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Virtual Program Examined Opportunities and Challenges Ranging from Economic Incentives to Retrofitting Existing Spaces
NEW BRUNSWICK, N.J., Mar. 2, 2021 – As the life sciences industry moves to increase domestic production and capacity, New Jersey is uniquely positioned to welcome new businesses – from R&D to vaccine component manufacturers. NAIOP New Jersey’s “Life Sciences: CRE’s New Frontier” program offered a primer for commercial real estate companies on emerging opportunities in the sector.
Speakers and panelists addressed issues ranging from how the State’s economic incentive programs can support business growth and retrofitting existing space to what developers need to know to meet the needs of these atypical end users.
Powering Life Sciences Growth in New Jersey
New Jersey is currently a life sciences powerhouse, leading the tri-state region with an annual economic impact of $83.4 billion GDP, 3,200 life sciences establishments and more than 300,000 direct, indirect and induced jobs. Noting that the state is home to the first FDA approved COVID-19 vaccine and saliva test, Debbie Hart, founding president and CEO of BioNJ, said, “40 percent of FDA drug approvals in 2020 came from companies with a footprint in New Jersey and over 25 percent of all cell and gene therapies in development are being worked on by companies here. We also lead the nation with 159 FDA-registered biopharmaceutical manufacturing facilities.”
The state’s premier academic institutions are providing the research and fueling the talent pipeline for these companies. As chancellor of Rutgers Biomedical and Health Sciences (RBHS) and executive vice president for Health Affairs at Rutgers University, Brian L. Strom, M.D., M.P.H., is committed to building one of the country’s best academic health centers. “Rutgers is listed in the top 100 most innovative universities in the U.S.,” said Dr. Strom. “With $750 million in annual sponsored research grants, we bring more federal research dollars to New Jersey than all of the state’s other colleges and universities combined.”
Its affiliation with RWJBarnabas Health has enabled RBHS to grow its research, clinical and education missions. This includes recruiting clinical faculty and some of the world’s foremost health care researchers, as well as developing a state-of-the-art clinical trial infrastructure. The partnership also involves a significant investment in the Rutgers Cancer Institute of New Jersey, including a joint project to build a new cancer pavilion in New Brunswick.
Through its Center for COVID-19 Response and Pandemic Preparedness, Rutgers has played a major role in battling the pandemic. RBHS supported vaccine trials by pharmaceutical companies Moderna and Johnson & Johnson, among other critical pandemic studies, and set up the New Jersey Community Contact Tracing Corps Program. The university also developed the first saliva test to obtain FDA approval.
“We are a very different institution than we were in 2013, and our partnership with RWJBarnabas health has enabled us to increase and expand our efforts. As a result, funding continues to rise and we are seeing a marked increase in grant submissions and awards,” said Dr. Strom.
Opportunities, Financing and Incentives
Tim Sullivan, CEO of the New Jersey Economic Development Authority (NJEDA), and Prism Capital Partners’ Eugene Diaz discussed the state’s economic incentive programs and their potential to promote growth within the life sciences industry. Sullivan highlighted several new and modified existing NJEDA programs designed to invest in innovation, support job creation and help underserved communities. These include:
- Emerge: Focuses on job creation in distressed communities and specifically targets growth sectors including life sciences.
- Aspire: Supports new construction of commercial projects such as lab space in urban, transit-centric areas.
- Community-Anchored Development Program: Supports partnerships to promote the growth of anchor institutions such as research institutions.
- Ignite: An incubator-support program that provides grants to subsidize rent in collaborative workspaces for early-stage life sciences and tech companies.
- Angel Investor Tax Credit Program: Provides a tax credit for investors in qualifying emerging technology businesses or venture funds.
- Net Operating Loss (NOL) Program: Enables qualified technology or biotechnology companies to sell NOL and R&D tax credits.
Sullivan also described the Innovation Evergreen Fund as “a game changer for New Jersey. We had a heritage of innovation second to none, but other states and cities have eroded our leadership. This venture investment fund is a public/private model that will provide a self-sustaining stream of funds to support innovative New Jersey companies.”
Diaz, whose ON3 campus has become a destination for life sciences firms, said that incentive programs are critical for companies considering moving to New Jersey. “For example, New York was going to charge Modern Meadow a dollar for rent. We lured them with incentives combined with other advantages our location offers. They would not have come otherwise.”
While the state’s programs offset some of the inherent costs associated with establishing a business, Diaz said he would like to see more incentives for developers. “We are the risk-takers when it comes to giving companies the space they need. More developers would get in the game and create space on spec if a program like Aspire gave us tax credits for providing value.”
Sullivan said he believes Aspire is developer-focused, and agreed the state would like to see more forward leaning development. “We need more dynamic, mixed-use R&D-centric places developed around transit that will provide access.”
Life Sciences Industry Trends: Building on Success
Daniel Loughlin, vice chairman for JLL’s New Jersey office markets group, led a discussion focused on trends in New Jersey’s life sciences market and the essential role real estate will play in maximizing efficiency and results for companies.
“COVID has put us on the map and heightened consideration of our supply chain,” said Loughlin. “We are seeing a lot of manufacturing activity at R&D campuses, and recently completed facilities which are designed to accommodate startups and small-batch manufacturing show a new presence for pharmaceutical manufacturing in New Jersey.”
Loughlin noted the NJEDA’s effort to maximize incentives in urban areas like Camden and Trenton could support life sciences development in the southern part of the state and offer a competitive advantage for recruiting talent. However, the market currently is a micro cluster located predominantly in suburban areas with existing infrastructure.
“Life sciences companies like to be in a clustered environment, and New York/New Jersey is a big focus for us,” said Melissa Gliatta, COO of Thor Equities, which recently acquired 95 Green Street in Jersey City and The Center of Excellence in Bridgewater.
“Companies want facilities with strong synergies in a cluster-type environment,” noted Peter Cocoziello, Jr., principal and managing director, Strategic Business Unit for Advance Realty Investors. “Today’s users often require less infrastructure than in past, and New Jersey is blessed to have such a robust amount already in place, often built by pharma companies or corporations that thought about the future.”
Al Martino, director of Site Management (SH&E and Facilities) with Nestle Health Science, said the key considerations for choosing a location have changed since Nestle relocated to Bridgewater from the Midwest. “Proximity to universities, hospitals and the life sciences network were critical six years ago, and an EDA grant was instrumental in helping Nestle offset costs. Today, sites need the infrastructure to support remote working. Diversity is essential to attracting talent and sustainability is also important. Without a real estate partner and a state that is aligned with our net zero commitment, we cannot achieve our goal.”
Construction and Site Considerations
The final panel examined some of the challenges of developing spaces and retrofitting existing buildings to accommodate the needs of life sciences companies. Christian Roche, principal with Langan Engineering and Environmental Services, said engineers need to get involved in the process as early as possible to identify site constraints, including zoning, existing infrastructure, environmental issues and traffic impacts. “These projects are often located on previously developed sites. While there may be a considerable amount of existing infrastructure, many life sciences facilities have specific requirements that have to be met.”
Matthew Malone, associate principal and practice leader with Perkins and Will New York, said, “Project development lines are becoming blurred and we are all working hand in glove.” He noted that the structural components of the building are a key consideration early on. “Life sciences fit-out work usually requires a higher infrastructure, so we look at clear or floor-to-floor heights. The use of heavy equipment means floor loading and vibration are critical, as is the height of the building. From a life safety perspective, once you get above six stories there is a reduction in the capacity for chemical use that is allowed.”
The collaborative development approach extends to the firms responsible for creating the built environment. “Increasingly, we are being asked to add value early in the process,” said Stephen Neeson, senior vice president of operations for Structure Tone New Jersey. “Early cost modeling based on concepts, real time market pricing and scheduling evaluations can affect a no-go analysis.”
Neeson noted that repurposing a 25-year-old building can be risky. “You have to peel the onion to determine ifit fits the science and needs of the end user. Consider waste management, power needs and the HVAC infrastructure, and dig deep into the age of the equipment to determine if it can be reconditioned and repurposed versus replaced.”
However, building a facility from scratch in a greenfield space can be cost-prohibitive and the state has an abundance of building stock. “Reinventing and repositioning buildings is the strongest trend we are seeing, said Malone. “Companies are looking for available lab space, and we are looking at what’s out there and quickly evaluating how we can get our product to market faster.”
In fact, all of the program’s panelists cited time as the single biggest pain point in the life sciences development process. Roche said, “At the municipal level, the time it takes to get entitlements done – which can be nine to 12 months – is entirely too long.”
Prism’s Diaz agreed. “The land use and planning paradigms of municipalities are stuck in the 18th century. When companies are evaluating New Jersey and they say it’s going to take me too long to get it going – that’s the killer. We are in a perfect position to attract the best of the best, but our speed to market needs to change dramatically.”
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