When the big trees fall, and light pierces the canopy, new giants will grow into the aperture. Last year, once-unshakable commercial assets, from Class A office space to Fifth Avenue retail, took a tumble. In their place, life science facilities are emerging.
In 2020, life sciences deals reached a record high of 16.4 percent of the total volume of investment sales for office space — up from 7.1 percent in 2019 and 5.7 percent in 2015, according to a Newmark report published in January. In fact, 2020 saw $15 billion in funding for life sciences development and more than $10 billion in closed real estate deals.
Those deals, which include existing products and new spaces, indicate that thanks to the exigencies made plain by the pandemic and an aging population, institutional investors and landlords are reevaluating the best use of their properties and diversification of their portfolios. As a result, empty office and retail spaces are being transformed into much-needed wet labs, incubator spaces, biomanufacturing facilities and research and development centers.
New construction is no exception, as “more than 36 million square feet of new development is expected to be delivered in the top 14 life science markets across the United States,” per the Newmark report.
Developers, investors and landlords who are rushing into the life sciences sector for the first time face a daunting building process, from seemingly Byzantine government regulation to ultra-technical infrastructure. It’s a job not just anyone can do, Nick Barnes, director of business development at Chicago-based contractor Leopardo, told The Real Deal.
“Right now, there are not a lot of life sciences vacancies but there is a lot of available space,” said Leopardo. “So naturally people are identifying existing properties and saying, ‘Okay, this could be a life sciences facility.’ But if you haven’t been in this sector before, you need to lean on experience.”
Founded in 1977, Leopardo has operated in every major market, including multifamily, hospitality and office interiors. But over the years, the company has been recognized for completing countless nuanced health care and lab projects — and more recently, life science.
In 2018, Leopardo showed off its life science chops by completing a 70,000-square-foot laboratory and office build-out for Valent BioSciences — a worldwide leader in the development and manufacturing of products for agriculture, public health, forestry and household markets — at Innovation Park in Libertyville, Illinois. The project involved transforming existing office space into a lab space and a greenhouse.
“These projects are typically very mechanically and electrical-intensive,” said Leopardo vice president Erik Magsamen. “Energy consumption in a lab building can also be an important consideration during the preconstruction phase. But even builders who are experienced in health care aren’t always equipped to do this work well and efficiently. There are different standards. There are different lessons learned.”
Magsamen added that due to its wealth of experience negotiating these intricate builds, the company is able to maintain a team dedicated to conceptually estimating life sciences projects, which allows its clients to make informed financial decisions. Unlike most builders in this space, it also operates an in-house virtual building group, capable of laser-scanning spaces to produce drawings and creating topographical models of greenfield sites. It also handles its own MEPFS (mechanical, electrical, plumbing and fire safety) coordination in-house — a rarity outside the largest life sciences general contractors.
That control and technical know-how translates to better, quicker and more cost-efficient outcomes for clients, Barnes said.
“When it comes to this type of build, there is a lot of infrastructure above the ceilings, things that you don’t see that have to be planned and coordinated virtually before it is built, so that when it is built, it is built in the smoothest, fastest way possible,” said Barnes. “We get incredible feedback, and that is the proof. It’s a difficult job, but our experience allows us to move fast and bring people’s dreams into reality.”
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