Taconic Partners, one of New York’s largest private owners and managers of laboratory spaces serving pharmaceutical and biotechnology companies, is consolidating its life sciences portfolio into a new subsidiary called Elevate Research Properties. Elevate will oversee three life science labs currently being developed by Taconic.
Elevate also plans to spend more than $ 250 million to renovate an office property it owns with Nuveen Real Estate near several academic medical institutions, including Mount Sinai Hospital, according to Matthew Weir, Taconic’s executive vice president. The building will include an office area of 200,000 square feet, and construction will begin next year.
“We saw that New York had all the basic elements to really see the growth of this sector, but of course what was really missing was laboratory space,” he said.
In addition, the new company is looking for opportunities outside of New York, especially in other East Coast markets, said Mr. Weir, who will serve as president of Elevate.
Life science research has thrived in many cities since the start of the Covid-19 pandemic, boosting demand for buildings designed for pharmaceutical, biotech and other laboratory purposes. Just over 29 million square feet of laboratory space was built in the United States in the first quarter of 2022, a record high of 55% year-on-year, according to real estate firm CBRE Group. Inc.
But after more than a year of unbridled growth, biotech stocks have entered the bear market this year as the cost of loans and scientific setbacks has dampened investor enthusiasm. SPDR S&P Biotech ETF,
the equilibrium index of biotech stocks has fallen by 43.44% year-on-year compared to a 21.33% decline in the S&P 500.
Life sciences companies, especially start-ups, receive much of their funding from venture capital firms. These companies, in turn, ultimately seek high stock market ratings to come out and profit from their start-up investments.
“There’s a lot of uncertainty there,” said Austin Barrett, executive vice president and head of the life sciences practice group at real estate brokerage Savills. He said the channel for funding from venture capital firms and government agencies remains strong.
But he added: “If companies can’t go out and raise big public money, then they can’t hire so fast.”
The New York market, with a total of 4.9 million square feet of existing life science space, is still in its early days, according to real estate firm Colliers.
The nation’s leading markets, Boston and the San Francisco Bay Area, have more than 30 million square feet of real estate related to life sciences, Colliers said.
SHARE YOUR THOUGHTS
Is real estate a good investment in life sciences? Why or why not? Join the conversation below.
Historically, suburbs have been more suitable for laboratory real estate, with plenty of space and more affordable rents for large R&D campuses, said Aaron Jodka, director of U.S. capital markets research at Colliers. But technological and architectural advances have made it possible to build laboratories on higher floors of office buildings, opening up more opportunities for development in New York.
The city has other ingredients for a growing life science industry, including $ 5.6 billion in venture capital and $ 3 billion in federal research funding flowing into the sector last year. “You’re starting to see a really strong recipe for the future growth of life science,” Mr Yodka said.
Founded in 1997, Taconic owns commercial and residential properties. The company is best known for renovating a massive building on Eighth Avenue, which it sold in 2010 to what is now Alphabet Inc.
Mr Weir said he was not worried that shocks to biotech stocks would hurt demand for laboratory space, in part because he believed demand for new therapeutic and other technologies, such as climate and agricultural technologies, would outlive current stock market losses. .
“Public market disruption is currently resetting the fundamentals,” Mr Weir said. “The aging of the population, the emergence of personalized medicine, technologies such as mRNA – there is just so much momentum in the market that these topics, at the macro level, will continue.
Write to Kate King at [email protected]
Copyright © 2022 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8