New York City Developer Launches Life-Science Venture

Elevate also plans to spend more than $250 million to redevelop an office property that it owns with Nuveen Real Estate near several academic medical institutions, including Mount Sinai Hospital, according to Matthew Weir, executive vice president of Taconic. The building, at 309 East 94th St., will include 200,000 square feet of lab space, with construction scheduled to start next year.

“We saw that New York had all the fundamental elements to really see this sector grow, but of course what was really missing was lab space,” he said.

In addition, the new venture is looking for opportunities outside New York, particularly in other East Coast markets, said Mr. Weir, who will serve as president of Elevate.

Life-science research has been booming in many cities since the start of the Covid-19 pandemic, stoking demand for buildings designed for pharmaceutical, biotech and other laboratory uses. Just over 29 million square feet of lab space was under construction in the U.S. during the first quarter of 2022, up a record-high 55% year-over-year, according to real-estate firm

CBRE Group Inc.

But after more than a year of unbridled growth, biotech stocks entered a bear market this year as the cost of borrowing and scientific setbacks have tempered investor enthusiasm. The

SPDR S&P Biotech ETF,

an equal-weighted index of biotech stocks, is down 43.44% year to date compared with a 21.33% decline in the S&P 500.

Life-sciences companies, especially startups, get much of their funding from venture-capital firms. These firms, in turn, eventually look for high stock market valuations to exit and profit from their investments in startups.

“There’s a lot of uncertainty out there,” said Austin Barrett, executive vice president and head of the life-science practice group at real-estate brokerage Savills. He said the funding pipeline from venture-capital firms and government agencies remains strong.

But he added: “If companies can’t go out and raise big public funds, then they can’t hire as fast.”

New York City’s market, totaling 4.9 million square feet of existing life-science space, is still in its early days, according to real-estate firm

Colliers.

The nation’s leading markets, Boston and the San Francisco Bay Area, each have more than 30 million square feet of life-science real estate, Colliers said.

Historically, the suburbs were more suitable for laboratory real estate, with plenty of space and more affordable rent prices for sprawling research-and-development campuses, said Aaron Jodka, director of research for U.S. capital markets at Colliers. But technological and architectural advancements have made it possible to build laboratories on higher floors of office buildings, opening up more opportunities for development in New York.

The city has other ingredients for a growing life-science industry, including $5.6 billion in venture-capital and $3 billion in federal-research-grant funding flowing to the sector last year. “You start to see a really strong recipe for future life-science growth,” Mr. Jodka said.

Founded in 1997, Taconic owns commercial and residential properties. The firm is best known for redeveloping a massive Eighth Avenue building that it sold in 2010 to what is now

Alphabet Inc.’s

Google division.

Mr. Weir said he isn’t worried that turmoil in biotech stocks will hurt demand for lab space, partly because he believes demand for new therapeutics and other technologies, like climate and agriculture tech, will outlast the current stock-market losses.

“The disruptions in the public market right now are a resetting of fundamentals,” Mr. Weir said. “The aging population, the emergence of personalized medicine, technologies like mRNA—there’s just such a large amount of momentum in the market that those themes, macro level, will continue.”

Write to Kate King at [email protected]

Corrections & Amplifications
A new subsidiary of Taconic Partners will control three life-sciences laboratories. Also, the developer’s building on the Upper East Side will have 200,000 square feet of lab space. An earlier version of this article incorrectly said the new subsidiary of Taconic Partners would control four laboratories and that the developer’s building on the Upper East Side would have 200,000 square feet of office space. (Corrected on June 21)