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Where Will All the Biotechs Go?
Assuming continued tech-sector growth, the bricks-and-mortar question looms
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Business New Haven
4/16/2001
By: Linda Mele
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In nearly every newspaper and magazine across the country one can routinely read articles about the burgeoning biotech industry and the fact that new companies are springing up like cropsy, and already established technology firms are looking to expand.
Connecticut - and the New Haven area in particular - is no exception, but is the rush to build laboratory, manufacturing, distribution and office space moving faster than the industry is growing - particularly in view of the Wall Street technology meltdown?
When and if the biotech industry's needs level off and all the hoopla quiets down, will towns, cities and developers be left holding a bag filled with unoccupied space and non-tax-producing developments?
According to Al May, managing director of communications and public policy for Connecticut United for Research Excellence (CURE) and its president, Debra Pasquale, the industry continues to grow and they don't foresee a slowdown any time soon.
“While there are now more private developers involved in this area than ever before, the creation of more lab space to meet growth needs will continue to be a challenge for years to come,” Pasquale asserts.
The state's Bioscience Cluster Sixth Annual Economic Report states that Connecticut's biotech spending on research and development topped $3 billion in 2000, up 15 percent from the year before.
CURE officials subdivide their “cluster” into pharmaceutical companies, biotech firms and university-based research operations.
The report shows occupied laboratory space within the overall bioscience industry grew during 2000 by 479,329 square feet, or 11 percent. Biotechnology company lab space grew at the fastest rate, by 126,447 square feet, or 34 percent.
The much larger and longer-established pharmaceutical segment expanded by 322,000 square feet - just a 12-percent gain since the pharmas occupied so much space to begin with. (Pharmaceutical firms in Connecticut employ ten times as many workers as their biotech brethren.)
Occupied space within the university research segment grew by 30,882 square feet, or three percent over 1999.
Overall, biotechnology lab space has increased over the last five years by 309,937 square feet, or 164 percent, pharmaceutical company lab space by 1,192,630 square feet (63 percent) and university lab space grew by 572,525 square feet, or 92 percent, the CURE report says.
In the aggregate, lab space has increased by 2,075,092 square feet, or 77 percent, in the state over the last half-decade.
The typical cost of laboratory construction is between $200 and $400 per square foot, compared with a range of $100 to $125 for office space, according to CURE.
In 1998, biotechnology companies occupied more than 300,000 square feet of space. This group is expected to lead the growth trend as CURE anticipate a 32-percent average annual growth requirement for laboratory space.
In addition, almost all of the biotech companies are building, or will need to build, new facilities over the next three years. Connecticut's pharmaceutical companies currently occupy more than 3.7 million square feet of space and estimate an average annual expansion rate of eight percent, or around 300,000 square feet.
Because of the sequencing of the human genome and concerns about genetically modified food, the biotech industry is very much in the forefront of the biosciences, according to Jennifer Van Brunt, editor of the online magazine Signals.
“More than anything else, the biotech sector [nationally] is entering 2001 replete from the richest financing feast in its 25-year history,” she reports. “Many a biotech firm has become wealthy almost overnight, gaining the considerable clout of a big pharmaceutical company.
“These wealthy firms are bound to effect some profound, perhaps startling, changes in the biotech sector in the near future,” Van Brunt says.
“[CURE]'s latest economic report again demonstrates that its growth is continuing and sustainable,” says Governor John G. Rowland. “It is additional evidence of Connecticut's national leadership in today's technology- and knowledge-based economy.”
Adds Commissioner James F. Abromaitis of the state's Department of Economic & Community Development (DECD), “The achievements of the bioscience cluster, as evidenced by this report, are impressive.”
Locally, a profusion of building and development plans are on the drawing board or already in the works.
According to Dale Kroop, Hamden's director of economic and community development, the town is working with a developer on the Hamden Bioscience Campus which will house 740,000 square feet of lab space.
“We don't have any commitments yet, but we do have site-plan approval so we'll be ready when companies want space,” Kroop says.
And the Cambridge, Mass.-based Lyme Properties, LLC, has partnered with Yale University to try to breathe new life into the beleaguered Science Park in New Haven. It will start with Building 25, which is already home to a number of biotechnology and service companies.
Originally built in 1917, Building 25 houses some 211,000 square feet. Project Manager Laura Woznitski says that Lyme Properties plans to renovate and upgrade the six-story facility and that work should be completed by the end of the year.
When it's fully developed, Science Park at Yale will have more than two million square feet of new and renovated mixed-use space “featuring state-of-the-art laboratory space and a range of amenities including restaurants, cafés, business services, landscaped parks and ample parking,” according to Lyme Properties officials.
SiteFinder, an online service of the Connecticut Economic Resource Center (CERC), receives more than 10,000 hits per month. Linked to more than 65 commercial brokerage firms, it contains more than 2,100 property listings, including those for office, industrial, retail, flex and biomedical buildings and sites.
Frank Hird, a real estate sales agent with OR&L Commercial Real Estate in Branford, says there is “a great deal of interest” out there for laboratory and R&D space.
“Obviously New Haven - and Yale - have the advantage,” Hird says, “because they're already filling space. Some will get the brass ring and cash in on the need - and others won't.”
Other projects include 1.2 million square feet of space in West Haven that's being tapped for technical occupancy at the former Sirsum Corda site. Orange First Selectman Mitchell Goldblatt says his town's plans for an Enterprise and Technology Park have been enjoined by a judge until another, unrelated matter is adjudicated, but the town still wants “to attract biotechnology firms or similar technical-oriented companies to that section of town [near the Marsh Hill Road exit of I-95].”
Richard S. Guralnick, executive vice president of the Business Group Inc. [BGI] in New Haven, says there is activity in New Haven.
“In addition to the Science Park at Yale project, 300 George Street [the former SNET building now known as the 300 George Technology Center] is attracting interest,” he says. “But if all the available space and developments are marked solely for biotech there will eventually be too much.
“Clearly, the first one in the ground has the upper hand,” Guralnick adds.
Since 1990, CURE has been the organizational center of Connecticut's bioscience industry, in partnership with CERC.
Another indicator that the biotech industry is growing in the state is that this year's report included information provided by 16 biotechnology companies and five pharmaceutical companies. Last year's report included only eight biotechs, according to state officials.
Another thing that impacts bioscience development is the availability of facilities' building funds through state initiatives and private and/or venture capital financing.
The state's $40 million BioScience Facilities Fund helps companies finance “the expansion or creation of biotech 'wet' laboratory space to support the growth and expansion of the bioscience industry in Connecticut.”
Administered by the real-estate staff at Connecticut Innovations Inc. (CII), money from BioScience Facilities Fund can be used for tenant improvements, loan guarantees and “a variety of creatively structured lending instruments” that are available for start-up biotech companies or for those who need to expand in an existing facility, officials say.
“That a larger percentage of both the biotechnology and pharmaceutical investment is being devoted to clinical studies is a clear sign of the maturation process taking place within the cluster,” CURE's Pasquale says.
So, if we listen to all the developers, real estate professionals, state employees and private funding sources, it looks like the only place for the industry to go is up. Whether it will or not remains to be seen.
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