Welcome to the Bio-Dome

When it announced it would close its research facility in Nutley, N.J., Swiss biotech company Roche went out to the market in search of a new state-of-the-art facility.

Courted by cities across the Northeast, including established pharmaceutical hubs in New Jersey and Cambridge, Mass., Roche officials added an unlikely option to the list of potential locations: New York City.

The company’s search, which was soon narrowed down to four competing facilities, two each in New Jersey and New York, quickly revealed a leading candidate: the Alexandria Center for Life Science. Sitting in the heart of Manhattan’s East Side Medical Corridor at 29th Street and First Avenue, the gleaming research and development campus sits at the center of New York’s emerging biotech industry.

“New York is on the top of people’s lists right now, but prior to Alexandria, there was no commercial location for life sciences,” said John Cunningham, senior vice president and regional market director for New York at Alexandria Real Estate Equities, the facility’s developer.

Biotechnology, the harnessing of cellular and bimolecular processes to develop technologies and products including drugs and hormones, first gained traction in New York City in 2005 when Mayor Michael Bloomberg announced the establishment of the privately financed East River Science Park, spearheaded by Alexandria. Since that time, the industry has grown by leaps and bounds, now boasting more than $250 million in yearly venture capital funding, up from $177 million in 2010.

Among other key selling points, New York boasts 25 clinical research trials underway, the second largest concentration of National Institutes of Health grants in the country and no less than 219 Nobel Laureates. Perhaps most impressive is that, in the past 10 years, there have been twice as many patents filed in New York than in San Francisco and Cambridge combined.

Last summer, Roche signed an 11-year lease to anchor Alexandria’s 420,000-square-foot West Tower. The company will join a number of high-profile pharmaceutical tenants that have already set up shop in Alexandria’s East Tower, including Eli Lily and Pfizer.

“When the CEO came to evaluate their shortlist, he embraced what we were talking about in terms of the collaborative environment,” Mr. Cunningham noted.

In return for the 235 jobs Roche is expected to bring to the Alexandria facility and New York, the company will receive tax incentives valued at $6.6 million from Empire State Development’s Excelsior Jobs program.

Founded in 1994, Alexandria Real Estate, the largest real estate investment trust focused on owning, operating and developing real estate for the life science industry, tapped into early demand for collaborative research facilities. With more than 17 million square feet across 175 properties in Cambridge, New York, Washington, D.C., San Francisco and elsewhere, the company has a unique perspective on emerging biotech hubs and the demands of tenants.

“New York is definitely unique, and there is opportunity here, but it was relatively untapped,” Mr. Cunningham said. “We compared it to San Francisco and Cambridge and found it had all the fundamentals; it just required investment.”

Mr. Cunningham, whose background is in real estate development, principally in the mid-Atlantic, leads leasing and development responsibilities in New York alongside Cushman & Wakefield’s William Hartman. Mr. Hartman declined the opportunity to be interviewed for this story.

Imagined in the mid-2000s, the Alexandria Center for Life Science in New York was kick-started with a $700 million commitment from Alexandria Real Estate Equities plus close to $60 million from various city, state and federal investments. Among those involved were the New York City Investment Fund and the New York City Industrial Development Agency, which committed $10 million and $5.6 million, respectively.

“As we look to diversify our economy and expand new sectors, it’s important to note that commercial bioscience is one of New York’s major growth industries, as evidenced by Alexandria’s commitment of $700 million to this innovative project,” said Mayor Bloomberg at the 2007 groundbreaking. “East River Science Park will be a premier research and development center that will enable researchers at our great hospitals and universities to turn their ideas into commercially viable products.”

The East Tower of Alexandria’s New York facility was delivered to the market in 2010 and was 100 percent leased within 10 months of delivery, despite the difficult leasing conditions at the time. The West Tower, now 50 percent leased, will deliver at the end of 2013, with Roche moving in Jan. 2.

John Cunningham_2012_0507

Mr. Cunningham

Alexandria has differentiated itself by fostering a culture of collaboration and eliminating the isolation of suburban research facilities—gone are the days when researchers would sit at the windows with binoculars keeping an eye out for corporate spies.

“What’s interesting about this being a vertical ecosystem is here you have all these companies together and the collaborative opportunities are huge,” Mr. Cunningham noted. “It is very much a catalyst.”

The Alexandria Center for Life Science boasts not only its state-of-the-art research facilities but also a digital conference and event center, two Tom Colicchio-backed eateries and an urban farm.

Yearly, Alexandria hosts its own summit for pharmaceutical and biotechnology professionals in a Davos-type environment. Past summits have focused on oncology, neuroscience and philanthropy.

So influential is the community that when Janet Woodcock, director of the Center for Drug Evaluation and Research at the Food and Drug Administration, visited the Alexandria Summit in 2011, her discussions led to direct influence on the FDA’s policy evaluating pharmaceuticals.

With more than 1.7 million square feet of research space in New York—a good portion of it at the Alexandria facility—the city is rushing to keep up with demand. An additional 1.1 million square feet of space is currently under development, according to research from CBRE, but as companies such as Roche pursue New York as a viable location, the pipeline still trails the amount necessary to harness interest.

Elsewhere in the city, the Audubon Biomedical Science and Technology Park in Washington Heights, BioBAT in Sunset Park and the New York Genome Project in Lower Manhattan all provide an incubator for biotech research. The barriers to entry for additional facilities, however, are severe.

“You can’t just make any building a life science building; there are robust infrastructure requirements,” Mr. Cunningham said. “This campus is designed to accommodate that.”

Among the considerations necessary for building lab space is minimum clear heights, the amount of space in between floors needed to accommodate systems, which stand at 14 feet. This presents difficulty for developers, especially when repurposing older buildings.

“If you don’t plan that from the outset, it’s hard to add it later,” Mr. Cunningham noted.

The cost of constructing lab space can vary, from $300 to $600 per square foot, excluding the cost of equipment and design, according data from CBRE. By comparison, building out traditional office space normally costs between $50 and $150 per square foot.

A third facility is in the pipeline at Alexandria, which could help shoulder some of the burden presented by the lack of research space in New York. But with the company exploring development opportunities elsewhere in the city, the lack of viable space comes into view.

“We’re always looking at other potential opportunities, but it’s tight from a real estate standpoint,” Mr. Cunningham said.

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