REAL ESTATE OUTLOOK NEW YORK CITY LIFE ... REAL ESTATE OUTLOOK NEW YORK CITY LIFE SCIENCE MARKET...

NEW YORK CITY LIFE SCIENCE MARKETMID-YEAR 2017

REAL ESTATE OUTLOOK


REAL ESTATE OUTLOOK

2 REAL ESTATE OUTLOOK NEW YORK CITY LIFE SCIENCE MARKET MID-YEAR 2017 REAL ESTATE OUTLOOK NEW YORK CITY LIFE SCIENCE MARKET MID-YEAR 2017 3


AC A D E M I C M E D I C A L I N S T IT U T I O N S

New York City has the world’s largest concentration of world-class institutionsOne of New York City’s most attractive features for life science companies is the ability to access a highly educated and coveted workforce graduating from world-class academic medical institutions. The city has the world’s largest concentration of such institutions with 11 major academic medical centers including Columbia University, Weill Cornell Medical College, NYU, Albert Einstein College of Medicine and Icahn School of Medicine at Mount Sinai. In addition, New York City has three of the country’s top 15 hospitals and five of the top 50 medical schools on U.S. News and World Report’s “Best Hospitals” 2016 list.

In established life science markets, such as Boston and San Francisco, private funding has spurred the growth of biotech tenants. In an emerging market, such as the New York metro area, the leading academic medical institutions and hospitals account for the majority of biotech and research start-up incubation. Early-stage tenants are heavily reliant on a sponsoring institution’s office and lab space. Once they spin-out, their options for continued growth become extremely limited due to the lack of city sponsored incubation space and the high cost of existing private lab space. These two factors continue to be the toughest challenges in establishing a viable life science market.

F U N D I N G

NIH funding continues to riseThe New York metro area ranks as one of the top three markets for NIH funding in the country. Out of the $31.3 billion in NIH funding awarded nationally in 2016, the New York metro area received $2.7 billion in NIH grants. On a state level, New York was awarded $2.2 billion, ranking third in the country. New York City was awarded $1.4 billion ranking it the second highest funded city in the country. Further, 2016 was the first time NIH funding surpassed $2.2 billion, outpacing the five-year average by 7%. In 2016, the top three academic medical institutions — Columbia University, Icahn School of Medicine at Mount Sinai and New York University accounted for 71% of all NIH funding in the city having received over $1 billion.

NEW YORK STATE NIH FUNDING

2012 2013 2014 2015 2016

$1.7

$2.1

$1.9

$1.5

$2.5

$2.3

$2.1

$1.9

$1.7

$1.5

$2.5

$2.3

NIH FUNDING (BILLIONS) 5-YEAR AVERAGE (BILLIONS)

SOURCE: National Institutes of Health (NIH)

Recent Lease TransactionsCOMPANY ADDRESS SQUARE FEET

Intercept Pharmaceuticals 10 Hudson Yards 49,143

JLABS (division of J&J Innovations) 101 Avenue of the Americas 30,000

Integra Partners 100 Wall Street 19,645

Turing Pharmaceuticals 600 Third Avenue 11,865

Crossover Health 25 West 45th Street 11,537

New York City is emerging as one of the most recognized future hubs in the global life science industry and currently boasts the largest workforce in the country with 91,097 employees. The city has the world’s largest concentration of academic institutions with eleven major academic medical centers including Columbia University, Weill Cornell Medical College, New York University, Albert Einstein College of Medicine and Icahn School of Medicine at Mount Sinai. New York City is ranked second in the nation with $1.4 billion in National Institutes of Health (NIH) awards in 2016.1

The existing life science landscape consists of over 120 life science companies. Some of the large established companies that recently raised funds for expansion include Flatiron Health ($175 million), Petra Pharma Corporation ($48 million) and Kallyope ($44 million).

Today, there is an estimated 1.7 million SF of existing life science lab and research space in New York City, but lab space continues to remain one of the most supply-constrained markets with minimal development in the pipeline. Currently, 100% of the built lab space is occupied in New York City, which has led companies to establish roots in locations outside of New York City. These include BioMed’s 400,000 SF Ardsley Park campus in West Chester and the multitude of options throughout New Jersey. The lack of lab space can be attributed to many factors, a few of which include zoning regulations that were not designed with the life science industry in mind and the large upfront capital costs associated with converting and developing lab space. However, with many new incentives, both public and private, aimed at both tenants and landlords, there are ample opportunities to develop new supply. Incentives and tax credits that are designed to further develop the life science industry range from $250,000 to as much as approximately $100 million.

New York City emerging as the next hub in the life science industryMarket for lab space continues to remain the most supply-constrained

THE FACTS

E D U C AT I O N

11major academic medical research institutions

3,449advanced life science degrees awarded annually (#1 Metro in U.S.)

F U N D I N G

$1.4 billion

of NIH funding in 2016 (#2 in U.S.)

E M PLOY M E N T

91,097

pharmaceutical, research, and development employees in the New York metro area2

39%more concentrated in life science employment than the United States average

20% market share in employment compared to the top ten markets



E M PLOY M E N T

New York metro dominates life science employmentThe New York metro area has one of the highest concentrations of life science employees accounting for 20% of the total employment within the top 10 life science markets, which include New England, San Francisco, and San Diego. Moreover, the New York metro area has 42% more employees than New England, 59% more than San Francisco, and 118% more than San Diego, further solidifying the area’s employment rank.

The life science industry’s employment has seen an uptick in recent years in the New York metro area; up 2% from 2016 and 4% from 2015. Given the recent push of incentives by the city, state and other government sponsored entities, employment is expected to maintain its upward trajectory.

I N C E N T I V E S

Over $1.1 billion in new incentives announcedPrior to the end of 2016, the city and state had programs available to many commercial businesses, but no formal program existed targeting the life science industry. That all changed in December of 2016, when Governor Cuomo announced a $650 million state funded life

science initiative and Mayor de Blasio announced LifeSci NYC, which will provide $500 million in various life science incentives.

The groundbreaking $650 million initiative by Governor Cuomo aims to spur growth of the life science industry and boost the state’s economic output. The program outlines three different initiatives: $250 million in tax incentives for new and existing life science companies, $200 million in state capital grants to further support investment in wet-lab and innovation space, $100 million in investment capital for early stage life science initiatives, with an additional state match of at least $100 million for operating support from private sector partnerships. 3

On the city level, Mayor Bill de Blasio pushed forward a $500 million initiative called LifeSci NYC, which is estimated to create 16,000 new jobs and further establish New York City as a global leader in the life science industry. The initiative calls for a 10-point plan, which includes a $100 million investment to create a new applied life science campus, provide $50 million to expand a network of life science R&D facilities, invest an additional $10 million to expand the network of incubators, commit $20 million a year in matching funds to support early-stage businesses, and commit $300 million in tax incentives for commercial lab space.4 Additionally, the mayor created the Life Science Advisory Council with leaders across the life science industry to provide guidance and secure partnerships for the city’s various initiatives, solidifying New York City as a global center for life sciences.

LIFE SCIENCE EMPLOYMENT

NY METRO NEW ENGLAND SAN FRANCISCO DC METRO SAN DIEGO

20

60

40

0

100

80

JOBS (THOUSANDS)

SOURCE: Moody’s

NY METRO LIFE SCIENCE EMPLOYMENT

2013 2014 2015 2016 2017

86

88

87

89

85

92

90

91

JOBS (THOUSANDS)

SOURCE: Moody’s

ZONING CLARIFICATION MEMO EFFECT

ORIGINAL LIFE SCIENCE ZONES (M ZONE) EXPANDED LIFE SCIENCE ZONES (C2, C4, C5, C6 & C8)

ZO N I N G

Clarification memo provides zoning law reliefHistorically, New York City has had a difficult time attracting companies in the life science industry, because the zoning laws restricted lab use to manufacturing districts (M Zone), where use group 17 is permitted. Use group 17 permits chemical compounding and packaging, the creation of pharmaceutical products and medical appliances, laboratories, research, experimental and testing facilities. Typically found in secondary and tertiary locations, manufacturing buildings have the proper characteristics to house life science tenants, especially those requiring laboratories. However, the undesirable locations has led to issues with employee commuting, attraction and retention, limiting the appeal of those buildings. In an effort to spur industry growth, New York City provided zoning variances and in some cases, city-owned land for life science development, but these opportunities have historically been limited to areas that sit next to academic medical institutions such as NYU on the Lower East Side or Columbia in Harlem on the Upper West Side.

In December 2016, the Department of Buildings (DOB), Department of City Planning (DCP) and the Economic Development Corporation (EDC) issued a clarification memo updating their interpretation of the zoning in the C2, C4, C5, C6, and C8 commercial districts. The city agencies and the EDC broadened their understanding of the current use group 9A zoning to also include the “synthesis and manipulation of chemical substances, biological matter, and animal models… [that] are integral activities in commercial medical laboratories devoted to research and testing…”5. Other minor clarifications were made in the memo, all with the stated goal of providing the proper zoning environment to spur growth in New York City’s life science industry. n



180 VA R I C K S T R E E T

180 Varick Street, Hudson Square Owner: Olmstead Properties, Inc. Built: 1930 329,000 SF Biolabs signed a 50,000 SF agreement with NYU Langone

H U DSO N R E S E A RC H C E N T E R

619 West 54th Street, Hell’s Kitchen Owner: Silverstein Properties/Taconic Investment Partners Built: 1930, renovated in 2012 325,000 SF (120,000 SF of lab/office available) New York Stem Cell occupying approximately 41,000 SF

AU D U BO N B US I N E SS A N D T EC H N O LO GY C E N T E R

Columbia University, Harlem Owner: Columbia University, the City of New York, and the State of New York Built: 1995 127,000 SF (60,000 SF for life science use)

A L E X A N D R I A C E N T E R FO R L I F E SC I E N C E — E A S T & W E S T

East River Science Park, 450 East 29th Street, GramercyOwner: Alexandria Real Estate Equities, Inc.

East Tower, 310,000 SF, built in 2010 West Tower, 419,000 SF, built in 2013 100% leased

101 AV E N U E O F T H E A M E R I C A S

101 Avenue of the Americas, SoHo Owner: Edward J. Minskoff Equities, Inc. Built: 1991, renovated in 2012 427,000 SF (170,000 SF of lab space) Occupied by New York Genome Center and JLABS, a division of J&J Innovations

423 W E S T 127 T H S T R E E T

423 West 127th Street, Harlem Owner: Janus Property Company Built: 1936, renovated in 2008 25,000 SF Harlem Biospace occupying 5,000 SF

Notable Life Science Facilities

K I PP S BAY B I OSC I E N C E S C E N T E R

455 First Avenue, Kipps Bay Developer: TBD SF: TBD Delivery: TBD

B RO O K LY N A R M Y T E R M I N A L (B I O BAT )

140 58th Street, Building A, BrooklynOwner: NYEDC Built: 1918 825,000 SF, with further expansion space existing in the complex (4 million SF) Received over $60 million in city and state funding

A L E X A N D R I A C E N T E R FO R L I F E SC I E N C E — N O R T H

450 East 29th Street, Gramercy Developer: Alexandria Real Estate Equities, Inc. Proposed 420,000 SF Delivery: TBD

CO R N E L L T EC H

Roosevelt Island Developer: Forest City Ratner Companies Proposed 240,000 SF college and office building Being marketed as a tech incubator building Delivery: 2017 (Phase 1)

Notable Life Science Facilities (Cont.)

Planned Life Science Developments

Potential Life Science Developments

B RO O K LY N N AV Y YA R D - B U I L D I N G 77

Building 77, Eighth Avenue, Brooklyn Developer: Brooklyn Navy Yard Development Corp. Built: 1942 1.17 million SF Undergoing $185 million building renovation, potential for lab science space



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CO LU M B I A U N I V E R S IT Y M E D I C A L C E N T E R - H A R L E M N Y

Audubon Science Park, Manhattan

A L B E R T E I N S T E I N CO L L EG E O F M E D I C I N E

1300 Morris Park Avenue, Bronx

A L E X A N D R I A C E N T E R FO R L I F E SC I E N C E - E A S T & W E S T

450 East 29th Street, Manhattan

SO PH I E DAV I S SC H O O L O F B I O M E D I C A L E D U C AT I O N - C U N Y

160 Convent Ave, Manhattan

180 VA R I C K S T R E E T

180 Varick St, Manhattan

N E W YO R K S T RU C T U R A L B I O LO GY C E N T E R - C IT Y CO L L EG E

89 Convent Ave, Manhattan

101 AV E N U E O F T H E A M E R I C A S

101 Avenue of the Americas, Manhattan

I C A H N SC H O O L O F M E D I C I N E AT M O U N T S I N A I

1468 Madison Ave, Manhattan

I N D US T RY C IT Y

220 36th St, Brooklyn

RO C K E F E LL E R U N I V E R S IT Y

1230 York Ave, Manhattan

B RO O K LY N A R M Y T E R M I N A L (B I O BAT )

140 East 58th St, Brooklyn

W E I LL CO R N E LL M E D I C A L CO LLEG E

445 East 69th St, Manhattan A L E X A N D R I A C E N T E R FO R L I F E SC I E N C E - N O R T H

450 East 29th Street, Manhattan


63 Flushing Ave, Brooklyn


63 Flushing Ave, Brooklyn

FO R D H A M U N I V E R S IT Y

441 East Fordham Road, Bronx

H U DSO N R E S E A RC H C E N T E R

619 West 54th St, Manhattan1A

11

CO LU M B I A U N I V E R S IT Y M A N H AT TA N V I L L E

Jerome L. Greene Science Center, Manhattan

423 W 127 T H S T R E E T

423 W 127th Street, Harlem

Academic Medical Institutions Life Science Facilities

Planned Life Science Developments

Potential Life Science Developments

20K I PP S BAY B I OSC I E N C E S C E N T E R

455 First Ave, Manhattan

19CO R N E L L N E W YO R K C IT Y T EC H

Roosevelt Island9

N Y U L A N GO N E M E D I C A L C E N T E R

550 First Ave, Manhattan

10S U N Y D OW N S TAT E M E D I C A L C E N T E R

760 Parkside Avenue, Brooklyn

GRAND CENTRALPENN STATION

PORT AUTHORITY

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45

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819

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1820

1A


CONTACT

Danny MangruResearch [email protected]

Jonathan SchifrinSenior Vice [email protected]

Jonathan [email protected]

Copyright © 2017 Transwestern. All rights reserved. No part of this work may be reproduced or distributed to third parties without written permission of the copyright owner. The information contained in this report was gathered by Transwestern from CoStar and other primary and secondary sources believed to be reliable. Transwestern, however, makes no representation concerning the accuracy or completeness of such information and expressly disclaims any responsibility for any inaccuracy contained herein.

1 https://www.nycedc.com/industry/life-sciences2 New York metro area includes parts of New York, New Jersey, and Pennsylvania.3 https://www.governor.ny.gov/news/governor-cuomo-announces-groundbreaking-650-million-initiative-fuel-growth-world-class-life4 http://www1.nyc.gov/office-of-the-mayor/news/943-16/better-jobs-higher-wages-mayor-de-blasio-secure-thousands-good-jobs-new-yorkers-the#/05 Life Sciences in Commercial Zoning Districts Memo, https://www.nycedc.com/sites/default/files/filemanager/Programs/LifeSci_NYC/ClarificationMemo-LifeSciences-CommercialZoningDistricts.pdf

Transwestern Consulting Group (TCG) is a privately held real estate firm operating as one collaborative team to deliver a holistic approach to personalized service. Through collaboration with the New York, New Jersey, Philadelphia and Boston offices, TCG has developed a specialty practice in the life science industry leveraging the knowledge base developed over the past 20 years, during the explosive growth of the life science hub of Cambridge, MA. In the past five years alone, the TCG team has assisted life science clients in over 200 transactions and 8 million square feet of laboratory and bioscience space. As multi-year recipients of the “Life Science Deal of Year” and “Largest Laboratory Transaction” awards, TCG is widely recognized as a leader and advisor to the world’s largest life science and biotech organizations.

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