A series of new facilities under construction or in planning stages should help New York begin to address its inability to retain growing life sciences companies spawned from its numerous universities and others research institutions, speakers agreed at a panel discussion hosted earlier this week by the New York Biotechnology Association.
The facilities stretch the length and breadth of the state, from a $30 million public-private facility designed to create a life-sci presence in Syracuse and revitalize a section of the city; to a pair of New York City projects that have raised $81 million toward the expansion of a Brooklyn incubator and creation of a new site for incubator graduates at the Brooklyn Army Terminal.
In all, a total six facilities comprising more than 2 million square feet are in New York's pipeline of life-sci space, according to the panelists who spoke at "The Biotechnology Catcher's Mitt" during NYBA's 18th Annual Meeting, held at the New York Marriott Marquis hotel.
That includes New York City and its suburban Long Island and Westchester County regions, a market that now contains a combined 2.6 million square feet of life-sci space, Richard Charles, senior vice president in the life sciences group of commercial real estate firm CB Richard Ellis, said during the panel talk.
A dearth of suitable life-sci space, along with higher construction costs compared to top-dollar "class A" office space, according to Charles, has kept rents higher than those of neighboring New Jersey and most of the nation's other markets. Rents for lab space in New York City itself range between $55 per square foot and $70 psf, though those numbers drop to between $35 psf and $45 psf in Westchester County, and "around" $28 psf on Long Island, Charles said. By comparison, rents in New Jersey are in the range of between $28 and $34.
"It's outstanding, the fact that New York has several properties here under development. It's an expensive area for entry," Charles said. "New York City has some great institutions, and you pay for that proximity."
Growth in the Garden State
The New York-Westchester-Long Island market is also dwarfed by the 13 million square feet of life-sci space available across the Hudson River in New Jersey — an inventory that balloons to 75 million square feet of space when the facilities of pharmaceutical companies are included.
And New Jersey is on course to expand its life-sci space as well. The state's Economic Development Authority is narrowing its list of preferred developers for the 100,000-square-foot third building at University Heights Science Park in Newark, a campus where 300,000 square feet of the planned 1 million square feet has been built out to date.
"We're very interested in the deal because of the surrounding institutions," namely New Jersey Institute of Technology, the University of Medicine & Dentistry of New Jersey, and the Newark campus of Rutgers University, said Warner Bonner III, principal in the life sciences space developer Phase 3 Properties, and moderator of the panel.
Bonner said during the panel talk that Phase 3 is among developers being considered by NJEDA for the third building, to be called Digital Century Center. The building, to be built at Norfolk and New Streets, will be designed for tenants in the life sciences and other technologies, such as nanotechnology and software development, he said.
Bonner said the sputtering economy has hampered developers like Phase 3 seeking to build new lab buildings. He said a prospective financing partner, Apollo Management, won't proceed unless Phase 3 can sign leases for at least 80 percent of Digital Century Center's space.
"Typically — up to six months ago, seven months ago — we would have needed 50 percent. So we have to meet with the economic development authority and make sure they can step up to that. We're going to need the authority to do that," Bonner said.
University Science Park accounts for most of the 1.7 million square feet of new life-sci space development talking place in New Jersey, Charles said.
Charles also cited one of New Jersey's faster-growing life-sci companies, the biopharmaceutical company Celgene, which he said is in the market for about 100,000 square feet of additional space in the Garden State. Celgene added space last year in two deals: Early in 2008, Celgene inked a sublease for 39,994 square feet at 106 Allen Road in Bernards Township, NJ, 16 miles west of the company's Summit, NJ, headquarters, then last fall agreed to sublease another 37,962 square feet in the same 132,101-square-foot class A building, the Liberty Corner Corporate Center completed in 1999 and owned by Mack-Cali Realty.
A Celgene spokesman, Greg Geissman, told BRN that the company has no specific plans to lease any new space, or expand its space at existing sites.
Charles said New Jersey has another advantage over New York besides more space, namely cheaper rent. Life-sci companies can expect to pay between $28 and $34 per square foot for lab space, a range that drops to between $8 and $14 psf for office-warehouse "flex" space.
Along with lower rents come lower tenant allowances, which Charles said range from $50 psf to $100 psf in New Jersey, compared with $100 psf to $150 psf in New York City and nearby suburbs.
New York is making progress on addressing its lack of life science space, however, with several facilities in the hopper. Furthest along are projects by two of the nation's publicly traded real estate investment trusts seeking to expand in the New York metro area:
• Alexandria Real Estate — The Pasadena, Calif., REIT is building the first phase, a 16-story, 320,000-square-foot East Tower, at its Alexandria Center for Science and Technology at East River Science Park in Manhattan. Alexandria disclosed in February it is in talks with a tenant prospect for 100,000 square feet of the East Tower. But the lab space developer has blamed the economic upheaval for its decision to delay earlier plans to break ground this year on the second 389,000-square-foot tower of the project.
• BioMed Realty Trust — The San Diego REIT is completing a $145 million set of three interconnected buildings comprising a 360,000-square-foot expansion of its now approximately 752,000-square-foot Landmark at Eastview office/R&D park in Tarrytown, NY. Most of the new space will be occupied by Regeneron Pharmaceuticals, which has promised to retain 440 jobs on the campus rather than move out of state, in return for a $4 million state grant and $5 million in tax breaks from Westchester County's Industrial Development Agency.
Also in New York City, the State University of New York's Downstate Medical Center is expected later this year to issue a formal request for proposals from prospective contractors interested in building out an expansion of its Advanced Biotechnology Incubator. The expansion would double the Brooklyn incubator's size from the current 24,000 square feet that houses 10 tenants, to about 50,000 square feet, and, like the existing facility, would feature labs starting in size at 500 square feet.
The RFP is expected to be issued this summer for the project, Eva Brown Cramer, SUNY Downstate's vice president for biotechnology and scientific affairs, told BRN.
Cramer, who is also a professor of anatomy and cell biology at SUNY Downstate, said SUNY Downstate has raised $25.2 million from the federal, state, and city governments for the expanded incubator. It would join a life-sci campus that also features a commercial synthetic chemical lab, and the namesake medical center, which Cramer termed "a wonderful location for clinical trials."
Five miles north of the incubator, SUNY Downstate also plans to convert a 525,000-square-foot former industrial building at the Brooklyn Army Terminal into a life sciences facility for companies that graduate from the incubator. BioBAT, also known as New York Science Center, welcomed its first graduate late last year, when the International AIDS Vaccine Initiative or IAVI opened a $17 million AIDS Vaccine Design and Development Laboratory within 36,000 square feet at BioBAT. IAVI retains 1,000 square feet at the incubator, which houses 10 tenant life-sci companies. State and city officials have committed $60.5 million toward BioBAT, which is being designed by Phase 3 Properties.
SUNY Downstate has raised more than $60 million to date for BioBAT/NY Science Center from the New York state and city governments. "Our concept is that when companies outgrow the incubator, they need a larger area to grow into," Cramer said. "There's a tremendous amount of research taking place in New York City and the metropolitan area, and a tremendous need for biotech space."
Smaller in size, but no less ambitious, are plans by the Central New York Biotechnology Research Center to develop a roughly 50,000-square-foot facility in Syracuse — part of a medical campus planned for the 14-acre site now occupied by the shuttered Kennedy Square apartment complex. Plans for the campus were announced last year by Gov. David Paterson.
The center is a venture of SUNY Upstate Medical University, SUNY College of Environmental Science and Forestry, the region's key economic development group Metropolitan Development Association of Syracuse and Central New York, and the Syracuse VA Medical Center.
The biotech research center has available $20 million it received from the state several years ago toward developing the $30 million Syracuse facility, and is working to raise the remainder.
"There really is, and has been forever, a dearth of wet lab space — just no space available, whether it is academic startups or companies that are already established and need some wet lab space," John Fieschko, the center's executive director, said from the audience. "We're hoping that in about a year and a half to two years to have the building ready."
Speaking with BRN after the panel talk, Fieschko said potential life-sci startups interested in the Syracuse site have ranged from traditional therapeutics developers to companies with a forestry focus. Albany Molecular Research approached the center seeking additional space, while another undisclosed stem cell company with a factory north of Syracuse contacted the center seeking space for a demonstration facility.
"A lot of professors have told me they've stared companies from the basements of their houses. It's those startups, as well as those established companies, that need space. It's really whatever the needs are. If we can fill up the building and we can get more funding, then we will build another one," Fieschko said in an interview.
He said the current amount of funding is enough to build part of the project, the building's shell. The center, three years in planning phases, has been working with King & King Architects and S/L/A/M Collaborative on a design for the facility. It expects, Fieschko added, to develop synergies with the state-funded Syracuse Center of Excellence in Energy and Environmental Systems, which focuses on alternative "clean" energy, indoor environmental quality, and water resources.
Also looking to grow more life-sciences startups is Cornell University's Cornell Center for Technology Enterprise and Commercialization. CCTEC Director Brian Kelly said the center has completed a roughly 8,000-square-foot center for life-sci business incubation, technology transfer, and economic development within the recently opened 250,000-square-foot Joan and Sanford I. Weill Hall, within Cornell's Ithaca campus.
The biotech incubator's name has been changed from the Innovation Development and Economic Applications Center, or IDEA Center, to the Kevin M. McGovern Family Center for Venture Development in the Life Sciences. The change followed a $7.5 million naming donation by the family of McGovern, a 1970 Cornell graduate and the chairman and CEO of McGovern Capital, a private investment firm and provider of intellectual property rights strategies. Cornell accepted the gift as part of its $650 million New Life Sciences Initiative, intended to boost faculty recruitment, student scholarships, and facilities.
"We hope that that will be able to sustain five to 10 Cornell companies that will probably have a turnaround of about 18 months," Kelly said.
CCTEC also nurtures startups through its "Big Red Triad" suite of services: A venture fund run by students in Cornell's Johnson Business School; a legal services group staffed by volunteers from the law school and overseen by outside law firms; and a business incubator that houses companies launched by Johnson School students. Cornell startups have also emerged from the Cornell Center for Life Science Enterprise, a venue for R&D, training, and technology transfer sponsored by the New York State Foundation for Science, Technology and Innovation, or NYSTAR.
Plugging the Brain Drain
Kelly said CCTEC hopes the new McGovern Center will allow it to retain startups like those that have left Ithaca and New York state in recent years. Of 85 companies launched from CCTEC since 1985, 50 are still active. And of those 50, five were launched last year — none of which are based in the Empire State.
Also in 2008, CCTEC signed 65 commercial agreements, received 242 invention disclosure notices, and filed 155 patents.
Speaking with BRN after the panel talk, Kelly said the dearth of space was just "a confluence of many factors" explaining why many of Cornell's startups have left Ithaca and New York state. Other factors he cited included the lure of good technologies developed elsewhere, especially in larger clusters with greater access to capital, and more entrepreneurs with experience in starting up biotech companies.
"Space is slowly emerging. What we truly need is what I would call real risk capital. Having some ability to access that is a going concern for all sectors," Kelly said.
But the economic upheaval of recent months has hampered the ability of startups to grow into the types of companies capable of filling larger space, whether in New York or elsewhere. A few startups have folded at Columbia University's Audubon Business & Technology Center, leaving it in the unusual position of having space available after years of being fully occupied and having to turn startups away, Carol Shuchman, Audubon's director of commercial leasing and development, said from the audience during the panel talk.
"The economy is hitting us as well," Shuchman said.
Audubon has housed 46 companies since the 100,000-square-foot incubator opened in 1995.
A Columbia U panelist — Orin Herskowitz, executive director of the university's tech transfer office, Science and Technology Ventures — said Columbia generates 10 to 12 startup companies a year, out of the 300 inventions generated there annually. Columbia is among the nation's top tech transfer schools, generating $130 million in IP licensing revenue each year, as well as launching 93 new companies since 2000.
"We've had a pretty good year so far, so we're likely to be up to well over 100 by the time this year wraps up," Herskowitz said.
Of the companies launched since 2000, 63 are still in business. Yet only "20-some-odd" of them are based in New York, Herskowitz added, saying: "These companies are landing in New York, In some cases, they're staying in New York. In some cases, they are not. "
"There's a lot of interest in trying to stay as local as possible. Practically speaking, could the intellectual property go out to Seattle, to the Accelerator, or to Boston? It can," Herskowitz continued. He cited Escoublanc, a startup using Columbia U Medical Center technology to develop treatments for metabolic disorders such as diabetes and obesity. Escoublanc moved on Jan. 2 from New York to Biogen Idec's incubator in Cambridge, Mass., after securing $6.65 million from the biotech giant, a financing tranche in a Series A round that could grow to $10 million based on milestones.
"A lot of the entrepreneurs would love to be in New York, and yet until we have employees come on board, [we] can't get there until these new facilities come on board. So I have to believe that there are more ventures coming out of Columbia that could land in New York, where there would be program space," Herskowitz said.
Not all of these ventures are expected to be in the life sciences, though he said all would benefit from proximity to Columbia faculty and staff.
"When you have these local interactions, the perception certainly from the faculty and I think from the investors, is that there's a cooperation that can be established that makes things a lot easier to get the science off the ground" locally, he said.
Also helping get startups off the ground, Herskowitz said, are some 40 PhD student interns working with Columbia-launched companies to help write business plans they hope will draw capital from VCs and other investors. The students are trained in economic analysis, patent analysis, and market landscaping.
Audubon is one of seven life-sci incubators operating across New York state, according to the NYBA web site. David Hochman, executive director of the 35-member Business Incubator Association of New York State, told the audience that the seven included two upstate incubators operating from former pharmaceutical facilities:
• East Greenbush: The University at Albany's East Campus has transformed the former Sterling Winthrop complex off Columbia Turnpike into a tech park with some 100,000 square feet of available wet lab space. The campus is home to the headquarters of Albany Molecular Research, the Cancer Research New York Neural Stem Cell Institute, and other life-sci employers — and starting in September, the new home of Tech Valley High School
• Rochester: The University of Rochester has converted a 40,000-square-foot former Wyeth laboratory building at 77 Ridgeland Road in nearby Henrietta, NY, into the Rochester BioVenture Center. High Tech Rochester manages the facility.
Hochman said his members run 40 incubators statewide; BIANYS estimates the total number at about 50.