Mature and Vital

How Philadelphia Stays Competitive as a Top Tier Life Sciences Market.

The Greater Philadelphia Life Sciences market has long been considered one of the top tier life science markets in the country. Philadelphia is in the top six with Cambridge/Boston, San Francisco, the Research Triangle, Southern California, and Washington DC/MD. Many new emerging markets around the country — including, Seattle, Sioux Falls, Miami, Orlando, St. Louis, and Houston — are spending money on scientific innovation, attracting thought leaders, and building potential clusters to compete on a national scale.

With a deep bench of innovative life science researchers and executive talent here, new companies are slowly but steadily entering the regional market and creating a demand for good quality research space. Other more mature companies with drugs in the clinical pipeline are growing to a level where they will need additional space for regulatory personnel and/or clinical and commercial manufacturing. For those companies using outside Contract Manufacturing Organizations (CMO’s), the trend is having a positive effect on the expansion of existing CMO’s in the market. It may eventually have a positive ripple effect on attracting CMO’s from outside of this region and overseas to consider new operations here.

Key Factors

The Life Sciences Industry considers a number of critical factors when selecting where to locate their headquarters’ research and manufacturing facilities.

  1. The depth and breadth of the scientific talent pool. This includes the availability of experienced leaders, innovative researchers, and young talented scientists and technicians in the areas of chemistry, biology, regenerative cell manufacturing, medical devices, gene therapy and nanotechnology.
  2. An active and growing base of emerging young companies.
  3. A high concentration of academic and institutional basic research with a culture of collaboration with private companies.
  4. A significant base of existing and planned research and development facilities to accommodate short and long-term growth.

Philadelphia scores high on all four of the key criteria as well as the overall cost of living. The only area where the City is slightly deficient is in new construction starts of high-quality research facilities.

Urban Market – New Growth

Some exciting things are happening In Philadelphia’s urban life sciences market. Construction of a 340,000-square-foot lab and office tower is underway in University City for Cambridge Innovation Center and the University City Science Center. Of this, 285,000 sf is already pre-leased and the remaining 155,000 sf of speculative space will be available for occupancy in the summer of 2018. This increased inventory will fill only a portion of the anticipated demand for high quality research space in the urban market. The developer Wexford Science & Technology, has a master plan to build 6.5 msf of clinical, laboratory research, retail, residential and office space on their uCity Square site in University City. Other significant urban developments include the Brandywine/Drexel Schuylkill Yards development, the Philadelphia Naval Shipyard, and the expansion of the Pennovation Center.

Suburban Market – Stagnant Absorption

The suburbs are experiencing a slow but steady absorption rate of research space. Although the market only saw 175,000 sf of positive absorption in 2016, there were eight companies searching for space in the market in the first quarter of 2017. The suburban market supply of approximately 363,000 sf of research space may be sufficient to accommodate all of the current and projected tenants looking for space over the next twelve months. Recently the supply side experienced a boost in availability when a 50,000 sf facility in Fort Washington was vacated by Vitae after they were purchased by Allergan. Two neighboring research/analytical facilities — formerly occupied by Merck and totalling 35,000 square feet — became vacant when an adjacent Merck facility absorbed its occupants.

Other than the Big Pharma campuses, like GSK Collegeville, GSK Upper Merion, Pfizer Collegeville, DOW Collegeville, and Merck North Wales, the closest any suburban submarket can get to being called a “cluster of life science space” exists along the Route 202 corridor in Montgomery and Chester Counties where over 100 related life science companies dot the landscape from King of Prussia to Malvern.

Still, supply hasn’t kept pace with demand for quality research space in the suburbs. As a result, some submarkets including Malvern and King of Prussia are experiencing escalating rents to heights not seen since 2010.

Innovation is Key

What is often not discussed in the debate about the strength of top ranking cities, is the diversity of therapeutic innovation. The wide range of existing and newly discovered drug products and medical devices is creating a balanced life sciences base positioned for continued growth.

Philadelphia is no exception. Formerly considered a Big Pharma capital, it is now home to some of the most innovative and cutting edge life sciences companies in the U.S. Spark Therapeutics, Genomind, Aevi Genomic Medicine, VenatorX, and TMunity all took root here.

Philadelphia receives funding from the National Institute of Health (NIH), an organization that invests critical research dollars in academic and private research projects for top tier cities. To a large extent this funding is the engine driving innovative life science products. The investment dollars from the NIH, along with a variety of undeveloped therapeutic technologies licensed out by Big Pharma to smaller research firms, fuels startup companies’ new drug products. Whether the proposed budget cuts to the NIH are approved or not, this funding to regional universities and research institutions will continue to be a driver for future life sciences growth.

Philadelphia is home to international thought leaders in chemistry, biologics, gene therapy, regenerative medicine, nanotechnology, and medical devices. The region has become a creative thinking hub for innovative medical and life science products and specialists. It is this very type of diversity that ensures the region will continue to thrive. As major research universities and institutions continue to be productive in their efforts to commercialize their basic research and technologies, Philadelphia is poised to maintain a high level of growth in the life sciences sector into the foreseeable future.

MICHAEL BROWN, Senior Vice President, Life Sciences Division

Michael has nearly 40 years of experience with sophisticated research and critical process facilities. His background includes familiarity with both large and small molecule research and manufacturing plants as well as medical device manufacturing.