Property expertise sought as US lab space demand grows

Start-ups and small companies working in life sciences across the US tend to establish themselves in incubator spaces initially, so moving to dedicated offices or labs will entail numerous considerations. This can be especially daunting for organisations with little experience or expertise in leasing or the construction of real estate.

While the number of start-ups seeking lab space has declined recently – largely due to inflation and high interest rates, which have also dampened venture capitalist interest in the sector – the outlook remains positive.

Many start-ups are exploring alternative funding models, including partnering with companies within the sector that have the capital to invest.

Fees, zoning, permitting and other requirements complicate the picture, and the involvement of many specialised parties and experts is needed to provide a basis for good decision making in relation to the space.

Life sciences firms should approach projects with caution; parties should consult trusted advisers with experience of real estate in general, and the sector in particular, for guidance on navigating these complexities.

Several key stakeholders have a role to play, from brokers to architects, interior designers to contractors, as well as consultants specialising in areas such as code compliance and sustainability.

The process of enabling communication between all parties is often led by a project manager, with an independent cost manager supporting budget development and control. These professionals work together to help tenants achieve their brief.

Converting existing spaces can seem attractive as they may demand lower rents, but they often come with much higher renovation costs compared to new build spaces. The stakes are further raised by the key role a building and its location play in attracting and retaining talent.

Few buildings have been constructed to house research and development functions, which limits options for companies in that sector. Life sciences clients require a specific type of infrastructure that, for example, allows for more robust mechanical, electrical and plumbing (MEP) systems – the most expensive aspect of lab fit-outs.

Companies must also look at where column lines are placed and how that plays into code standards, and whether the ceiling-to-deck height accommodates the required MEP systems while still providing room for lab equipment. These are just a few of the requirements that need to be considered.

Without experienced planning and oversight, prospective tenants' objectives may not be met and budgets and schedules may be missed, requiring costly ongoing adjustments. But experts with a background in life sciences projects can help prioritise what needs to be done.

Once there is a broad understanding of these needs and objectives, it is important to work with a project manager who collaborates closely with senior managers and other stakeholders to develop a project execution plan (PEP). This defines a firm's goals for the space, as well as setting the budget and timeline; but it takes time and effort.

The project manager will assemble the team needed for the job, which could include cost managers, design consultants, architects, engineers and structural experts, depending on the company's specific requirements. All parties need to be fully acquainted with the PEP and understand their objectives clearly.

Expertise is needed to navigate all decisions that underpin such projects, including the strict technical requirements and rigorous performance standards.

Lab spaces are technical by their very nature but the stakeholder groups that need to come together to provide their input into how the space will be operated are equally as complex. Having a project manager who can manage the lines of communication between all stakeholders is therefore of critical importance to achieving the brief.

Nothing slows down a project more than delays in decision-making. The longer a company sits on information, the faster a project loses steam. Emphasis should be given to maintaining a consistent team, particularly with regard to a client's leadership of a project.

Personnel changes can have a detrimental impact – new stakeholders take time to be brought up to speed on decisions that have already been made and may demand a re-evaluation of some initiatives. This can cause confusion among the project execution team and result in costly changes.

While such changes in leadership are sometimes inevitable, firms should be sure to consult with those who have been through similar changes in the past and who know how to adjust and accommodate accordingly.

An organisational chart also needs to consider any external teams involved. This will show the relationship between all parties and provide clarity on roles and points of contact for key decisions.

Project managers should determine a client's targets upfront and establish detailed deadlines for the project team, which can be carefully tracked and altered as necessary.

Given present labour shortages and equipment lead times, the days of being able to turn around a 25,000 sq. ft (2,300m²) project in a couple of months are no longer realistic if clients are to maintain control of quality and cost.

Clients appointed as project managers will need to coordinate any relevant information relating to a project's schedule, which will then be ratified with suppliers as they are onboarded.

As with the comprehensive schedule, project managers should have a realistic and complete budget – ideally devised with a cost manager – at the beginning of a project. This budget must include an appropriate amount of contingency for unexpected conditions or changes needed throughout construction that have to be managed.

It is important not to fall into the trap of contingency being seen as funds that can be used solely for programme or client-driven changes. There will be unforeseen events, and project managers should be tracking risks – both known and unknown – based on experience to protect the budget.

In the absence of thorough budget management, it will be difficult to guide expectations and provide clear communications, which will delay decision-making and increase risk and costs.

Paying the right level of attention to the areas covered in this article coupled with the support of industry experts will help life sciences companies to evolve competitively.