Adaptive Reuse or New Construction? Considerations for Life Sciences

Justin Brasell

Life sciences companies—whether young startups receiving an influx of venture capital or mature entities with a long history in the industry—are setting out in record numbers to find space for developing treatments that advance public health and improve lives. To do so, life sciences users require a combination of office, lab, collaboration and warehouse space within an amenity-rich environment.

The demand for life sciences facilities—exacerbated by the pandemic—has skyrocketed and has been outpacing supply in markets such as San Francisco, Boston and San Diego for some time now. However, factors such as real estate availability, cost of living, access to STEM talent and proximity to major research institutions have paved the way for new emerging markets, including Houston, Raleigh-Durham, Washington, D.C., and New York City.

In response to the demand, property investors and, in some cases, owner-occupiers are weighing the benefits of adaptive reuse versus ground-up development. Specifically, land-constrained markets with limited life sciences availabilities but unusually high office vacancy in the aftermath of the pandemic can offer attractive opportunities for adaptive reuse.

When done correctly, adaptive reuse projects have the potential to meet the demand for life sciences space while breathing new life into a building. Case in point: the former Henkel North American headquarters turned Ilume Innovation Center in Scottsdale, Ariz., and BioCube in San Jose, Calif., another office-to-life-sciences conversion. Also currently underway is the repositioning of an Atlanta office tower for The Center for Global Health Innovation.

David Klein

However, office properties aren’t the only candidates for conversion. In Houston, logistics and retail properties have been reimagined for life sciences use, as seen through a former Nabisco cookie plant, an 80-year-old Sears department store and a Sam’s Club.

As for new builds, TMC3, a 37-acre biomedical research hub in Houston is considered one of the most transformative projects in the life sciences arena.

Whether you’re a developer in the sector, a building owner looking to attract life sciences tenants, or an established life sciences company contemplating whether to buy or lease, consider these factors when determining if you should pursue an adaptive reuse or new build.

Speed to Market

This is critical as life sciences companies are often ready to move into their space in as little as 60 days. Adaptive reuse projects often take one to two years to complete whereas ground-up construction can take anywhere from three to five years.

Infrastructure

Given the research that is conducted in labs, it’s vital that a building’s infrastructure support the needs of scientists, such as redundant power supply, appropriate ceiling heights, larger floorplates and sufficient floor loading for equipment and vibration control, to name a few. When evaluating a potential conversion project, you want to consider its existing HVAC and MEP systems. It can be difficult to replicate life sciences facilities in buildings—especially older office assets—that weren’t designed for that use upfront.

Capital Investment

Assuming you own (or are acquiring a building with the proper infrastructure), a conversion has the potential to be more cost-efficient than a new build. However, a new build offers the opportunity to develop a top-of-the-line, flexible building from the start that can easily pivot based on a tenant’s growing needs.

Zoning

Unlike your standard office building, laboratories are often subject to specific zoning requirements that may pose more construction challenges for conversion projects and operational challenges for the chemical and biowaste handling that life science tenants require. New builds take longer, but in the right municipality, are less restricted as developers can identify potential zoning challenges and adjacent competitive and conflicting uses before acquiring a site.

Amenities

Life sciences real estate requires a very specific ecosystem—one that inspires innovation with access to in-demand amenities. On-site food service, collaboration spaces and fitness centers, as well as proximity to convenience goods and services create an environment that life sciences companies crave.

Life sciences companies produce innovative solutions to the world’s most pressing healthcare problems, and as such, require real estate that supports the science that’s happening behind closed doors. Whether through adaptive reuse or new construction, consider your options when determining which approach works best for your business model and supports long-term innovation.

Justin Brasell is executive vice president & managing director, Healthcare & Life Sciences Advisory Services at Transwestern. Based in Houston, he specializes in providing real estate solutions to life sciences and medical office landlords and tenants.

David Klein is senior vice president, Tenant Advisory at Transwestern. Based in San Francisco, he specializes in tenant advisory and landlord representation and is deeply engrained in the life sciences sector through his conversion assignments for life science incubators, San Jose BioCube and LifeSpace Labs.