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Over the past several years, we have moved from having a glut of available lab space in the U.S. to reaching lab building occupancy rates of 90 percent to 100 percent in many leading markets. In some areas, such as Kendall Square in Cambridge, Mass., developers can barely build lab space fast enough to meet the demand. So, we thought that it would be a good time to explore what makes a quality developer lab.

WHAT’S DRIVING THIS TREND?

Many companies have moved away from the idea of the suburban research campus and have relocated their research operations to be within identified innovation clusters where groups of other companies, universities and institutions are doing similar research. These clusters tend to flourish in dense urban cores, close to retail, housing and transportation in order to attract top talent and be close to capital. In addition, smaller companies have taken a greater role in discovery, and they too are moving to these clusters. This has driven huge demand, primarily in these well-established markets where demand has outstripped supply.

Developers have stepped into this void and have been building new lab space in these markets to support biotechnology companies of all shapes and sizes. Tim Stoll, Vice President of Development at BioMed Realty, says that his company has over two million sf of lab space either delivered or in process in established and growing life-science clusters. The combination of usually high-value real estate and labs which are expensive to build means that there is an extensive amount of investment and ground work that has gone into creating these spaces.

BioMed Realty's Center for Life Science Boston - designed by Tsoi/Kobus & Associates - is an example of a multi-tenant speculative lab building in the Longwood Medical Area Life-Science Cluster in Boston. Image: Jeffrey Totaro

A wide variety of financial factors weigh into owning and leasing lab space. Rather than delving into that aspect of labs, we will focus on what distinguishes different characteristics of the different types of space out there. According to Stoll, an experienced developer provides what the market needs. "That demand can range from a cold, dark shell to a warm lab shell to a fully built space, depending upon the market and the tenant. We work with our tenants to ensure that we collectively make the right amount of investment,” Stoll says. “Often, that means building in flexible modular base building systems to a certain point, and then planning or leaving room for additional modules or supplemental units over time. As long we allow for sufficient clear heights, the shaft space and control zones, we can solve many program needs on a case-by-case basis more efficiently over time than building in excess capacity on day one."

So what types of lab space are out there and available for you to lease? We've categorized these options into four different types:

  • Speculative labs
  • Build-to-suit
  • Conversions
  • Incubators

SPECULATIVE LAB

In this approach, developers build speculative lab buildings tailored to the current market without necessarily having a tenant to lease the space initially. Once the core and shell of the building are completed, lab tenants lease all or part of a floor or the building and fit out the empty shell with lab space that meets their unique requirements. These buildings tend to be multi-tenant facilities, where life science companies are often able to expand within the same building. But here's the catch: an experienced life science real estate developer will provide a flexible warm shell with utilities that are appropriate for a modern lab, while less experienced or under-financed developers may only provide four walls and a roof (a cold shell). Not all shell space is created equal, which means that whatever isn't provided initially will become the tenant’s responsibility. Nor are all building floor plans created equal. You need to look at what dimensions of lab module can be accommodated and what floor-to-floor height is available. Are there columns that interrupt the lab? Is the floor plan flexible enough to be able to house a variety of lab configurations? A developer may show you a plan that works for you now, but how easy will it be to change to meet your future needs?

Some developers are offering lab modules as narrow as 10 ft., which can become very tight once you attempt to place large equipment, such as fume hoods and freezers, inside the lab, while other developers are offering lab modules up to 11-ft. wide. For floor-to-floor heights, we prefer buildings in the range of 14-ft. to 16-ft. in order to allow for the distribution of ductwork. By contrast, a typical office building may have a floor-to-floor height of 11-ft.' to 12-ft. Lower floor-to-floor heights can be made to work, but this adds cost, decreases flexibility, reduces efficiency and provides lower quality space.

Quality matters. Gone are the days when labs could be stuck into windowless, tilt-up, concrete warehouses in industrial parks. Organizations are competing fiercely for talent and lab spaces now need daylight and views, and researchers are demanding amenity spaces. Stoll said that "Today’s researchers expect to be connected with their peers and their community. In vibrant areas like Kendall Square, amenities may be limited to a spot to park your bike, a shower and a place to grab your coffee. In suburban locations, the amenities are more abundant, but generally trend appears to be toward providing more options for eating, meeting and working out closer to the office."

Infrastructure is critical in a lab building, and the infrastructure demands become even more acute with multi-tenant facilities. For example, lab buildings require redundant service elevators to facilitate the moving of chemicals and equipment, as well as multiple loading docks and dumpsters and rooms for the storage of hazardous chemicals and chemical waste.

Utilities are another differentiator of good lab space. A proper lab facility needs to have adequate HVAC delivered throughout the building. This can be particularly challenging in a speculative building because you don't have an existing tenant whose needs are known. The key, once again, is designing systems that can be flexible. Different types of research will have different air flow requirements, and different approaches to heating and cooling requirements also influence the demand for HVAC. Systems must be able to ramp up to handle hood intensive chemistry and also be able to ramp down to handle dry labs, and they need to do both tasks efficiently. A developer doesn't need to install the capacity to provide maximum CFM from the start, but the system must have the flexibility to expand as the building fills or researchers’ needs grow. Space is required inside of shafts to run specialty exhausts and also on the roof to locate the fans, and this is typically included in the rent paid by the tenant.

Labs are also big users of electricity, so you need to make sure that the electrical service is properly sized to meet your demand. Emergency power for freezers and other lab equipment is not typically provided by the landlord, so you need to make sure of adequate space for a generator and its fuel tank. A well-designed lab building from an experienced developer will usually supply compressed air and vacuum, but once again room for important equipment like purified water skids, nitrogen tanks or dewars, and acid neutralization systems needs to be available. If not, it becomes the tenant's responsibility. Just imagine carving a shaft through every floor above you in order to run ductwork, or giving up a corner of your floor so that you can get in an additional air handler. This is the hidden price you can pay in a building not properly designed for labs.

Lab space inside the Center for Life Science Boston. Image: John Horner

BUILD-TO-SUIT

The build-to-suit approach is when a developer has reached a deal with a tenant for an entire building before starting construction. As a tenant, you have the ability to have the developer build the building to your specifications, including the right module size, the right floor-to-floor height and the utilities you need. In many cases, ownership of the improvements reverts to the tenant after the lease period expires.

If a build-to-suit sounds an awful lot like building your own building what is the difference? First, the capital outlay is spread out over many years, which is not the primary difference. The fact is that developers own and control most of the land inside the hottest innovation clusters. According to Marie Gasparro, Assistant Director of Facilities Planning at The Broad Institute in Cambridge, the primary reason that they utilized a developer in building their facility was simply that "the developer owned the land that we wanted to build on." Typically, developers have entitlements in place and are adept at navigating the approval process. Gasparro said that "up until this point, we had only self-managed renovation projects, the developer took care of things I had never even heard of in the approval process so that there were no surprises."

A developer brings a wealth of lab construction experience that simply doesn't exist in many small to medium size organizations. "On our project" says Gasparro, "the developer was really handy in the VE process, especially in regards to MEP systems and helped us take a significant amount out of the project cost." This was true in conflict resolution during construction as well: "They just carried a bigger stick than we did," she says.

Can an experienced lab developer build at a lower cost? Absolutely, says Stoll. "Like all skills, an opportunity cost arises when trying to learn or become an expert at a task. Constructing a build-to-suit from the ground up is something that requires end user feedback and buy-in, and we've found the client’s time is best spent when invested in research or other core business efforts, not worrying about real estate."

However, build-to-suit is not necessarily the right fit for smaller companies with limited space needs. For example, depending on the location, limitations on the size of the building a developer is willing to build for a single tenant may be a consideration. According to Stoll, "The scale of a project is dependent upon the location and the opportunity. We are more focused on investing in research facilities that will support the life science industry for the long term than building for a single client for the short term."

CONVERSIONS

We have seen developers convert other building types to labs, including offices, warehouses and shopping malls. There are striking examples of labs that have gone into repurposed space. But, these are the exceptions, not the rule. We started identifying some of the criteria that make good lab space earlier in this article. In some specialized cases the repurposed spaces can meet these requirements, which can reduce the total cost of the project. If an existing non-lab building can't meet these requirements, the building still can be repurposed into lab space, but compromises will be required. If the floor-to-floor height is too low, ceilings may have to be lowered or mechanical spaces created on the floor to run ductwork. Inefficiencies may be created, while columns and shafts may pop up in unexpected places. Where conversion projects fall short is in the provision of infrastructure because adding a new service elevator or a new loading dock to an existing structure can be very challenging, which means that these shortcomings become your headache as a tenant.

Conversions offer the opportunities for some very striking spaces, good locations, and shortened schedules, but they also present the risk of compromised space so be very careful.

INCUBATORS

Incubators are traditionally lab spaces intended for smaller and startup companies. Developers rent space to users by the bench or by the lab, and for durations as short as just one month, with most companies staying just a year to a year and a half to get their pipelines off the ground.

Incubators are more than just labs for startups. Typically, an operator or accelerator affiliated with local development agencies or local universities provides additional services and management beyond those provided by the developer, such as lab equipment and EH&S that a young, emerging biotechnology company simply can't afford. In addition, accelerators provide a network of entrepreneurs, business coaching, and VC support. When looking at incubator space, make sure you are getting the fullest package possible along with quality lab space.

CONCLUSIONS

As long as the trend to move research to urban cores continues (and we are seeing this happen with innovation cores developing in places ranging from New York to Oklahoma City) researchers are more and more likely to find themselves in developer lab buildings. Experienced lab developers have found that it takes more than just slapping a high-tech facade on a building and calling it lab ready. They are building labs that, like BMR's Center for Life Sciences Boston, are flexible, with extra floor-to-floor height, proper bay spacing and utilities sized for modern research. They are building labs where companies want to be and building buildings that researchers want to work in.

But don't fall into the trap of thinking that all lab buildings are the same. Not all developer lab buildings are created equal. Make sure the space works now as well as in the future. Make sure the building has the infrastructure you need and can efficiently provide the utilities you need. At the end of the day, the deal with the lowest rent and the biggest TI allowance may not always be the best. Work with a developer experienced in building laboratory buildings and utilize the expertise of an experienced lab planner to guide you through the process.

Greg Muth is senior science and technology project manager at Tsoi/Kobus & Associates in Cambridge, Mass. www.tka-architects.com

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