Scheer Partners is prominently featured in a Washington Business Journal story on the local lab market. The story is also below.
Two real estate companies that track Washington-area lab space – Rockville-based Scheer Partners Inc. and Jones Lang LaSalle Inc. in D.C. – are both forecasting less vacancy in lab space in the coming year as the National Institutes of Health and other federal programs beef up spending.
“That’s part of what’s stimulating things in a positive direction,” said Henry Bernstein, a senior vice president of Scheer. “There is good movement and expansion in these very important federal agencies that then spin out work to the private sector.”
Most of the highly specialized, expensive real estate now lying fallow is along Maryland’s Interstate 270 corridor, though exact vacancy estimates differ. And while the biotech sector remains on uncertain ground, with constrained venture capital and pressure from investors to cut expenses, recent data suggest the community is beginning to cast off its recessionary torpor.
To begin with, the hemorrhaging of tenants has slowed in recent months. Net absorption – a measure of how much space is filled in an area subtracted by the square footage vacated – is slightly in the red for suburban Maryland lab space in the first half of the year.
But at negative 12,471 square feet, that is still a vast improvement over the negative 160,342 square feet at the same point last year, said Evan Regan-Levine, a research analyst at Jones Lang. The change is a “huge jump” year over year and means even a few expansions or new deals could put net absorption in positive territory, he said.
Much of the improvement is coming in bits and pieces – with small companies expanding incrementally. After a yearlong search GlycoMimetics Inc., a biotech with a pipeline that includes a treatment for a complication of sickle cell disease, recently settled on new space at 401 Professional Drive in Gaithersburg, not far from its current headquarters. The expansion comes on the heels of a $38 million venture capital round GlycoMimetics closed in October 2009. The company was represented in the search by Scheer.
“We’re going to expand modestly to accommodate modest growth,” said GlycoMimetics CEO Rachel King. “Hopefully we’ll grow out of that space quickly.”
Jones Lang and Scheer present the area’s lab vacancies differently.
Scheer projects lab space vacancies in the region that stretches from Baltimore through Northern Virginia to fall as low as 6 percent in 2010, assuming the pickup in leasing activity continues through the end of the year. That’s mostly contained within the I-270 corridor, which holds 7 million square feet of the region’s 10 million-square-foot base of lab space, according to Scheer. The company places the midyear 2010 vacancy rate at 7.5 percent, down from 11 percent in mid-2009.
Jones Lang’s data, focused solely on suburban Maryland, puts the lab space vacancy rate for the second quarter at 18 percent, with a total supply of 1.8 million square feet. That vacancy figure might be larger partly because it includes all vacant space in buildings that contain both labs and offices, Regan-Levine said.
Part of the optimism springs from bricks-and-mortar growth by the NIH that will expand its physical presence in Maryland. The National Cancer Institute is branching out with a new 575,000-square-foot campus in Shady Grove slated to open in 2013 and a 330,000-square-foot Frederick research facility that opens next year.
That construction has encouraged biotechs that “NIH and NCI are moving their programs forward,” Bernstein said.
Congress and the Obama administration are likewise shifting more dollars into research that could flow up I-270. The new health care law contains $1 billion in tax credits and grants for small biotechs through the Therapeutic Discovery Project. Obama’s fiscal 2011 budget calls for an increase of $1 billion in NIH funding over fiscal 2010.
The expected growth hasn’t been missed by outside investors. San Diego-based BioMed Realty Trust has been snapping up life sciences buildings along the corridor over the past few months.
The company paid $53 million in May to buy a 218,000-square-foot cluster of properties along Medical Center Drive in Rockville. In March, BioMed Realty bought two buildings along West Watkins Mill Road in Gaithersburg – collectively containing 82,400 square feet – for $14 million.
“Certainly, we are very bullish on the Maryland core life sciences market,” said BioMed Realty spokesman Rick Howe.