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Philadelphia Real Estate Round-Up 2021

In 2021, Philadelphia’s Cellicon Valley continued to prove why it’s an up-and-coming life sciences and biotech cluster. Current reports state the city received $1.23 billion in National Institute of Health (NIH) funding in 2021 — and that number is expected to be bigger once finalized, said Lauren Gilchrist, Managing Director of Research at Longfellow Real Estate Partners.

“Philadelphia specifically has significant volumes of new investment from both [private capital and NIH funding], specifically for cell and gene therapy,” Gilchrist added.

There’s plenty of other reasons to love the city: its low cost of living, robust public transit system, and proximity to academic institutions like the University of Pennsylvania and Drexel University.

But the challenge is meeting the demand that’s been created by a perfect storm: from FDA fast-tracked approvals, to increased capital to the cell and gene therapy space, to the COVID-19 pandemic, said Audrey Greenberg, Co-founder and Executive Managing Director of the Center for Breakthrough Medicines.

“There’s a lot of stuff coming online, and Discovery Labs is especially on fire. But it’s still not enough,” Greenberg said.

Here’s a look at a few of the players who delivered much-needed projects to the region in 2021 and what kind of space is still needed in Philadelphia.

Conversions

Many developers are making the move to convert old buildings to life sciences labs and manufacturing space, especially as more companies come on the market following the COVID-induced commercial real estate crash.

“A lot of initial clients just either left, or they got out of their leases,” said Pete Matson, Vice President of Business Development at DPS Group. “And so a lot of the developers and the real estate folks were trying to repurpose these buildings.”

After this past year, it’s safe to say the City of Brotherly Love is no stranger to conversion projects. But that wasn’t always the case.

“Prior to last year, there were really no successful conversions. What’s been demonstrated is that the right developer with the right commitment and the right bones in their buildings can successfully do conversions in Philadelphia,” said Joe Fetterman, Executive Vice President of Colliers. “And that the market will move 20-25 blocks away from University City to occupy space.”

The Curtis

The Curtis is one of the most successful life science conversions in Philly. Located in Center City, this former publishing company site now boasts ample wet lab space after a conversion by Keystone Property Group. In August, Keystone leased out two spaces in the building, adding Aro Biotherapeutics and a classified company to its charter. Other tenants include IMVAX and Vivodyne.

Innovation 800

At the end of 2021, Discovery Labs acquired the old Philadelphia Inquirer printing press, which boasts 857,000 square feet of space not too far from the company’s current digs at Innovation 411 and Innovation Renaissance.

“We’re currently working to gut it and take out the old printing presses,” said Greenberg. “It’s really a perfect building for life science conversion because it has the floor loading capacity, the ideal ceiling height, the electricity and utility requirements, and the transportation capabilities.”

Budd Campus

The former Budd Plant, where metal fabrication and body stamping once took place, will soon become a biomanufacturing center thanks to a partnership between the Plymouth Group and Centerbridge Partners, L.P.

With 2.4 million square feet of space, the building will house Budd Bioworks, taking up 300,000 square feet of GMP manufacturing space and 150,000 of lab and office space. This life sciences hub will anchor the rest of the campus, which will include retail, residential, and restaurant space.

Graduation space

Graduation space is another area of large demand in Philly. These spaces are larger than incubators, which typically house small start-up companies, but smaller than the large lab, office, and manufacturing spaces catered toward well-established companies with ample capital.

“We’ve currently got the incubators and full-blown commercial spaces, but we need a little bit more of that space in-between,” Gilchrist said.

These spaces also offer shared amenities to their tenants – a major perk so that companies won’t have to spend precious capital on buying expensive equipment upfront. 

“I think one of the things that these graduating companies are going to look for is not only more space, but also a provider that can give them additional perks and amenities,” said Fetterman.

B.Labs

Officially open for 2022, Brandywine’s B.Labs at the Pennsylvania Biotechnology Center offers 50,000 square feet of life science incubator space. The space also provides shared amenities, resources, and expertise for its clients. These spaces are suitable both for start-up companies and those looking to graduate from a smaller lab.

Manufacturing Space, CDMOs, and Flex Space

A year ago, Fetterman said searching for manufacturing space in Philadelphia was like searching for a needle in a haystack. Most available spaces were more like flex-warehouse spaces than anything else and oftentimes weren’t very well-located.

“As we speak today, there’s a million and a quarter square feet of available manufacturing space at various stages of development or redevelopment in Philadelphia,” Fetterman said.

Center for Breakthrough Medicines and Discovery Labs

CDMOs are filling some of those available spaces. One of the most successful in Philadelphia is the Center for Breakthrough Medicines, which operates out of Discovery Labs. Currently occupying 100,000 square feet, they are quickly expanding in the near future.

“We’ll have a total footprint at the Discovery Labs site of over 700,000 square feet, which is one of the largest single-site, cell and gene therapy manufacturing CDMOs in the world,” Greenberg said. “It’s really exciting for Philly to have that recognition.”

Greenberg shared that the company is building out GMP manufacturing space which will include viral vector, cell processing, and plasmid DNA production. The space will also support process development, analytical development, and testing, in addition to lab and warehouse space.

“We have a full end-to-end offering when it comes to cell and gene therapy outsource development and manufacturing which is really unique,” Greenberg said.

Greenberg added that there’s a huge demand for GMP manufacturing space in Philly, especially for small batches of therapeutics that will be used for clinical testing. Many CDMOs in the past have not been able to handle that small-scale capacity, but the Center for Breakthrough Medicines is built to take on the task as well as large scale commercial production.

Discovery Labs

Discovery Labs also had a big year, starting with signing a 150,000 square-foot lease with the University of Pennsylvania.

In addition to University of Pennsylvania and Center for Breakthrough Medicines, they also signed leases with Life Sciences PA, Seed Therapeutics, WuXI Biologics, NeuExcell, and GSK.  The 20,000 square foot lease with NeuExcell allows them to expand their research and development operations in addition to supporting discovery research from preclinical candidate exploration to submission of INDs to start clinical trials.

WuXi AppTec

Also making a wave in the CDMO space is WuXi, which opened another facility in 2021 at the Navy Yard. The new facility’s 140,000 square feet of space more than triples the company’s previous testing capacity.

Spark Therapeutics/Drexel

In December, Spark Therapeutics announced the creation of a new gene therapy innovation center on Drexel University’s campus in University City. The project is a $575 million investment and is built-to-suit.

“The investment anchors Spark here in Philadelphia. And it also gives credence to the idea that Philadelphia can be a major manufacturing hub. I think we’re going to see really rapid activity happening there,” Fetterman said.

2022 Predictions

With such a busy 2021 for Philadelphia’s life science and biotech companies, it’s no wonder the experts believe next year will be even bigger.

“I think we’re going to see a lot of new capital announced in Philadelphia, as well as new projects that have new investments that have never been in the region before, which is really exciting,” Gilchrist said.

The current trends point upward for both building new space and converting existing buildings.

“There are just so many buildings both in the city and in the suburbs that are being marketed for life science use—it does seem that there’s going to be an explosion of new companies jumping on that space and utilizing the space that’s existing,” Matson said.