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Lost in Space
Connecticut's bioscience construction conundrum: No one will come
unless you build it — and no one will build it until they come
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Business New Haven
9/17/2001
By: Susan Cornell
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In Connecticut, laboratory space devoted to biotechnology research has increased by 309,937 square feet, or 164 percent, in the last five years, while pharmaceutical lab space has grown by 1,192,630 square feet or 63 percent. During that period, university lab space increased 572,525 square feet, or 92 percent.
These are the findings of the June 2001 Annual Economic Report of Connecticut United for Research Excellence (CURE), the not-for-profit organizational center of the state's bioscience industry. CURE further predicts that more than 380,000 additional square feet of lab space will be needed to accommodate the needs of Connecticut's existing biotechnology companies by the end of 2003.
In addition, such figures don't even take into account the needs of new companies starting up in Connecticut or companies relocating here.
The prospect of continued rapid growth in the science sector is stimulating new opportunities for industries such as construction and real estate. For firms capable of developing lab space for the rapidly expanding firms in state, the sky is the limit.
In the mid- to late 1990s, Gov. John G. Rowland recognized the downstream benefits of biotechnology and biomedical research in reviewing the growth figures and projections. “Biomedical research and biotechnology is an economic engine for our state's economy,” the governor said in 1997. “We especially encourage financiers, developers and construction companies to take a serious look at the opportunities this emerging sector represents for long-term growth and prosperity in our state.”
Laboratories themselves are the physical environment in which scientists conduct research experiments involving molecular biology, cell biology, immunology, chemistry and other sciences. Labs are pretty much the nerve center for practically all pharmaceutical and biotechnology activities.
The growing need for such space is a pricey proposition. Typical laboratory space costs $200 to as much as $400 per square foot to build from the ground up, compared with $100 to $145 for ordinary office space. And, with a typical allotment of 150 to 300 square feet per person, both space and funding needs for construction are substantial.
Such features as air-processing equipment, plumbing, electrical supply, waste disposal and material storage account for much of the cost differential.
In New Haven, the biotech growth is concentrated in two large developments, which private out-of-town developers with track records are working to convert to laboratory space. Science Park is now the charge of Lyme Properties of Cambridge, Mass. Lyme's niche is converting vacant factories into scientific labs. In November, Lyme agreed to spend roughly $200 million to convert the turn-of-the-century gun factories into a million-square-foot development over the next five to ten years.
In Cambridge Lyme has developed parts of Kendall Square, which is teeming with biotech companies. Bob Green, a Lyme manager, favorably compares the Elm City with Cambridge: There is less competition and rents are cheaper here, so the developer has the opportunity to get in on the action before it takes off. Green adds that because space is so expensive to develop, banks are reluctant to write building loans for biotech.
Green explains that biotech is a good match for a post-industrial inner city because lab space requires high ceilings to accommodate intricate wiring and ventilation systems and floors that can handle heavy loads - characteristics common to factories.
In February, Winstanley Enterprises of Concord, Mass. purchased 300 George Street in New Haven, a 550,000-square-foot building once home to Southern New England Telephone's customer service center.
Science Park and the renamed 300 George Street Technology Center developments will help to meet the continuing need for lab space. So will the Connecticut BioScience Facilities Fund administered by Connecticut Innovations Inc. (CII), the state's leading technology investment firm.
In 2000, the fund loaned $9 million for laboratory space construction statewide. This is a $60 million fund that provides financing to biotechnology companies for the construction of wet laboratory and related space.
The state legislature created the fund in 1998 with $30 million of state seed money, and charged CII with its management. CII contributed an additional $10 million from equity-investment proceeds. Since then, the fund has committed more than $20 million to finance over 225,000 square feet of lab and related space.
Explains CURE President Debra Pasquale: “Typical laboratory space can cost between $250 and $500 a square foot, compared to $100 to $150 a square foot for ordinary office space. The reason laboratory space is so much more expensive is because of the stringent requirements they must meet in terms of air quality, temperature control, etc. They also may have special electrical needs for the computers and robotic devices found within these labs. Finally, there is the need to create areas that can be sealed so as to prevent contamination. All these factors add to the cost of laboratory space.”
Richard R. Barredo, CII's managing director for project finance, is the individual in the know about the BioScience Facilities Fund. Explains Barredo of the construction complexities of lab space: “The air gets changed ten to 12 times an hour” in many labs. “It must be heated or cooled depending on the time of year. In an office building, the air is changed maybe 2 to 3 times an hour. The massive ductwork and heating systems add to the cost factors. Then, you must bring in gas and purified water. And, there are different types of gasses. There are special countertops and cabinets that are very expensive.”
Adds Barredo: “In the real world, real-estate developers don't want to go out any farther [on a limb] than they have to, and the banker is reluctant. This leaves the developer short in fitting-out lab space. Biotech wants money for R&D rather than bricks and mortar. So there's a disconnect between the bank and the real estate developer.”
The common denominator is what the building could be used for alternatively, “so the lender is willing to lend only a portion to [match] the value of an [equivalents-sized] office building,” he adds. “But the biotech needs need to be satisfied.”
High costs come into play in other areas, as well. “It's not just the biotech space costs, but the demands on the town,” Barredo says. “First, the site must have adequate space for parking, and a loading dock and receiving areas screened from the public view [Barredo says one reason is the use of animals in research]. There must be a clean environmental report, a minimum of 13 feet between slab height and ceiling level [ideally 16 feet] and overhead plumbing.”
The floor loads must also accommodate heavy equipment. “The basic building infrastructure must be more heavy-duty than that for a typical office,” says Barredo. “And the utility service requirements are not what you find in a typical office building. For a water supply, there is a minimum two-inch diameter feed to the building - they suck down a lot of water. And there are needs to access to municipal sewer services. So the inherent demands and needs are far from your typical office building, contributing to the cost factor.”
Then there is the question of definitions. Barredo considers the term bioscience “all-inclusive, including the large pharmaceuticals.” He explains, “We lend to biotech wet labs in comparison to a chemistry lab that looks identical but it demands much higher air volume.” Chemistry areas may run $350 to $450 a foot, he explains.
“Drug-discovery companies are running 50-50 [in terms of space needs] between wet labs and chemistry,” says Barredo. “For drug manufacturing businesses requiring a clean-room environment, the cost is $1,000 a foot. Wet biotech is the lower end of the threshold.
“The Bio Facilities Fund lends to new early-stage companies, funded for venture capital dollars,” Barredo says. “They're hoping for something five to ten years down the road. The biotech companies are behind the eight ball because the banking community is not out there with open arms. That's where we come in.
“Even building out on spec - there's the base building providing basic building infrastructure. And then there's having it raised.” Barredo explains that the private developers “just spec it out.”
Kevin Crowley is director of business recruitment for the state's Department of Economic & Community Development. “Biotechnology companies have special space needs that vary with each company,” he says. “In general, the cost of the laboratory space ranges from $250 to $500 per square foot depending on the company's specific requirements. Even those numbers come in to question on a daily basis.
“Much of that cost is associated with the equipment and building infrastructure required for research and development,” says Crowley. “Most often companies require laboratories that have stringent specifications regarding air quality and turnover, temperature, etc. Depending on the research being conducted and the 'control' that is needed, the air in a particular facility can be replaced every hour, sometimes less.”
Additionally, Crowley adds that laboratory benches, sinks and hoods are typically required. “Also, a company may require a 'seal' on the facility with an airlock entrance,” he says. “All of these special needs can significantly add to the cost of a facility. This list can go on with each application. However, the value of the research findings often justifies such costs.”
Explains Laura Woznitski, project manager with Lyme Properties LLC, which has designed the first building in Science Park: “The huge differences are in the mechanical, electrical and plumbing systems. It's also the heavy loads in the buildings. They require greater strength - 100 pounds per square foot is typical for an office building, but we need 250 pounds per square foot in this building. The differences in the building structure drive up the cost.”
In addition, Woznitski says: “A lab may require special humidification and filtration. They may also require that air is turned over with a greater frequency. It's a very specialized system. This [Science Park] building is designed to function at specific requirements 24 hours a day. And it requires frequent maintenance.”
Woznitski adds that complex engineering requirements drive up the construction or renovation cost and suggests that a firm work with an engineer with laboratory experience.
William Waldron, a long-time project manager and construction professional, has been at this a while. “I've been building for decades,” he says. His background includes work with high-tech spaces like hospitals and medical schools.
“People are blown away by the cost if they're not used to this type of construction,” says Waldron. There's an unfilled need in New Haven and elsewhere that may remain partly unfilled, he says.
“It's one thing to build a strip mall, but to put one of these things up would take a brave person unless they had signed leases in their back pocket,” he says. “No one will do it on a pure speculative basis.
“The unique needs are the enormous amount of air you have to move,” Waldron says. “You must heat it, cool it, humidify it or dehumidify it, and filter it depending on the conditions. You must move it into the space and then exhaust it from the space. And you move it one time only. By code, you can't recirculate the air.”
Also, Waldron notes that, “The power requirements are above normal. You need bigger motors, bigger fans and bigger pumps. And there are systems that are particular to biotech - nitrogen, central vacuum, processed and chilled water. There's a code particular to the industry, a code for construction of labs.”
Waldron defends the codes. “These are not nuisance codes but necessary to the people working in the labs,” he says. The closest comparison he cites is the construction of a hospital.
The director of financial planning for the CuraGen Corp., Terrie Atkinson, explains that her company “is more dry-lab concentrated. We focus on molecular biology with information technology.”
As such, “In terms of building infrastructure, we need a building that is more infrastructure-intense,” she explains. “We have lots of needs for HVAC and electrical power. We have lots of robots and computers. In the labs, we have a need for 100-percent fresh air turnover. In terms of where we have some chemistry needs, we need centralized utilities. HVAC needs are different here than in the general office space.”
Explains Atkinson: “If you're flexible and cutting-edge, you need open systems. Open and flexible design is critical. You want utilities up in the ceiling. We want to 'plug and play,' to reach up into the ceiling to get what we need - power, gas, air.”
The other critical element is ceiling height, Atkinson says. “We can't use your normal 12 feet; we need 16- to 18-foot ceilings. Finding existing buildings [that meet that specification is difficult. That's why we needed to do a build-to-suit or build on spec.
“There's the high-tech lab and what I'll call a heavy academic lab. That's the difference for CuraGen,” says Atkinson. “We've tried to have a more efficient approach.” Regarding Curagen's plans for Branford, Atkinson says that “The site we've chosen allows us the ability to build the two buildings we need, allows for future expansion, and the location works in terms of employee demographics. There are a lot of requirements that are part of what leads us to build a facility rather than retrofit.”
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