Jones Lang LaSalleMANHATTAN BIDS FOR BIOTECHSteve GarmhausenMaybe it’s the fact that the East River Science Park will be New York City’s largest biotech campus. Or it could be that the $700-million project is being built on spec. Whatever the reason, its 872,000 square feet seems like an awful lot of space to fill.
Then again, if the planned science park fulfills the city’s goal of jump-starting a true commercial bioscience industry, the 3.7-acre campus, in the Kips Bay neighborhood between First Avenue and the FDR Drive, could start to seem very small to its tenants.
“Where do these companies go when they become bigger?” asks Patricia Ardigo, director of the life sciences group at CB Richard Ellis, who envisions the new park eventually spawning satellite research hubs in Long Island and Westchester.
It would be a nice problem to have, but the city, which will lease the site on Bellevue Hospital’s campus to Alexandria Real Estate Equities Inc., must first overcome challenges to landing tenants. Those include established competition in Boston and New Jersey as well as Manhattan’s high rental rates.
The good news is that recruiting work is well under way. The city has already spoken with 500 companies worldwide, says Bill Fair, managing director of healthcare and bioscience for the New York City Economic Development Corp, which was the major driver behind the project.
“Conceptually, people don’t think of New York as bioscience,” admits Fair. The city is playing up four strengths in its recruiting efforts: its deep, skilled employment pool; entrepreneurial talent; and access to capital for all stages of a company’s growth.
But the biggest muscle group in the city's armature is its collection of 11 major academic medical research institutions, including NYU and Columbia’s schools of medicine and Memorial Sloan-Kettering Cancer Center. Together, these institutions filed more biotech patents between 1992 and 2002 than the institutions of Boston, Cambridge and the San Francisco Bay area combined, says Fair. But because of the city’s dearth of lab space, the people behind those patented ideas are forced to go elsewhere to try to commercialize them.
“The great ideas are already here,” says Fair. “It’s just that the companies haven’t stuck here. We’re good at spinning out companies to places like La Jolla.” (He might have mentioned New Jersey as another popular destination; perhaps it’s too close for comfort.)
The feedback from biotech companies has been that these strengths could offset the high cost of setting up shop in New York City, Fair says: “Cost is definitely an important factor, but not the most important factor for companies making location decisions.”
Ramping up biotech in the city has been talked about for a good 20 years. But for various reasons?among them the rivalries between the research and academic institutions?it remained talk.
Upon taking office four years ago, Mayor Michael Bloomberg commissioned a market study that identified all the ingredients for biotech success. The administration, determined to follow through, had a key assist from several business-world heavy hitters, including Jerry Speyer and Henry Kravis, who reportedly used some muscle on their own to persuade directors on the boards of the city’s universities and hospitals to put aside their turf concerns and form a consortium to bring biotech into the city.
When the city’s RFP process for East River culminated in August with the selection of Alexandria, mere talk had congealed into reality. The Pasadena, Calif.-based real estate investment trust is a pioneer in building, running and acquiring lab and office complexes; it owns 127 properties with 8.2 million square feet. Alexandria has the “deep pockets and the wherewithal for a long stay,” says Ardigo, who served on the EDC and New York City Partnership’s biotech task force that helped bring about the science park. (Read about Alexandria in the November Forbes/Slatin Real Estate Report, available by subscription on our
Publications page).
Bringing in a private developer also relieves the city’s institutions of driving economic development?which is not, after all, their mission. What’s more, the REIT is financing the park and building it on spec. What makes Alexandria CEO Joel Marcus, so confident that he took on blue-chip REIT Boston Properties for the right to build East River? Good question; he isn’t talking to the press. But his company’s bioscience parks are full of institutional users as well as corporations like Merck and Quest Diagnostics, and Alexandria should be focused on getting such heavy hitters to pre-lease space at ERSP.
“They have to go after large users right out of the box,” says Peter Waldt, senior director at Cushman & Wakefield, and a veteran of city government, who notes that the bioscience plan in the Giuliani era focused on institutions, while Bloomberg’s plan expands the mix to include corporate tenants. By contrast, the 100,000-square-foot Audubon Biomedical Science and Technology Park, part of Columbia University Medical Center and housed in the historic Audubon Ballroom where Malcolm X was assassinated, is mostly filled with incubator-sized companies and organizations.
The science park will also provide lower-cost lab and office space for entrepreneurs, who would now find a dry well, says Fair: “If someone called my office today, I’d have no place to put them.”
Subsidies are sure to be key to filling the space. The New York City Partnership has pledged $10 million to help small and medium-size companies fit out their space. Labs’ specialized needs?everything from extra-thick walls to emergency wash stations?add a tidy premium to their costs, explains Bob Von Ancken, the head of consulting and evaluation at Grubb & Ellis, which is conducting a pricing study for the EDC.
The state aid needed to compete with well-subsidized life science space like that in New Jersey may be hard to squeeze out of Albany because biotech companies?even though they create high-quality jobs?tend to be loss leaders, often investing for years before seeing any profit, notes Ardigo.
The park’s first phase, slated for groundbreaking in 2006, includes two laboratories and office towers totaling 542,000 square feet, with the first tenants anticipated in 2008. Designed by Hillier Architecture, It’s to include a glass-enclosed retail area with 43,000 square feet of public open space, including a riverfront esplanade, and 520 underground parking spaces. The second, 330,000-square-foot phase is slated for completion by 2009, and it will have additional open space and 200 more parking slots.
There’s a potential snag for the second phase. The city’s office of the chief medical examiner must first vacate the site; that is problematic because the office is storing 9,000 unidentified remains of victims from the September 11 attacks there. The remains are to be moved to the planned memorial at the World Trade Center site – whenever that is completed.
But if all goes well, the second phase will have a line of would-be tenants waiting to move in. The EDC’s Fair acknowledges that the city’s plans for biotech are not unique. In fact, all 50 states have biotech initiatives in their economic agendas. But unlike most of them, New York actually has what biotech firms are looking for, he says.
“Most places pin their hopes on biotech as a hot, sexy area, thinking they’ll see great stock increases, lots of employees and cures for diseases,” he says. “What we’re doing is the opposite of the way most places approach biotech.”
