Life sciences developments are booming in Chicago, bringing jobs and helping fight ‘brain drain’

CHICAGO TRIBUNE

Life sciences developments are booming in Chicago, bringing jobs and helping fight ‘brain drain’

By Brian J. Rogal

Much of Chicago’s office market remains stuck in the doldrums, but another economic engine has come to life, ready to remake the city into a hub for advanced industry and research. New towers dedicated to life sciences and biotech are already rising in an arc around the downtown core, with more likely on the way.

“It really is the next industry for Chicago,” said Regina Stilp, principal of Farpoint Development, part of a team chosen by the city to transform the former Michael Reese Hospital site on the Bronzeville lakefront into a $7 billion mixed-use development.

Farpoint’s team will soon break ground on the Bronzeville Innovation Center, a 500,000-square-foot building with labs and offices, where life sciences entrepreneurs will create startup firms with help from Israel’s Sheba Medical Center. Stilp said it and other new developments means Chicago may finally compete with mammoth life sciences clusters in Boston, San Francisco and San Diego, giving the thousands of scientists and lab workers graduating each year from local universities ways to stay in their hometown and grow its economy.

“They want to stay here, but there’s this brain drain to the coasts because there are no life science jobs or tech jobs that they really want,” Stilp said. “So, we’re trying to solve that.”

Farpoint and its partners aren’t alone. A who’s who of the local development community are either launching or already leasing several million square feet of new space dedicated to life sciences, forming the cornerstones of planned communities such as Sterling Bay’s Lincoln Yards, Related Midwest’s The 78 and the former Reese site, as well as in the rapidly expanding Fulton Market neighborhood. Experts say developers finished or started about several million square feet already, with another 2 million square feet of buildings on the drawing board.

“All of these developers are playing the life sciences game, so obviously they believe it’s crucial to Chicago’s continued growth,” said Jonathan Metzl, executive vice president of commercial real estate firm Cushman & Wakefield.

Some builders pivoted from office development to the life sciences sector, and the shift comes at the right time. COVID kept thousands of Chicago workers confined to their homes, but also led to explosive nationwide demand for research into new therapies for disease. And unlike new corporate headquarters, which typically bring in highly educated workforces, life sciences firms need people with a range of experiences, from scientists with advanced degrees to lab workers and support staff who did not graduate from college. It’s a recipe for broad-based economic development, fueling both the construction of splendid lab buildings and high-priced apartment towers for top earners, as well as providing jobs for disadvantaged communities near the new life sciences clusters.

“What many people don’t realize is that 40% of life sciences jobs only require a high school diploma or a GED,” said Dr. Suzet McKinney, who leads developer Sterling Bay’s life sciences division and formerly led the Illinois Medical District on Chicago’s West Side.

“One of the advantages for Illinois and Chicago is (laboratories need) people with Ph.D.s and master’s degrees, and also a significant number of people with associate degrees who work in labs, and these are all high-paying jobs,” said Jim Sullivan, chief executive officer of Vanqua Bio, a new Chicago-based life sciences firm developing a therapy that will slow or stop the progression of a form of Parkinson’s disease.

Richard Florida, an urban planning expert at the University of Toronto, said shifting life sciences into high gear makes sense for cities still suffering from COVID. Laboratories require hands-on work, so researchers are more likely to sign leases for new space and expand while traditional office users stay home on Zoom calls and eventually vacate offices they no longer need.

“Real estate leaders have always been able to remake downtowns in a new way, and I think they’re doing it again,” he said.

Multiple developments

Like Farpoint, Sterling Bay kicked off its massive planned community with a building dedicated to life sciences. The firm broke ground at 1229 West Concord Place in October on the south end of the Lincoln Yards site and plans to finish the 320,000-square-foot riverfront tower by 2023. Starting with life sciences was an easy choice for the development, which the company hopes will encompass more than 12 million square feet, including thousands of residences, a set of office buildings and parks, as well as lab space.

“Chicago has never had a critical mass of the appropriate type of lab space that scientists and entrepreneurs need,” McKinney said.

But Sterling Bay started small. In 2018, It purchased 2430 North Halsted St., the former Stanley Manne Children’s Research Institute, and revamped it into laboratory space, eventually leasing it to Chicago firms such as Exicure Inc. and Evozyne, a molecular engineering firm.

“That building was purchased as an experiment, a way to see if life sciences can really take off in Chicago,” McKinney said.

The project’s success led directly to the launching of 1229 West Concord Place, a building where firms incubated in 2430 North Halsted could expand.

“And it won’t just be one building at Lincoln Yards, we’re building an entire life sciences campus,” she said.

The decision to focus on life sciences made a convert out of Jonathan Snyder, executive director of North Branch Works, an organization dedicated to preserving the thousands of high-paying industrial jobs still located along the North Branch of the Chicago River. Along with other community leaders, he initially opposed Sterling Bay’s development when the firm sought City Council approval in 2019.

“I really like that Sterling Bay used life sciences to kick off Lincoln Yards,” Snyder said recently. “It’s a fantastic use for the development and will greatly increase and add to the city’s growing research infrastructure. Chicago has lagged behind other cities in this area, and this is a great way to catch up.”

Snyder said he still questions whether the riverfront corridor has enough public transportation infrastructure to support Sterling Bay’s overall vision for a $6 billion residential and office hub, and wonders whether industrial jobs better suit this slice of the North Side. But after the city approved the developer’s plan and rezoned the area, he decided to be pragmatic and make the best of it.

Scientific research forms the core of other developments ringing the city’s downtown. Related Midwest’s The 78, a planned $5 billion development on vacant land just southeast of the Loop, will soon host an academic and lab building, large enough for up to 500 researchers and thousands of students. Scientists at the lab, which will be run by Discovery Partners Institute, a University of Illinois-led venture, will conduct research into many high-tech fields, including how artificial intelligence can improve patients’ outcomes. Developers will break ground on the lab next year.

Fulton Market in the West Loop is also well on its way to becoming a scientific hub. The former meatpacking district began transforming into a high-tech office center when Google established its Midwest headquarters in a former cold storage building there in 2015. It’s now the city’s hottest office market, one of the few areas where tenants line up to lease space, and life sciences is sparking yet another development wave.

Developer Trammell Crow in 2020 opened the 14-story 1375 West Fulton St., phase one of the company’s 725,000-square-foot life sciences campus, and finished the second phase earlier this year. Mark Goodman & Associates plans to continue the neighborhood construction boom by breaking ground at 400 N. Elizabeth St., just a few blocks away, on what will become a 16-story life sciences tower.

A place to grow

Scientists like Sullivan say Fulton Market is a perfect place to grow.

“One of the key things when you start up a biotech firm is to attract talent,” he said. “And part of attracting talent you need is having world-class facilities.”

Vanqua Bio was founded in 2019 to further research begun by neurologist Dr. Dimitri Krainc of Northwestern University’s Feinberg School of Medicine. The new firm spent time in a small lab space provided by the school, then moved to a few thousand square feet in Sterling Bay’s life sciences incubator building at 2430 N. Halsted St.

Initial research was promising, said Sullivan, scoring the firm $85 million in funding last year, allowing it to graduate into about 20,000 square feet on the sixth floor of 1375 W. Fulton St. The company moved in a few weeks ago, has hired dozens of people and in the next few years will begin human testing and perhaps double in size.

Its new home is a step up from a small academic lab. The rooftop deck, beer garden, fitness center, lounge and other amenities might not seem important, Sullivan said. But Vanqua is recruiting nationally, and spacious Class A labs with all the comforts is what will help draw scientists and lab workers away from other jobs in Boston’s life sciences hub, the nation’s largest, as well as San Diego and San Francisco.

“Without this building, we would have had to seriously think about whether we could stay in Chicago,” Sullivan said.

Locating within a life sciences hub also ensures constant contact with other scientists, including potential recruits and collaborators, an energy which should help draw in more firms, according to Viola Meehan, Vanqua’s chief financial officer.

“We saw Fulton Market was already attracting other life sciences firms, and we wanted to be a part of that vibe,” she said.

Developers and industry boosters hope dozens of new Chicago firms follow Vanqua Bio’s path.

“We’ve had more than 20 venture capital-backed life sciences firms founded in Chicago over the past few years,” said Paul Giannopulos, senior managing director of Chicago- based JLL. “The demand we’re seeing so far is mostly (local), from companies growing out of our universities, getting funding and saying, ‘Great, now we can stay in Chicago.’ ”

Life sciences incubator Portal Innovations saw a burst in demand after it signed a deal in 2020 to open an office in 1375 W. Fulton St., where it occupied about 11,000 square feet, said President Patrick Flavin. The company typically provides local startups such as Grove Biopharma, which is searching for new biotherapeutics to treat neurodegenerative diseases, with short-term leases for lab and office space, financing and strategic advice. Portal Innovations did so much business it opened a 35,000- square-foot office in 400 N. Aberdeen St. in February.

“We didn’t know how much (demand) we would tap into, until we did it,” Flavin said.

He added that if Chicago’s life sciences industry keeps growing, it won’t stay dependent on firms nurtured in Chicago.

“I think we’ll start to see companies moving from Boston to Chicago,” he said.

Available lab space was the missing piece in Chicago’s puzzle, Giannopulos said, and he already sees signs that Chicago can now both hold onto its homegrown firms and attract outside companies.

Chicago-based Xeris Pharmaceuticals established research and development facilities in San Diego because Chicago lacked lab space, but agreed in 2020 to relocate the operation to 11,000 square feet in Portal Innovations’ incubator, he said. And Talis Biomedical Corp., of Menlo Park, California, also signed a deal last year to take more than 26,000 square feet in the building.

Giannopulos expects companies will keep coming, attracted by the nation’s third-highest concentration of science and engineering graduates, drawn from local schools like Northwestern, University of Chicago, the University of Illinois and other research universities around the Midwest.

“If you graduate from Indiana University, you’re probably skipping Indianapolis and going to Chicago,” he said.

The life sciences sector‘s biggest development is likely to be Google’s rumored deal to lease about 200,000 square feet at Trammell Crow’s new Aberdeen building, Giannopulos added. Even if it’s not a strictly life sciences lease, life sciences firms also need high-tech talent, so anything boosting Fulton Market’s tech reputation will further energize the sector.

But for all its success so far, Chicago’s life sciences sector is still in an embryonic stage, according to Mark Goodman, president of Mark Goodman & Associates. Boston has about 27 million square feet devoted to life sciences, and two or three tenants pop up whenever spaces become vacant. Chicago will need that kind of pipeline to fill all its planned space, and to nurture it, he’d like to see the whole community of developers, along with area hospitals and universities, collaborate on plans for a real hub, instead of all the players working on their own projects scattered about the city.

“That really hasn’t happened here yet,” Goodman said.

Still, he’s optimistic enough to break ground on his planned life sciences tower on North Elizabeth Street as early as next year.

“Life sciences as an industry is growing across the country, and there’s no reason why Chicago should not get its share.”