By Adrian Ponsen CoStar Analytics
Home to the country's first medical library and surgical amphitheater, Philadelphia has a long history of advances in healthcare research. But with some of the highest construction costs in the U.S., the city has also long been known as a challenging market for commercial development. Fast forward to 2021, and the combination of these forces has meant that the supply of modern lab facilities to accommodate the city’s growing life sciences industry has been falling short of tenant demand for years.
But the days of Philadelphia's lab space shortage could be numbered. The pandemic has dealt a serious blow to demand for traditional office space, as white-collar employers across a range of industries adapt to working from home. Meanwhile, recent leasing by a range of life sciences firms from Amicus to Zoetis has remained strong. Together, these trends have catalyzed a wave of conversions of traditional office buildings into lab facilities that can accommodate Philadelphia's growing roster of life science firms.
Across Center City and University City, at least 10 large office properties are planning conversions like these, with some of the largest renovations planned for The Curtis, 401 N. Broad St. and the Wanamaker Building. All eyes are on just how quickly these projects will lease and which will fill-up first.
Located less than five blocks from Thomas Jefferson University's fast-growing main healthcare campus and from Pennsylvania Hospital, one of the earliest established public hospitals in the U.S., Keystone Property Group's Curtis Center has scored some early wins.
At the beginning of the second quarter, Keystone announced three leases totaling 28,000 square feet with Imvax, Vivodyne and Applied Genetic Technologies.
The largest of these deals came from Imvax, which is pioneering treatments for brain cancer. The firm increased its existing space within the property from 15,699 to 21,066 square feet.
Vivodyne, which creates lab-grown replicas of human organs used for testing new drugs, took 6,230 square feet and will move from a smaller lab at the University of Pennsylvania. Florida-based Applied Genetic Technologies Corp. also opened its first Philadelphia office to be close to research happening at Wills Eye Hospital and took 1,000 square feet.
All of these leases were signed for spaces on three floors, where Keystone will also be opening INQ Labs in October 2021. At 23,362 square feet, INQ Labs will offer furnished suites with combinations of office and lab space for tenants from 3,500 to 6,000 square feet, allowing life science firms to occupy space quickly, with minimal upfront out-of-pocket expenses.
The Independence Hall area, where The Curtis is located, has been less of a magnet for traditional office users in recent years. But modern adaptations to older office buildings like these have potential to bolster the neighborhood’s economy significantly in the years ahead, especially as they tap into its long history of healthcare innovation, which dates back as far back as 1751 when Pennsylvania Hospital was founded.
