Developers Turning To Nonprofit Institutions To Fill Megacampuses Amid Leasing Doldrums

It’s been a rocky road for life sciences owners so far this year, with deep public funding cuts to research institutions further dampening already sluggish demand among tenants, even in premier biotech markets.

Leasing doldrums have plagued major developments, but landlords have found some traction in an unpredictable place: private foundations. The Chan Zuckerberg Initiative and the J. Craig Venter Institute have both signed leases in biotech megacampuses, providing a bit of energy.

“We are already working collaboratively with Craig [Venter] and his team to reinforce momentum for additional companies to join the RaDD ecosystem,” IQHQ Senior Vice President of Leasing Jeff Oesterblad said in an email.

IQHQ developed the Research and Development District in San Diego, where JCVI leased 50K SF last month.

“Reception to the JCVI deal has been positive, and we expect more companies to follow JCVI's lead,” Oesterblad said.  

IQHQ also owns the Elco Yards property in the Bay Area, where the Chan Zuckerberg Initiative took 225K SF earlier this year. 

These leases not only begin filling up mostly dormant developments in key markets but also point to a strategy of using these institutions as anchors to create biotech hubs and attract additional startups. 

For John Flavin, a developer at Portal Innovations, which builds biotech innovation hubs in Chicago and elsewhere, it is a signal that smaller private players will have a larger role in biotech funding. 

“That whole assembly line is being disrupted,” Flavin said. “Things are getting rewired, the whole way you translate innovation from a university into a new company that ultimately takes a molecule or device to a patient.”

The biotech world has been rocked by the Trump administration’s changing focus on federal science funding. Billions of dollars have been cut and thousands of federal workers have been let go as part of a large-scale reordering of the federal budget. 

Flavin and others expect that as federal funding is reduced, it will open up more opportunities for private funders to step in, fill some of the gap and become the kind of anchors that can lead to biotech hubs and increased leasing.

Others agree that philanthropy has a place. Brian Stanley, a policy analyst at the Boston University School of Public Health, told Chemical & Engineering News that these private groups can provide funding, though he cautioned that they often need to see results for long-term commitments and lack the ability to fund basic research in the same way universities can.

“It doesn't mean innovation is going to stop,” Flavin said. “It’s more how do you get it funded? Where do you go? And here in the U.S., it’s a great opportunity for the private sector foundations, like the Gates Foundation or Chan Zuckerberg.”

Flavin said investments by institutions including Chan Zuckerberg, the Sean Parker Institute for the Voice and the Gates Foundation have helped with funding for the basic research that can lead to breakthroughs and commercialization, which in turn drives leasing activity.

These investments aren’t enough to pick up the slack from federal cuts, but it can become more important as researchers look for support, Flavin said.

“These entities will become even more important, you know, in the mix, because they're good at supporting that kind of initial research,” he said. “You’re seeing increased philanthropic support, just as we’re seeing increased demand by universities as they recognize that their expertise is not commercialization.”

The Chan Zuckerberg Biohub Chicago is a $250M commitment to funding research on inflammation and immunology, done in partnership with the University of Chicago, Northwestern University and other local partners. 

The CZ Biohub Chicago has enabled more cooperation between different local players, according to Samir Mayekar, managing director of the University of Chicago’s Polsky Center for Entrepreneurship and Innovation. The project could also help bring more development to the Fulton Market submarket and spill over to other parts of the city, he said.

Grove Biopharma, a startup incubated in a Portal lab, just signed a 30K SF lease in Fulton Market in April at the new Trammell Crow life sciences development where the Chan Zuckerberg Biohub will be located.

“It’s very interesting, and I’m going to be watching to see big capital flows start happening,” Mayekar said. 

That is the long-term thesis IQHQ has around the Venter Institute locating in San Diego. As IQHQ’s Oesterblad suggested, Venter's name, reputation and leadership position in the global genomics and biotech fields “will serve as the foundation of RaDD's life science ecosystem.” 

The Venter Institute name has been a calling card to attract and reach out to other life sciences and tech tenants, Oesterblad said.

There has been an innovation arms race over the past decade as academic institutions such as the Massachusetts Institute of Technology and Stanford University have focused on not just innovation but also commercialization, he said.

These private institutions and biotech hubs can provide a useful bridge that speeds up commercialization and ultimately builds up local ecosystems and funding, he said. These private groups have more flexibility in terms of location and can move and open offices in markets they believe they can grow and scale. 

“Right now, you see an oversupply of life sciences real estate,” Flavin said. “But I think that slack will be taken up by some of these new players.”