of the science, economic development, and real estate. There are distinctive site requirements for these facilities, including: ceiling height; HVAC, utilities, and floor load-bearing capacity; elevator and loading dock requirements; and general location/talent access.
Leases for research, manufacturing, and office operations of a life science company are very different from conventional office leases. Considerations for lab-specific building utilities, hazardous and chemical limitations, and other laboratory support services are not typically part of office lease planning. For any life science entity looking for real estate, it is critical to understand the type of space needed during the life cycle of the business. This includes considering what location offers the most beneficial results and how the building can accommodate a design that best suits its needs. See the below to learn about the types of lab space needed and explore the graphic describing examples of each type of lab space.
Types of Lab Space
- Incubator Lab Space is for early-stage or new companies. An idea is explored and then, if it demonstrates potential, moves towards proof of concept. Investors will typically invest in smaller funds with benchmarks or performance measures for the development of the product and nothing more. Therefore, the physical space must be designed for the development and initial testing of the product. Funding is at a very early stage and, therefore, flexibility and the sharing of resources such as business and lab equipment is essential.
- Accelerator Lab Space is for a company that has completed or is near completing its justification of the “good idea” and is close to or has established its proof of concept. Commercialization becomes the next priority; therefore, funding is still limited but increasing to support the commercialization process. Still, companies cannot afford to burn through funds tied to building out space or long lease commitments.
- Graduated Lab Space is for a company that successfully advances beyond the proof of concept in the incubator/accelerator space and graduates out of that space after it has secured funding for product development. These companies seek pilot space that is designed to meet specific needs so they can commercialize their product as quickly as possible. Graduated labs are typically larger and assigned to individual users. Shared equipment is available in more enhanced shared equipment areas; meeting spaces and conference rooms are important as well.
- Commercialization Space is large-scale, designed for product development, and to support future growth. Companies in this stage will occupy large buildings, be a major tenant within a building, or have their own campus.
Incubator Lab Space: Lab Central
- Located in Cambridge, Massachusetts and on the Harvard University Campus.
- Began with 28,000 sq. feet in 2013 and today operates over 225,000 sq. feet due to incredible demand.
- Capacity for 125 start-ups comprising approximately 1000 scientists and entrepreneurs.
- Ready-to-go, permitted lab and office comprising 54 individual lab bays and eleven 3 – 4 scientist “pods” in shared labs.
- Fifteen private lab suites (450 to 1050 square feet) for companies of up to 18 employees.
Month to month service agreement for up to 2 years.
Accelerator Lab Space: C2I
- Located in Woburn, Massachusetts.
- 20,000 sq. feet of shared/private lab & office space.
- Home to 25 startups with all the resources critical for them to conduct proof-of-concept research and develop their inventions into future commercial products.
- Direct access to experienced mentors, advisers, investors, and professional services.
- In-house direct access to CRO and technical support.
- As well as direct access to a network of professional services, advisors, consultants, and investors.
Graduated Lab Space: BioLabs Philadelphia
- Located in Center City Philadelphia at the historic Curtis building, a revitalized landmark publishing house that has become a hub for top life science companies.
- 23,000 sq. feet facility.
- A state-of-the-art laboratory facility featuring bright lab and office suites ranging from 1k-2k sq ft.
- Graduate suites offer flexible lease terms.
- Provides environmental health and safety support, biowaste, lab coats and laundry, dry ice and packaging, networking and events, among other services.
Commercialization Space: Merck South San Francisco Development Hub
- Located in the 200 block of East Grand Avenue in the heart of the Bay Area.
- Established in 2017 and has grown to over 200 employees.
- Newly designed 290,000 sq. feet of research and office space.
- Includes a 300-seat auditorium, open green spaces, a fully equipped fitness center and a cafe.