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A LIFE SCIENCES EXPLOSION: Exploring the Northeast Supercluster - Structure Tone
Pre-pandemic, the life sciences sector was growing rapidly throughout the Northeast United States. Now, with all eyes on the industry developing and manufacturing the vaccine, five markets across the region—Boston-Cambridge, Washington DC, New Jersey, Philadelphia, and New York City—were named in the top ten US life sciences clusters by CBRE. Together, the supercluster accounts for 72% of existing life sciences inventory by square footage, 56% of under construction life sciences inventory, and 40% of lab conversions.
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A LIFE SCIENCES EXPLOSION: Exploring the Northeast Supercluster

Pre-pandemic, the life sciences sector was growing rapidly throughout the Northeast United States. Now, with all eyes on the industry developing and manufacturing the vaccine, five markets across the region—Boston-Cambridge, Washington DC, New Jersey, Philadelphia, and New York City—were named in the top ten US life sciences clusters by CBRE. Together, the supercluster accounts for 72% of existing life sciences inventory by square footage, 56% of under construction life sciences inventory, and 40% of lab conversions.

THE EXPERTS:

Pat Toner, VP STO Global Services & National Life Sciences Sector Leader

Stephen Neeson, SVP of Operations, Structure Tone New Jersey

Nick Cassaro, Senior Project Manager, Structure Tone Boston

Kaitlyn Blazer, Business Development Manager, Structure Tone Philadelphia

 

 

 

 

 

 

 

 

How do the markets across the Northeast compare to one another?
Neeson: We have a long history of the traditional, Fortune 500 big pharma in New Jersey, so we’re seeing an increase, not only in CapEx investments with those private clients, but we’re seeing an infusion of developer-driven programs, such as the center of excellence in Bridgewater, other developers repositioning existing real estate in urban areas like Jersey City, and cultivating more rural areas, like the Franklin Township in Somerset.

Blazer: Philadelphia is emerging as a hotspot for cell and gene therapy due to our proximity to eds and meds. We have the Cellicon Valley corridor in University City which is located within blocks of UPenn, Penn Med, and Drexel. The Navy Yard and a couple other campuses are popping up, both in the city and edging out into the suburbs that make Philadelphia an attractive market for life sciences companies to set up shop.

Toner: We’ve seen an explosion of bio-clusters in New York. It looks a lot like the greater Boston market did 20 years ago. There’s growth everywhere
from Long Island City in Queens to the 1st Avenue corridor in Manhattan, which spans all the way up to Columbia, Manhattanville, and West Harlem. Then there’s Midtown West and Hudson Square as well. One of the institutions that continues to grow is the biolabs at NYU Langone.

Cassaro: What really ties these markets together is the hospitals and the education that runs through the Northeast. You have Harvard and MIT that come out of the greater Boston area. In New York, you have NYU and Columbia, and then Princeton and Penn Medicine further down. We’ve seen thought leaders emerge from those universities and affiliations who are now leading the development of novel therapeutics, real pharma, and biotech.

How does the Northeast life sciences market compare to other regions around the country?
Toner: What’s unique about the Northeast is the culture and density—but there are a handful of trends that we’re seeing across the board in this sector.

Neeson: One of those trends is multi-tenant facilities, where owners advertise shared capacity for infrastructure. The distribution and shared costs are built into lease agreements rather than upfront costs paid by each of these smaller companies that may not be financially leveraged to get real estate propositions going on their own.

Cassaro: For years, biotech has had a high barrier to entry. Companies needed these campus-like environments. Now that the science can support a smaller scale but higher yield model, startups have the chance to move into high rises within these dense, Northeastern cities.

Are there any downfalls to the region’s density?
Blazer: There is limited existing lab space in these large developed metropolitan areas, so there’s a huge opportunity for landlords to repurpose floors in their existing buildings to entice life sciences clients. What is most important to our life sciences clients is speed to market, and if a spec lab is available right now, then these clients are prepared to occupy the space ASAP.

Neeson: That’s where this huge wave of speculative development is really taking hold. Rather than building a facility specifically for biomedical research, biochemistry, or chemical biology, developers are now looking for existing real estate that can be convertible to multiple uses.

Cassaro: Geographically, I think Connecticut is where the next wave of work will be because we’re running out of old buildings to fix in the I-95 to I-495 belt. Plus, Connecticut has the educational institutions, it sits between two metros, you can ride the Amtrak, and the state is offering incentives.

Has the pandemic stalled or accelerated construction in cities across the Northeast?
Toner: In March, most of our healthcare and life sciences driven work was allowed to continue. Almost all of our big pharma clients paused non-critical projects and deployed teams centered around Operation Warp Speed. Scientists, engineers, manufacturers, construction crews—anyone touching the supply and logistics chain—were working around the clock on those sites with a lot of interaction with government officials trying to accelerate approval. We’re also seeing the larger firms reprioritize capital to build out independent supply chains and prepare each continent to be more self-sufficient in the
case of another health crisis.

Blazer: If anything, we’ve seen an influx of life sciences opportunities in our market. Our life sciences clients are taking advantage of this time and continuing to grow their operations, because after all, the work of life sciences and biotech firms will be the solution to the pandemic.

Are you seeing any trends specific to life sciences in the Northeast?
Cassaro: This year, there was more venture capital investment in biotech in the middle of a pandemic than there was last year without a pandemic. People believe that what Pfizer and Moderna are doing in terms of using a novel therapeutic as a vaccine is only proving the case that novel therapeutics can be used for other types of diseases or health needs. This vaccine development is really the second wave of novel therapies and now we’re going to start to feel the ripple effects. As these firms mature, they’re going to touch all different facets of this supercluster—starting in urban areas and expanding into suburban areas as they grow to secure labor at a more reasonable price.

What’s next for life sciences construction in the Northeast?
Toner: I see the continued investment by venture capitalists, the continuation of partnerships, the advancement of personal medicines, and smaller scale environments for life sciences development. Clients are asking us to look at properties that have been vacant for some time, anything from industrial properties to most recently a skating rink that can be converted to small-scale manufacturing facilities, so I see growth from urban centers out into suburbia.

Cassaro: In Boston, I think we’re going to continue to be at the forefront of novel therapies and R&D for startup companies. Year over year, we’re going to see the venture capital world investing and believing in biotech. The vaccine race has proven that novel therapies can be fast reacting in a regulatory space and we’re starting to see landlords investing in GMP manufacturing now that small, pilot-scale manufacturing can be done in multi-tenant buildings.

Blazer: The key in Philadelphia is to continue to develop real estate to house these life sciences firms. If Philadelphia can develop lab space for the life sciences companies that want to be here, then we will continue to grow as one of the major gene and cell therapy hot spots in the world.

Neeson: Obviously, mergers and acquisitions over the years have driven a tremendous amount of activity in our marketplace. Now we’re seeing the emergence of a lot of joint ventures, larger companies acquiring the rights to smaller companies’ R&D products or contract arrangements. This seems to be an emerging trend throughout the globe, and I expect we’ll see more of that here in the Northeast.