The life science industry is an important contributor to Philadelphia’s regional economy, totaling over 50,000 jobs and occupying nearly 9 million square feet (“SF”) of lab, related office, and manufacturing space in multi-tenant buildings the region. According to CBRE, the region’s research and healthcare institutions received nearly $1 billion of funding from the National Institute of Health (“NIH”) in 2018, the 6th highest in the nation. Venture capital (“VC”) funding in local companies has grown significantly over the last two years, reaching record levels in 2018, and reflecting Philadelphia’s growing importance as a node for gene and cell therapy research.
As such, the City’s Department of Commerce and Philadelphia Industrial Development Corporation (“PIDC”) received feedback that there was a complete lack of lab space for the smaller and mid-sized life science companies, especially in the desirable University City neighborhood. This area is the nexus of the educational and medical institutions doing cutting edge research in the gene and cell therapy fields, and the source of Philadelphia’s educated employment pool. Given this feedback, the City and PIDC wanted to better understand the depth and characteristics of the shortage of lab space, and create strategies on the real estate, policy, and financing side to facilitate the future development of lab space.
RESGroup conducted an extensive demand analysis that included stakeholder interviews with representatives of life science companies, research and education institutions, developers, and building owners, and an online survey of the region’s life science companies. The stakeholder interviews obtained information about location preferences, tenant sizes, pricing, building amenities, and other critical issues from participants, while the online survey sent to over 300 life science companies within the region, collecting more data from the tenant-side.
The supply analysis was completed with the help of CBRE to understand the dynamic nature of existing lab supply and proposed life science projects. Analyzing the proposed projects revealed their anticipated timing, the types of spaces and amenities available, and highlighted challenges faced by developers trying to bring new inventory to the market. RESGroup identified the gaps in the life science industry, the growth stages of the companies seeking space, the challenges they face from a real estate and financing perspective, and recommended solutions that would require the City’s intervention to increase the lab space to maintain growth and attraction of startup, graduate and mid-size life science companies.
