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Region's biotech start-ups seeking space
Fatter wallet universities tend to get the first crack
Friday, March 31, 2006

Matthew Bootman needs space.

The lab and office that his life sciences firm CrystalPlex currently occupy in Harmarville's U-Parc is quickly becoming obsolete. And two recent attempts to upgrade -- moving into the city in new buildings with a band of fellow up-and-coming biotech companies -- have crumbled.

He is hopeful that, with plans under way for developers to erect at least two new buildings equipped with labs and offices at South Oakland's Pittsburgh Technology Center, he'll find what he needs. But even with more than 300,000 square feet of lab space under way, it's no sure bet.

The bottom line for many fledgling life sciences firms in the region is this: Flexible, affordable lab and office space is hard to come by, particularly in high-demand neighborhoods such as Oakland where rents are higher and landlords typically require long-term leases to recoup dollars spent to build customized labs.

The dearth of lab-ready space doesn't leave a lot of affordable alternatives for growing companies such as nanotech drug discovery and diagnostics firm CrystalPlex that are "in-between" -- too big for a smaller incubator space, yet not grounded or successful enough to commit to a lease beyond five years.

"A lot of these companies come and go, it's not something you can develop for the short term," said Dr. Alan Seadler, who stepped down as CrystalPlex's chief executive officer last year to become the Edward V. Fritzky chair in biotechnology leadership at Duquesne University.

Even biotech companies small enough to use incubator space can find it problematic.

Take the Pittsburgh Life Sciences Greenhouse's South Oakland space for start-ups.

It includes cubicles, labs and access to the services and amenities the tech-support group provides. But all that comes at a price -- $30 to $42 per square foot -- and the labs currently house 12 firms and are completely full, a spokeswoman said.

There is U-Parc, the former Gulf Oil Co. research facility now owned by the University of Pittsburgh. It provides ready-made lab and office space for about $15 per square foot.

But tech company executives say it can be less than ideal since they are forced to make the miles-long trek to the universities to interact with other scientists and their latest research.

It's not only start-ups that are confronting a shortage of lab space.

The region's universities, led by the University of Pittsburgh and Carnegie Mellon University, spend nearly $1 billion on research annually and say they will need 1 million square feet of space over the next 10 years.

The new offices at the Pittsburgh Technology Center should ease some of the crunch, but some local life sciences executives are concerned they won't be able to afford it.

Mary Del Brady, chief executive officer of RedPath Integrated Pathology, says it's unlikely that developers would risk agreeing to a short-term lease and still be willing to spend funds to tailor the lab space to suit her company's needs. The North Side-based biotech firm hopes to double its 2,000 square feet by year-end.

She and several other local life science chiefs are lobbying the state for help. Their goal is to tap tobacco settlement funds to assist with the financing of "flexible, affordable, lab and office space."

Pittsburgh is not alone in its shortage of space for life sciences firms.

But regions such as Chicago and the Washington, D.C., suburbs with their larger biotech industries have been able to attract developers willing to construct "campuses" designed to accommodate companies at various stages with different space needs.

For example, Cleveland-based Forest City Enterprises, which has the option to develop the old LTV Coke Works down the road from the Pittsburgh Technology Council, is spending $500 million developing on a biotech "cluster" in the Chicago suburb of Skokie, Ill.

To help ease Pittsburgh's dilemma, Duquesne's Dr. Seadler is in the "planning stages" of developing an Uptown incubator for life science companies. He plans to seek state designation to make the area eligible for tech-focused "Keystone Innovation Zone" tax credits, such as the one that already exists near Pitt and CMU that encompasses parts of Oakland, Lawrenceville and the technology center.

Blaise Larkin, CEO of developer Madison Realty Group, which plans to erect 160,000 square feet of lab and office space at the technology center, acknowledged that the cost to customize lab space is "tough without some sort of commitment" in the 10 to 20 year range.

Still, he and the John Ferchill, who heads the Cleveland-based Ferchill Group that also plans to build on the technology center site, said they are confident that their buildings will be filled with lab-needy tenants. "We're guys that take risks -- we did this before, it worked and we'll do it again," said Mr. Ferchill.

Those risks, of course, may not be all that great given the lack of space. Biotech insiders note that if companies such as CrystalPlex, which would be willing to come to the technology center for a five-year lease at $30 per square foot, can't cut it, there's always the desperate-for-space universities.

First published on March 31, 2006 at 12:00 am
Corilyn Shropshire can be reached at cshropshire@post-gazette.com or 412-263-1413.