On My Own: Growing Biotech Firms Making The Costly, Risky Move Into Dedicated Labs
Boston-based Affinivax, a clinical-stage biopharmaceutical company, had been working on a novel type of vaccine technology well before any mention of Covid and lockdown entered the lexicon last year.
So it’s not surprising that on the heels of the company's own advances in developing a unique platform for vaccines and the big boost in the sector due to Covid and mRNA tech, it would start looking for a new home.
The step is a common, and challenging, one for developing firms like Affinivax. With financial responsibilities pushing a rapid timeline that forces companies to be more specific than ever with the design and operations of their new workspace, they must really consider long-term corporate strategy.
“These firms need to be able to make a commitment to a space quickly and get into the space quickly,” said TRIA Director of Integrated Design Edwin Hargrave, whose team spent a year designing the new Cambridge space for Affinivax in a 50K SF suite in Kendall Square, the center of the Boston region’s biotech world. “There’s a lot of pressure in that regard to be timely. It’s incredibly high pressure.”
Often, companies making this move have completed new fundraising rounds or gained new clinical approval for treatments or technology; in Affinivax’s case, it saw success in developing its strep vaccine and received a boost from its partnership with Astellas, which is making periodic payments to Affinivax based upon progress milestones. A $120M Series B round of funding also was in the works when they hired TRIA.
There’s also a space crunch familiar to life sciences real estate, but especially daunting for these firms. Newmark Director Joe Pearce, who specializes in the Boston area, says there’s a shortage of spec suites for these types of companies, who often seek around 10K to 12K SF. They end up paying a premium because landlords don’t always want to subdivide spaces, Pearce said, because they can court larger firms with bigger budgets that are also desperate for more square footage.
But markets around the nation, especially the big three of Boston, San Francisco and San Diego, have been well aware of what happens when this link in the chain of company growth is missing.
“If you don’t have the space for companies to grow and become mature, they’ll do so in another market,” Pearce said. “These are typically not-yet-mature companies that need space yesterday."
These types of spaces tend to be uniquely suited for each tenant, but there are some commonalities. Many firms in this stage of their life cycle will require small manufacturing facilities in addition to lab and office space, to begin creating the therapeutics or treatments needed for advanced clinical testing.
Affinivax’s space features a scale-up lab space dedicated to meet this need. But each company also needs to figure out every aspect of the space, from material disposal to finding and ordering equipment.
“The incubating spaces they come out of are literally full service and provide all the operational infrastructure needed,” TRIA Senior Lab Planner Jonathan Romig said.
Finding a space fast enough to maintain momentum can also be a big competitive advantage.
Gensler Global Life Sciences Leader Erik Lustgarten said most companies at this stage can’t wait eight to 12 months for a traditional build-out; many end up staging partial build-outs so they don’t lose too much time waiting to move into a fully finished space. There’s also increasing amounts of money placed in Series A fundraising rounds for biotech and life sciences firms, Lustgarten said, which can lead to bigger bankrolls and more bidding between startups looking for these spaces.
At Volastra, a New York City-based startup focused on cancer therapeutics, company leaders knew they needed to move from JLabs, the Johnson & Johnson-backed life sciences incubator in SoHo, roughly a year after launching in 2019.
Around July 4, the company found 11K SF of previously developed lab space at 1361 Amsterdam Ave. in West Harlem, after the expected tenant backed out, and signed a lease in a few days. Growth, not funding, was the catalyst for the move, Volastra Vice President of Strategy and Operations Diane Tager said. Stumbling upon an ostensibly open space meant the firm could continue aggressive growth plans, rather than having to hold off on hiring or use contract operations to run tests while it looked for more space.
“It was such a huge difference for us,” Tager said. “We moved from a 600 SF incubator that would have maybe held six, eight scientists at max capacity during Covid and social distancing. Now, we can maintain our trajectory. It’s been a game changer."
When Affinivax started looking for its space two years ago, space was incredibly tight in the Boston and Cambridge market, as it is now. TRIA has seen there’s a parallel growth in incubator space with the size of the overall market, but the next step up is much harder to find. With that in mind, TRIA runs the design process and real estate search simultaneously, finalizing building details while extrapolating the needs of the client into square footage and real estate criteria to start zeroing in on a space.
For Affinivax, the firm settled on the space at 301 Binney St., owned by BioMed Realty Trust.
“They’re generally a young company, and they’re not struggling, but searching for an identity,” TRIA Director of Integrated Design Edwin Hargrave said. “We do a process to help them make decisions on the physical characteristics of their space, colorful branding opportunities. Are they a beer or whiskey crowd? Do they want ping-pong? Are they going to go from 14 to 100 employees in a few months?”
301 Binney is one of the most expensive buildings in the country for life sciences firms. Affinivax's neighbor, Scholar Rock, agreed to pay $135 per SF in a five-year deal for 51K SF at the building in 2019, according to regulatory filings.
The interior of the new Affinivax HQ reflects not just the increased budget and longer design process, but the needs of a later-stage firm. The extensive use of glass walls — “the upper limit of the use of glass that we could accomplish technically,” said Hargrave — checks the standard box in terms of connecting lab and office space.
The space was initially split in half by a giant mechanical room that chops the space in two, but TRIA worked to weave lab space amid the office space, instead of the straightforward move of separating the office from the lab, the designers said. More importantly, it works as a branding and promotional exercise of sorts, pushing ideas of transparency and putting the science on display.
Talent and investors will likely be touring the space or considering an opportunity to work for or with the firm, so it’s important to project long-term vision and values; a branding wall and timeline of the company’s history, created by an environmental graphic designer, is displayed on the wall.
“The idea was to be constantly reminded you’re inside something that’s cohesive and discovering as a community, as opposed to just sterile laboratories,” Romig said.
Property owners are becoming more adept at delivering turnkey lab and office suites that are targeted toward early stage companies entering Phase 1 and Phase 2 clinical trials, JLL Executive Managing Director and Mid-Atlantic Life Sciences Practice co-Lead Pete Briskman said.
That can be a good solution for growing firms looking to preserve capital, but customization can be costly; if these firms need to customize the space to meet their needs after it is already built, Briskman said, it can trigger future restoration clauses for tenants to return the space back to its original condition after vacating the space.
Undoubtedly, more and more companies will be seeking their own space within the larger space crunch for life sciences real estate. Earlier this month, a CBRE report offering a snapshot of the national life sciences market found venture capital funding had skyrocketed and hit a quarterly record of $10B, double that from Q1 of 2020.
“In the future, I foresee tenants having to solve for greater manufacturing demands,” Briskman said. “This will mean that as they grow, they will come to an inflection point as to whether to outsource manufacturing, bring it in-house or do a hybrid model. If tenants decide to bring it in the house, they will want more operational control of the facility, which will most likely result in bypassing turnkey suites and solving for their growth on their own and building out their own custom facilities.”