By Sarah Trefethen
Software developers have been grabbing up office space and headlines in recent years, but the next wave of hot new tenants may be more likely to wear long white lab coats than Mark Zuckerberg -style hooded sweatshirts.
Biotech researchers and drug companies (many of which are facing expiring patents on major drugs) are increasingly looking to New York, with its dense concentration of hospitals and universities, as a location for their own labs and cutting-edge research.
“They’re coming to where the science is,” said John S. Isaacs, an executive vice president at CBRE who specializes in the life sciences sector.
But for laboratory tenants looking to relocate to Manhattan, finding a space and a landlord to meet their needs can be a real challenge.
One refuge they can turn to is the Alexandria Center for Life Science, located on the eastern end of 29th Street, overlooking the FDR and the East River.
The site is a collaboration between the EDC and the Alexandria Real Estate Trust, whose national portfolio with 127 properties comprises approximately 8.2 million s/f of office and laboratory space.
The center’s first, 310,000 s/f tower opened in 2010 and is fully leased to tenants including Pfizer, Kadamon Pharmaceuticals and two Eli Lilly subsidiaries, Lily Oncology and ImClone systems.
Last September Roche, the company that invented Valium, announced it would lease the top two floors of the planned 17-story, 410,000 s/f second tower, currently under construction.
NYU Langone has issued an RFP for design and engineering services indicating its intent to lease 120,000 s/f on floors 2-5 of the same building.
Joel Marcus, founder and CEO of Alexandria, said he started looking at New York in 2001, and quickly saw the potential for the city’s intellectual capital to attract the kind of tenants who work out of his properties in other cities.
What was missing, he said, was “a great site where you could convene and tie the commercial side and the academic side together,” along with the management expertise to give the tenants the support and infrastructure they need.
“It’s a totally different situation,” Marcus said. “Laboratory tenants require a much more enhanced building. The waters and the gasses that come into the building are not what come into normal buildings.”
Laboratory equipment means greater floor loads, and the need to keep cutting-edge research and development under wraps means laboratory tenants require greater security than your typical office tenant.
But there are up sides.
Asking rents at Alexandria start in the high $70s psf, Marcus said, and life sciences tenants are used to signing triple-net leases.
The cost of a lab build-out can range from $300 to $600 psf, according to CBRE.
“In our world, most of our tenants will put a lot of resources into their space,” Marcus said. “This space tends to be mission-critical. If it goes down it could have a huge economic impact on the company.”
Amenities at the Alexandria Center include beautifully designed public spaces, an on-site conference center and Riverpark, a restaurant by Chef Tom Colicchio where produce is prepared straight from the center’s extensive garden.
New York received $1.4 billion in NIH awards last year, the second highest amount of any US city.
The 11 major academic research institutes are constantly producing newly-minted PhDs whose research could be turned into new products.
Isaacs, of CBRE, represents ImClone, a company that was founded in New York but considered building its own space in New Jersey before it settled on its space in Alexandria.
But suitable space in the city is hard to find, particularly for younger companies that aren’t ready to move into Alexandria.
“The big thing that NYC is missing is that B-quality lab space,” Issacs said.
Not every building in the city could be converted to laboratory space, but it’s a possibility in former industrial structures with strong floors and high ceilings.
And while some landlords used to dealing with bankers may be wary of a tenant whose employees include lab rats and live viruses, the reality may be less exciting than most science fiction movies suggest.
Those tenants who work with live animals clean their own space, according to Issacs, and the entire industry is heavily regulated by the FDA.
“If you go into one of these labs they’re spotless,” he said. “The FDA standards are much higher than any landlord would expect.”
Today, he said, he has clients who are looking for a total of about 100,000 s/f of lab space in Manhattan.
“There are venture dollars that will fund, dollar for dollar, these biotech companies,” Issacs said. “They just need the space.”