Taking too long? Close loading screen.
Connect with us


In a Battered New York Office Market, Life Science Is Flourishing



The coronavirus pandemic, which has focused greater attention on health care and spurred a heated race for a Covid-19 vaccine, has also ratcheted up interest in life science real estate in New York.

The city had already been trying to play catch-up with other life science powerhouses such as Boston, San Diego and San Francisco. Real estate companies, with government support, had been building commercial laboratories for medical researchers, incubator spaces for biotech start-ups and offices for pharmaceutical companies poised to bring new drugs to market.

Now, funding from investors is flowing to such projects at a time when the city’s office market is battered by lockdowns and orders to work from home. Office availability in Manhattan jumped to 14.1 percent in the third quarter from 11.8 percent in the same period a year ago, while the average rent dropped about 1 percent, according to Newmark, a commercial real estate advisory firm.

Developers are jumping on the life science bandwagon, which has emerged as a bright spot in an uncertain picture for commercial real estate. Rent for labs in Manhattan averages around $105 a square foot, according to a report from CBRE, a real estate services company.

Experts are warning that it may be too soon to celebrate a turnaround, but developers are charging ahead.

ImageA rendering of a former Chrysler showroom occupied by the Walt Disney Company for decades that Taconic Investment Partners plans to convert into a life science hub.
Credit…Viewpoint Studios
Credit…Viewpoint Studios

The latest move comes from Taconic Investment Partners, which has just revealed plans to convert a former auto showroom on the West Side of Manhattan into a life science hub. The building was erected in 1929 for Chrysler, but ABC has occupied it for decades. When the Walt Disney Company, which owns the television network, departs in January for new digs downtown, Taconic, in a partnership with Nuveen Real Estate, will begin overhauling the building, said Matthew Weir, a senior vice president at Taconic.

“We think this is a game-changing point in New York,” he added.

The city has long possessed key ingredients for the life sciences to flourish. It has leading universities and academic medical centers — the places where scientific breakthroughs are often made and bioscience businesses born. And it is teeming with chemists, biomedical engineers and other life science professionals.

Funding to research institutions in the city from the National Institutes of Health, the federal government’s biomedical research agency, has risen every year since 2016 and last year hit $2.2 billion, second only to the Boston area.

But New York has lacked labs and other spaces entrepreneurs need to start their companies and bring drugs to clinical trials and, eventually, commercial production.

As a result, young biotech firms tended to go elsewhere. For instance, Regeneron Pharmaceuticals, spun out of research done at Columbia University, moved 30 miles north to Tarrytown, N.Y. The company, which had revenue of more than $7.8 billion in 2019, is conducting trials for a Covid-19 antibody treatment that was recently given to President Trump.

The situation began to change in 2010 when Alexandria, a California-based developer of bioscience complexes, opened a gleaming tower known as the Alexandria Center for Life Science-New York City on the East Side of Manhattan on the hospital corridor known as Bedpan Alley. The location reflects the conviction that life science developments need to be near research institutions, forming “clusters.” In 2014, Alexandria completed the second of three planned towers on its campus.

Governmental initiatives were established to encourage such efforts, which promise high-paying jobs and tax revenue. In 2016, New York introduced a $500 million life science initiative, led by the city’s Economic Development Corporation. In 2017, New York State unveiled its own $620 million plan.

Deerfield Management Company, a health care investment firm, is a beneficiary of the city program. It is receiving nearly $100 million in tax credits for converting a 12-story building in the Flatiron district into a vertical campus with lab space, lecture halls and offices for nonprofit groups and academic institutions.

Credit…Jeenah Moon for The New York Times

Retrofitting a building for life sciences can be a major undertaking. While less expensive and faster than building from scratch, the cost can be four times higher than the cost to convert a building for office use, according to some estimates.

Nor is every building suitable for conversion, said Peter Schubert, a partner at Ennead Architects, which has worked on life science projects. The best candidates have large floor plates, are structurally robust to prevent vibrations that can be disastrous in lab work and have high ceilings that can accommodate the extensive ductwork necessary for enhanced ventilation. Electrical systems need to support increased power requirements. Loading docks may need to separate, say, the secure arrival of tissue samples and the removal of chemical waste. Although former manufacturing plants often fit the bill, “it’s really building by building,” Mr. Schubert said.

The challenges haven’t discouraged developers.

Taconic’s upcoming project will be part of an emerging life science cluster on Manhattan’s West Side. The developer, working with Silverstein Properties, has already rebranded a nearby former film production studio as the Hudson Research Center, leasing space to tenants including the New York Stem Cell Foundation.

Plans for the new project were drawn up by Perkins & Will, an architecture firm, and call for replacing the brick and concrete facade with glass and shiny aluminum. A helix-shaped auto ramp, a remnant from the building’s showroom days, will become the centerpiece of the reincarnated interior. The renovation is expected be completed in early 2023, Mr. Weir said.

Other projects are underway in a growing life science cluster in West Harlem, near Columbia University, where Janus Property Company is retrofitting old brick factory buildings for tenants including Harlem Biospace, an incubator offering co-working lab space. Janus is also constructing the 350,000-square-foot Taystee Lab Building on the site of a former bread bakery.

Credit…Jeenah Moon for The New York Times

A flood of private venture capital money to the companies that would occupy such projects has only buoyed interest.

“Every week, a developer is buying a building to convert to life science,” said Joshua King, an executive managing director at Cushman & Wakefield, a commercial real estate company. He said that he and his colleagues were constantly fielding calls from landlords considering office-to-lab conversions.

But the life science “boom” is a boomlet, at best.

Of nearly 500 million square feet of office space in New York, less than two million square feet are redeveloped for labs or marketed exclusively for the life sciences, although more is in the pipeline. (For comparison, Boston has around 30 million square feet of such space.)

Life science “is by no means going to be an office savior in New York,” said William Hartman, an executive managing director at Cushman & Wakefield. “It’s not going to solve the big office vacancy problem.”

“Maybe we’re experiencing a premature exuberance,” he added.

The availability for buildings marketed for labs is 30.5 percent, according to the CBRE report, although the availability for prebuilt space is just 2.3 percent.

“The reality is, the demand is limited,” said John H. Cunningham, an executive vice president at Alexandria. “There are a handful of companies out there in the market kicking tires.”

But Lindsay Greene, chief strategy officer at the Economic Development Corporation, predicted that demand would catch up with supply as seed-stage companies secure funding and graduate from incubators to their own spaces. “There’s a catch-up effect,” she said. “We have to allow time for it to play out.”

Some existing life science space has served pandemic-related endeavors. The city located its Pandemic Response Lab, which processes coronavirus tests, in the Alexandria Center.

Still, the future of the sector will depend on tenants that will outlast the pandemic. It takes about 25 years for a life science sector to reach maturity.

“Our goal is not to overtake some other city,” Ms. Greene said, “but to be in a peer group with them.”


Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *


The Trump campaign celebrated a growth record that Democrats downplayed.



The White House celebrated economic growth numbers for the third quarter released on Thursday, even as Joseph R. Biden Jr.’s presidential campaign sought to throw cold water on the report — the last major data release leading up to the Nov. 3 election — and warned that the economic recovery was losing steam.

The economy grew at a record pace last quarter, but the upswing was a partial bounce-back after an enormous decline and left the economy smaller than it was before the pandemic. The White House took no notice of those glum caveats.

“This record economic growth is absolute validation of President Trump’s policies, which create jobs and opportunities for Americans in every corner of the country,” Mr. Trump’s re-election campaign said in a statement, highlighting a rebound of 33.1 percent at an annualized rate. Mr. Trump heralded the data on Twitter, posting that he was “so glad” that the number had come out before Election Day.

The annualized rate that the White House emphasized extrapolates growth numbers as if the current pace held up for a year, and risks overstating big swings. Because the economy’s growth has been so volatile amid the pandemic, economists have urged focusing on quarterly numbers.

Those showed a 7.4 percent gain in the third quarter. That rebound, by far the biggest since reliable statistics began after World War II, still leaves the economy short of its pre-pandemic levels. The pace of recovery has also slowed, and now coronavirus cases are rising again across much of the United States, raising the prospect of further pullback.

“The recovery is stalling out, thanks to Trump’s refusal to have a serious plan to deal with Covid or to pass a new economic relief plan for workers, small businesses and communities,” Mr. Biden’s campaign said in a release ahead of Thursday’s report. The rebound was widely expected, and the campaign characterized it as “a partial return from a catastrophic hit.”

Economists have warned that the recovery could face serious roadblocks ahead. Temporary measures meant to shore up households and businesses — including unemployment insurance supplements and forgivable loans — have run dry. Swaths of the service sector remain shut down as the virus continues to spread, and job losses that were temporary are increasingly turning permanent.

“With coronavirus infections hitting a record high in recent days and any additional fiscal stimulus unlikely to arrive until, at the earliest, the start of next year, further progress will be much slower,” Paul Ashworth, chief United States economist at Capital Economics, wrote in a note following the report.


Continue Reading


Black and Hispanic workers, especially women, lag in the U.S. economic recovery.



The surge in economic output in the third quarter set a record, but the recovery isn’t reaching everyone.

Economists have long warned that aggregate statistics like gross domestic product can obscure important differences beneath the surface. In the aftermath of the last recession, for example, G.D.P. returned to its previous level in early 2011, even as poverty rates remained high and the unemployment rate for Black Americans was above 15 percent.

Aggregate statistics could be even more misleading during the current crisis. The job losses in the initial months of the pandemic disproportionately struck low-wage service workers, many of them Black and Hispanic women. Service-sector jobs have been slow to return, while school closings are keeping many parents, especially mothers, from returning to work. Nearly half a million Hispanic women have left the labor force over the last three months.

“If we’re thinking that the economy is recovering completely and uniformly, that is simply not the case,” said Michelle Holder, an economist at John Jay College in New York. “This rebound is unevenly distributed along racial and gender lines.”

The G.D.P. report released Thursday doesn’t break down the data by race, sex or income. But other sources make the disparities clear. A pair of studies by researchers at the Urban Institute released this week found that Black and Hispanic adults were more likely to have lost jobs or income since March, and were twice as likely as white adults to experience food insecurity in September.

The financial impact of the pandemic hit many of the families that were least able to afford it, even as white-collar workers were largely spared, said Michael Karpman, an Urban Institute researcher and one of the studies’ authors.

“A lot of people who were already in a precarious position before the pandemic are now in worse shape, whereas people who were better off have generally been faring better financially,” he said.

Federal relief programs, such as expanded unemployment benefits, helped offset the damage for many families in the first months of the pandemic. But those programs have mostly ended, and talks to revive them have stalled in Washington. With virus cases surging in much of the country, Mr. Karpman warned, the economic toll could increase.

“There could be a lot more hardship coming up this winter if there’s not more relief from Congress, with the impact falling disproportionately on Black and Hispanic workers and their families,” he said.


Continue Reading


Ant Challenged Beijing and Prospered. Now It Toes the Line.



As Jack Ma of Alibaba helped turn China into the world’s biggest e-commerce market over the past two decades, he was also vowing to pull off a more audacious transformation.

“If the banks don’t change, we’ll change the banks,” he said in 2008, decrying how hard it was for small businesses in China to borrow from government-run lenders.

“The financial industry needs disrupters,” he told People’s Daily, the official Communist Party newspaper, a few years later. His goal, he said, was to make banks and other state-owned enterprises “feel unwell.”

The scope of Mr. Ma’s success is becoming clearer. The vehicle for his financial-technology ambitions, an Alibaba spinoff called Ant Group, is preparing for the largest initial public offering on record. Ant is set to raise $34 billion by selling its shares to the public in Hong Kong and Shanghai, according to stock exchange documents released on Monday. After the listing, Ant would be worth around $310 billion, much more than many global banks.

The company is going public not as a scrappy upstart, but as a leviathan deeply dependent on the good will of the government Mr. Ma once relished prodding.

More than 730 million people use Ant’s Alipay app every month to pay for lunch, invest their savings and shop on credit. Yet Alipay’s size and importance have made it an inevitable target for China’s regulators, which have already brought its business to heel in certain areas.

These days, Ant talks mostly about creating partnerships with big banks, not disrupting or supplanting them. Several government-owned funds and institutions are Ant shareholders and stand to profit handsomely from the public offering.

The question now is how much higher Ant can fly without provoking the Chinese authorities into clipping its wings further.

Excitable investors see Ant as a buzzy internet innovator. The risk is that it becomes more like a heavily regulated “financial digital utility,” said Fraser Howie, the co-author of “Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise.”

“Utility stocks, as far as I remember, were not the ones to be seen as the most exciting,” Mr. Howie said.

Ant declined to comment, citing the quiet period demanded by regulators before its share sale.

The company has played give-and-take with Beijing for years. As smartphone payments became ubiquitous in China, Ant found itself managing huge piles of money in Alipay users’ virtual wallets. The central bank made it park those funds in special accounts where they would earn minimal interest.

After people piled into an easy-to-use investment fund inside Alipay, the government forced the fund to shed risk and lower returns. Regulators curbed a plan to use Alipay data as the basis for a credit-scoring system akin to Americans’ FICO scores.

China’s Supreme Court this summer capped interest rates for consumer loans, though it was unclear how the ceiling would apply to Ant. The central bank is preparing a new virtual currency that could compete against Alipay and another digital wallet, the messaging app WeChat, as an everyday payment tool.

Ant has learned ways of keeping the authorities on its side. Mr. Ma once boasted at the World Economic Forum in Davos, Switzerland, about never taking money from the Chinese government. Today, funds associated with China’s social security system, its sovereign wealth fund, a state-owned life insurance company and the national postal carrier hold stakes in Ant. The I.P.O. is likely to increase the value of their holdings considerably.

“That’s how the state gets its payoff,” Mr. Howie said. With Ant, he said, “the line between state-owned enterprise and private enterprise is highly, highly blurred.”

China, in less than two generations, went from having a state-planned financial system to being at the global vanguard of internet finance, with trillions of dollars in transactions being made on mobile devices each year. Alipay had a lot to do with it.

Alibaba created the service in the early 2000s to hold payments for online purchases in escrow. Its broader usefulness quickly became clear in a country that mostly missed out on the credit card era. Features were added and users piled in. It became impossible for regulators and banks not to see the app as a threat.

ImageAnt Group’s headquarters in Hangzhou, China.
Credit…Alex Plavevski/EPA, via Shutterstock

A big test came when Ant began making an offer to Alipay users: Park your money in a section of the app called Yu’ebao, which means “leftover treasure,” and we will pay you more than the low rates fixed by the government at banks.

People could invest as much or as little as they wanted, making them feel like they were putting their pocket change to use. Yu’ebao was a hit, becoming one of the world’s largest money market funds.

The banks were terrified. One commentator for a state broadcaster called the fund a “vampire” and a “parasite.”

Still, “all the main regulators remained unanimous in saying that this was a positive thing for the Chinese financial system,” said Martin Chorzempa, a research fellow at the Peterson Institute for International Economics in Washington.

“If you can’t actually reform the banks,” Mr. Chorzempa said, “you can inject more competition.”

But then came worries about shadowy, unregulated corners of finance and the dangers they posed to the wider economy. Today, Chinese regulators are tightening supervision of financial holding companies, Ant included. Beijing has kept close watch on the financial instruments that small lenders create out of their consumer loans and sell to investors. Such securities help Ant fund some of its lending. But they also amplify the blowup if too many of those loans aren’t repaid.

“Those kinds of derivative products are something the government is really concerned about,” said Tian X. Hou, founder of the research firm TH Data Capital. Given Ant’s size, she said, “the government should be concerned.”

The broader worry for China is about growing levels of household debt. Beijing wants to cultivate a consumer economy, but excessive borrowing could eventually weigh on people’s spending power. The names of two of Alipay’s popular credit functions, Huabei and Jiebei, are jaunty invitations to spend and borrow.

Huang Ling, 22, started using Huabei when she was in high school. At the time, she didn’t qualify for a credit card. With Huabei’s help, she bought a drone, a scooter, a laptop and more.

The credit line made her feel rich. It also made her realize that if she actually wanted to be rich, she had to get busy.

“Living beyond my means forced me to work harder,” Ms. Huang said.

First, she opened a clothing shop in her hometown, Nanchang, in southeastern China. Then she started an advertising company in the inland metropolis of Chongqing. When the business needed cash, she borrowed from Jiebei.

Online shopping became a way to soothe daily anxieties, and Ms. Huang sometimes racked up thousands of dollars in Huabei bills, which only made her even more anxious. When the pandemic slammed her business, she started falling behind on her payments. That cast her into a deep depression.

Finally, early this month, with her parents’ help, she paid off her debts and closed her Huabei and Jiebei accounts. She felt “elated,” she said.

China’s recent troubles with freewheeling online loan platforms have put the government under pressure to protect ordinary borrowers.

Ant is helped by the fact that its business lines up with many of the Chinese leadership’s priorities: encouraging entrepreneurship and financial inclusion, and expanding the middle class. This year, the company helped the eastern city of Hangzhou, where it is based, set up an early version of the government’s app-based system for dictating coronavirus quarantines.

Such coziness is bound to raise hackles overseas. In Washington, Chinese tech companies that are seen as close to the government are radioactive.

In January 2017, Eric Jing, then Ant’s chief executive, said the company aimed to be serving two billion users worldwide within a decade. Shortly after, Ant announced that it was acquiring the money transfer company MoneyGram to increase its U.S. footprint. By the following January, the deal was dead, thwarted by data security concerns.

More recently, top officials in the Trump administration have discussed whether to place Ant Group on the so-called entity list, which prohibits foreign companies from purchasing American products. Officials from the State Department have suggested that an interagency committee, which also includes officials from the departments of defense, commerce and energy, review Ant for the potential entity listing, according to three people familiar with the matter.

Ant does not talk much anymore about expanding in the United States.

Ana Swanson contributed reporting.


Continue Reading