Tech and architectural advancements have made it possible to build labs on higher floors of office buildings

"A New York City developer known for projects serving technology companies is doubling down on space for biotechnology laboratories and other life-science uses at a time biotech stocks are being roiled by interest rates and upheaval in the capital markets.

Taconic Partners, one of New York's largest private owners and managers of lab space serving pharmaceutical and biotech companies, is consolidating its life-sciences portfolio into a new subsidiary named Elevate Research Properties. Elevate will control three life-sciences laboratories under development by Taconic.

Elevate plans to spend more than $250 million to redevelop an office property that it owns with Nuveen Real Estate near several academic medical institutions, including Mount Sinai Hospital, according to Matthew Weir, executive vice president of Taconic. The building, at 309 E 94th Street, will include a 200,000-square-foot lab space, with construction scheduled to start next year.

"We saw that New York had all the fundamental elements to really see this sector grow, but of course what was really missing was lab space," he said.

In addition, the venture is looking for opportunities outside New York, particularly in other East Coast markets, said Mr. Weir, who will serve as president of Elevate.

Life-science research has been booming in many cities since the start of the pandemic, stoking demand for buildings designed for pharmaceutical, biotech and other lab uses. Just over 29 million square feet of lab space was under construction in the U.S. during the first quarter, up a record 55% year-over-year, according to real-estate firm CBRE Group Inc.

But after more than a year of unbridled growth, biotech stocks entered a bear market this year as the cost of borrowing and scientific setbacks have tempered investor enthusiasm. The SPDR S&P Biotech ETF, an equal-weighted index of biotech stocks, is down 43.44% year to date compared with a 21.33% decline in the S&P 500.

Life-sciences companies, especially startups, get much of their funding from venture-capital firms.

"There's a lot of uncertainty out there," said Austin Barrett, executive vice president and head of the life-science practice group at real-estate brokerage Savills. He said the funding pipeline from venture-capital firms and government agencies remains strong. But he added: "If companies can't go out and raise big public funds, then they can't hire as fast."

New York City's market, totaling 4.9 million square feet of existing life-science space, is in its early days, according to real-estate firm Colliers. The nation's leading markets, Boston and the San Francisco Bay Area, each have more than 30 million square feet of life-science real estate, Colliers said.

Historically, the suburbs were more suitable for lab real estate, with plenty of space and more affordable rent prices for sprawling research-and-development campuses, said Aaron Jodka, director of research for U.S. capital markets at Colliers.

But tech and architectural advancements have made it possible to build labs on higher floors of office buildings, opening up more opportunities for development in New York.

The city has other ingredients for a growing life-science industry, including $5.6 billion in venture-capital and $3 billion in federal-research-grant funding flowing to the sector last year." [1]

 

It makes sense and is viable to build laboratories for biotech next to major academic centers for medical science. There is a high concentration of good ideas and high-level staff in such places.

 

1. New York Venture For Life Sciences Launches
King, Kate. 
Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 22 June 2022: B.6.