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Orlando EDC Sees Growth, Despite Slump, As Two Life-Sci Anchors Plan ’09 Openings

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The top life-science recruiter in the Orlando area said the industry will continue to grow within the region over the coming year, despite the current economic slump, thanks in part to two anchor research institutions set to open new facilities next year.
 
The University of Central Florida is constructing its $99 million, 198,000-square-foot UCF Burnett School of Biomedical Sciences, set to open in May 2009 within the Orlando master-planned mixed-use community of Lake Nona. Three months later, also at Lake Nona, the Burnham Institute for Medical Research will open an $80 million, 168,000-square-foot research campus.
 
Those two facilities will be joined in March 2010 by UCF’s second building on the Lake Nona campus, a $68 million classroom building and medical library for the new College of Medicine, set to welcome its inaugural class in the fall of 2009.
 
John Fremstad, vice president of technology industry development with the Metro Orlando Economic Development Commission, told BioRegion News the development of Burnham and the UCF projects will enable the region to deliver on the longtime goal of a life-science cluster whose anchor institutions would both spin out and draw from outside biopharma and medical device companies.
 
“We’re trying real hard to finish what we’ve started in the next year and a half, so by ’09 I think you’ll hopefully see some new deals be announced that can either be built or can fill in,” Fremstad told BioRegion News last week. “The deals that have been announced, I’m still excited to say, are happening.”
 
Some of those deals, he said, will be done by small life-sci companies securing short-term leases for space at the Burnham and UCF facilities that the institutions do not need immediately, but into which they plan to grow over time.
 
“You’ll see announcements on some three- to five-year leases for 10,000 to 25,000 square feet. As [Burnham and UCF] grow in, another company can start in the [unoccupied] space that already exists, then move out,” Fremstad said. “They’ll have some leeway, because they own it.”
 
Burnham says it is open to the possibility of leasing portions of the third floor short-term.
 
“However, the building is not designed to be a secure multi-tenant facility as you might find in the typical incubator facility designed to have several different tenants, some of whom may be dealing with human subjects, clinical research, human blood samples, et cetera,” Cyril Doucet, vice president of operations and administration for Burnham Lake Nona, said via e-mail to BRN.
 
“Our building was designed as an open, collaborative space. Nevertheless, we also wish to encourage further development of the life-sciences cluster; and … our building might be a suitable short-term home for a bio-related firm. We would need to assess the impact of the potential tenant's operations on our activities and it's suitability for our building,” Doucet added.
 
Organizations that are collaborating with Burnham directly “would be ideal candidates for such a lease arrangement,” Doucet said.
 
He said one UCF faculty member will lease space from Burnham for a startup starting next year, adding: “We would certainly explore any interest in the facility that would come our way.”
 

“We’re trying real hard to finish what we’ve started in the next year and a half, so by ’09 I think you’ll hopefully see some new deals be announced that can either be built or can fill in.”

UCF has signed the MD Anderson Cancer Center’s Cancer Research Institute to 30,000 square feet on the fifth floor of the Burnett biomedical sciences building. The five-year lease, announced in December, allows MD Anderson to move the institute within Orlando to a site three times the size of its current space. The new space is also temporary: CRI will pay the university $2.5 million to occupy the building for up to five years as MD Anderson makes plans to build its own research center within UCF’s Lake Nona site.
 
Additional space could be filled short-term by the spinouts the college expects to co-create with Burnham and MD Anderson. The director of the cancer research institute, Cheryl Baker, is a UCF alumna.
 
“She has talked about some pretty heavy collaboration with us when they move in,” Zenaida Gonzalez Kotala, a UCF spokeswoman, told BRN last week.
 
UCF’s plans for Burnett include a transgenic animal facility and three biosafety level 3 laboratories. As of last week, workers constructing the Burnett biomedical sciences building “have most of the exterior done,” Gonzalez Kotala said. “They’re now starting to work on the interior. The service and passenger elevators are all done, as is the sprinkler head system.”
 
Until the building is finished, the College of Medicine is operating from a temporary 16,000-square-foot office adjacent to UCF, at Central Florida Research Park.
 
She said that at the College of Medicine classroom building, workers have completed pouring concrete and are “now working on the columns and erecting the first part of the building.”
 
Together, the UCF facilities are projected to generate some 500 jobs — 350 at the Burnett building and 150 at the classroom building — once fully occupied in 2010. By 2010, UCF also expects about 100 students on campus.
 
The college is also sifting through the 1,800 applications it has received between June 24 and 25 for the 40 available seats in the medical college’s inaugural class, set to start studies in fall of 2009. One likely reason: Each student accepted to the College of Medicine will receive full scholarships for all four years of the program, with $20,000 for tuition and $20,000 for other fees and living expenses. Deadline for applications is Dec. 1.
 
UCF says its medical college will graduate 120 students per year.
 
Construction of the Burnham facility is “about halfway there,” Doucet told BRN. “The external building structure is very near completion including windows, roofing, external walls. Internal work is proceeding on schedule. The electrical and mechanical systems are being installed; installation of internal walls has begun.”
 
Burnham’s construction team includes the architectural firm Perkins+Will, and general contractor BE&K.
 
Burnham plans a soft opening during its first few months as staff and their projects relocate to the new facility, he added. “We expect to relocate at least eight scientific groups into the new facilities during the first few months of occupancy, along with the operating and administrative staff. We will move in with over 70 employees.”
 
At present, Burnham has 40 employees in five scientific groups in Florida, working from 16,000 square feet of temporary space donated by Florida's Blood Centers at its building within Orlando Central Park.
 
Tavistock Group chipped in more than $30 million in cash and 100 acres of land towards the UCF College of Medicine and the Burnham campus.
 
Beyond UCF and Burnham, the region has only a few properties capable of accommodating biopharma or medical-device companies. But additional space is in the works.
 
Commercial real estate brokerage NAI Realvest of Orlando is marketing the 100,000 square feet planned for the first phase of developer James Ekbatani’s Life Science Medical Research Park at Marketplace. The 28-acre campus is planned for 285,000 square feet of laboratory, office, and retail space in several buildings capable of housing multiple tenants; how many buildings will depend on tenant demand.
 
Norma Sutton, associate bioScience specialist with NAI Realvest, told BRN Ekbatani is in talks with several prospective tenants interested in leasing portions of the first phase. While conceived as four 25,000-square-foot buildings, the developer can build fewer and larger buildings depending on tenant preference.
 
“There are some startup companies that are very interested in it. There’s an established company that’s interested in it as well. They’re Florida companies now,” Sutton said. She declined to name the companies.
 
Ekbatani hopes to sign quickly one or more leases totaling at least 25,000 to 30,000 square feet. “He’s given us basically till the end of the year to see if we can pre-lease it, and then he’ll make a decision whether he’s going to move forward with it or not,” Sutton said.
 
Asking rents for the first phase range from $17 per square foot to $30 per square foot, depending on the infrastructure needs of tenants. As with most lab spaces, rents are triple net with the developer offering up to $140 per square foot toward tenant improvements.
 
Sutton said lab rents in and around the city “are competitive. I don’t know that they’re cheaper per se” than the state’s eastern biotech hubs such as Palm Beach County, where Germany’s Max Planck Society and the Scripps Research Institute are establishing new anchor research sites [BRN, July 28].
 
“The buildout on the laboratory building really determines what the rent is,” Sutton said.
 
Another potential site for life-sciences companies in metro Orlando is the 100,000-square-foot wet-lab incubator that Tavistock announced in February for Lake Nona. Tavistock said in its announcement it would start work on the building in 2009 and complete it the following year. [BRN, Feb. 25].
 
Rasesh Thakkar, senior managing director with Tavistock and a member of its board of directors, told BRN through an assistant last week that the lab project remains under development. “We are working actively with our design partners on the initialbuilding program for our first spec wet-lab building at Lake Nona.  The project has generated substantial interest and we are excited about the kinds of tenants that we expect to occupy the building. We anticipate announcing more specifics about the wet-lab building later this year.”
 
The incubator, like Burnham and UCF, would be built within Lake Nona’s sci-tech park, or medical city. The medical city will also be home to three other projects that will combine biomedical research with healthcare. These include:
  • A new $560 million Orlando Veterans Affairs Medical Center set to rise on 65 acres. The center will include an outpatient clinic, a 134-bed hospital, a 118-bed nursing home, and a 60-bed domiciliary. The US Department of Veterans Affairs plans to award a construction contract next year, and complete the facility by 2012;
  • A $400 million pediatric health-care facility set to be anchored by the 95-bed Nemours Orlando Children’s Hospital and Research Campus, which plans to build on a 60-acre site it acquired in June. Nemours has hired Skanska USA Building to manage the construction of the 600,000-square-foot project, set for a groundbreaking in 2009 and completion in 2012; and
  • Florida Hospital, which is expected to develop a new hospital on 100 acres it confirmed it acquired in June when it won a zoning change from the Orange County Commission. The hospital has never publicly discussed its plans.
‘Surprising Pace’
 
The biomedical and research facility projects are expected to accelerate growth in metro Orlando’s life-sciences sector, which has risen over the past five years from virtually nothing to more than 9,000 jobs in some 150 companies that generate a total $2.6 billion in economic activity, according to the EDC.
 
The sector has also benefited from some of the region’s other strong industries, from agriculture to tourism to other tech specialties. In addition, Florida Hospital is creating a robotic surgery training center, the Global Robotics Institute to be led by Vipul Patel.
 
Indeed, these gains in health and medical jobs, and tourism, have propelled the region to the highest growth rate in Florida. That should continue over the next two years, UCF projected in its Florida & Metro Forecast 2008-2038, released in June and available here.
 
Jobs in the combined education and health services sector, which includes life-sci and healthcare and college/university jobs, should increase by 2.7 percent in 2008 to 114,100 jobs; and by 3 percent in 2010 to 118,700 jobs. Between 2008 and 2038, employment in the sector is expected to grow nearly 70 percent to 193,500 jobs.
 
As of June, the sector grew 3 percent year-to-year, to nearly 1.04 million jobs from just over 1 million jobs in June 2007, according to Florida’s Agency for Workforce Innovation.
 
“Health and education are areas that, in Florida, have continued to produce jobs, as well as tourism and leisure,” Sean Snaith, director of the Institute for Economic Competitiveness, within the University of Central Florida’s College of Business Administration, told BRN last week. “Every one of the other major employment sectors have actually been shedding jobs.”
 
Asked about the spinout-generating potential of Burnham and UCF, Snaith noted the pace of life-sci growth has been much faster than for typical economic development. “There have been a number of developments that I think is going to help attract additional business. It has been happening at a pretty surprising pace. Usually, they take a lot of time to build up.”
 
Yet Orlando has not been immune to the economic slump that has beset Florida and the rest of the nation. The unemployment rate for the Orlando-Kissimmee metropolitan statistical area has risen more than one percentage point over the past year,to 5.3 percent as of June, the most recent month available, from 3.9 percent in June 2007. The region’s labor force also grew during the past year, by 2.1 percent or 23,324 people, some of whom are likely among the 16,688 people who were without work last month.
 
The median price of an Orlando-area single-family house slid by 15 percent in the second quarter to $219,500 from $258,000 a year earlier, according to Florida Association of Realtors figures released July 24. Condo median prices also fell by 15 percent, from $156,900 to $132,900.
 
But the drop in housing prices also appeared to have touched off a spurt of house buying by bargain hunters. Orlando single-family home-sales activity rose 3 percent in the second quarter to 1,641 homes from 1,595 homes in Q2 ’07. Not so in the condo market, where year-to-year sales volume dipped 9 percent to 172 units from 188.
 
The apartment market, however, has welcomed a developer’s confidence in Orlando: McKinley Inc., a residential developer in Ann Arbor, Mich., with nearly $2 billion in assets told the Ann Arbor (Mich.) Business Journal it has begun shifting its focus to Central Florida.
 
Over the past 18 months, McKinley has snapped up distressed apartment buildings with a combined 2,840 units in the Interstate 4 corridor stretching from the Clearwater/Tampa area to Orlando. He said the company has acquisitions of another 345 units in the works.
 
The economic slump also forced Florida Gov. Charlie Crist and state lawmakers to plug a $2 billion budget shortfall before approving the state’s current $66.2 billion spending plan. Among casualties was the $250 million Innovation Incentive Fund the economic-development program that helped attract Burnham to Lake Nona and a handful of other research institutions to the rest of the state.
 
Eliminated this fiscal year, that fund forced state officials to draw subsidy funds from other, cheaper economic incentive programs [BRN, May 5, April 7].
 

“I would agree that it’s not a positive, but I think we are fortunate enough that we got some of our deals,” Fremstad said. “If I was a betting man, I’d say Orlando’s got a head start and as good a shot as any of those other markets that are attempting to build their life sciences communities.”

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