BIOTECH BUILDINGS CRUNCH Lack of lab space in area constrains industry, firms say

THE BALTIMORE SUN

Maryland's biotech companies have gobbled up the region's affordable laboratory space to such an extent that industry growth may be constrained.

When Human Genome Sciences was formed in August of last year, Lewis Shuster, a veteran Maryland biotech executive and the company's new executive vice president, searched for a building. He looked in the Washington suburbs and in Howard and Anne Arundel counties.

"Basically, there was nothing," he said. Then he got lucky. He heard that Synthecell Corp., another biotech company, was moving from its Rockville home to larger quarters. So he quickly made a deal, pushing Synthecell out the door early.

The story is often repeated in Maryland as biotechnology companies of all sizes compete for a limited amount of space. "It is very, very frustrating for us," Mr. Shuster said. "It is a real constraint on our growth."

As banks have shied away from lending developers money for construction, extra space has quickly been taken. Today, the problem extends from Baltimore to the Interstate 270 corridor in Montgomery County, where most of Maryland's biotech companies are headquartered. While state and local officials say they are concerned about the helping the tiny industry find a solution to its space crunch, no action has yet been taken.

"They call [Baltimore] the city where science comes to life, but they don't make half the effort to support biotech that they do to support Coke or Sears," Paul M. Silber, chief executive of In Vitro Technologies, complained.

At least one company that wanted to move to Maryland didn't, and a local company found itself courted by other states.

Clonetics Inc., a San Diego company with 40 employees, wanted to move to Maryland last year. Its chief executive, Suzan Garner, traveled to Baltimore four times, staying a week each time to look for about 25,000 square feet of space.

"After an intensive six-month search with two good Realtors, we were all very disappointed," she said. "We thought we would see a lot of available space, and there was just nothing." In San Diego, she said, the kind of space she was seeking is readily available.

Genetic Therapy, Inc. of Gaithersburg and Crop Genetics International of Hanover, two of Maryland's most prominent -- if not profitable -- biotech companies, have had to use cash that they otherwise could have spent

on research and development to renovate spaces to fill their growing needs.

And Genetic Therapy, which is in the process of spending $4 million to add 38,000 square feet of space to its existing 19,000, was wooed by state and county officials in West Virginia. The officials offered to help the company get loans through guarantees and other arrangements. Maryland, on the other hand, offered far less in loan guarantees.

Genetic Therapy will stay in Maryland to be close to the National Institutes of Health and other scientific research institutions, but Chief Executive James Barrett said that when the company begins manufacturing a product he will keep in mind West Virginia's offer. "They certainly opened our eyes," he said.

Crop Genetics, which needed manufacturing space this year, was forced to raise the necessary cash by a secondary public offering last summer at a time when the market was not particularly favorable.

Developers say the real estate market is the major reason they are unable to covert the region's glut of vacant office and warehouse space to house biotech companies. It can cost $150 a square foot to outfit a vacant building with laboratories, and banks have been unwilling to lend money for such a project -- particularly when the tenant is a biotech company.

Take four Baltimore biotechnology companies that are now outgrowing the three local incubators -- buildings that offer tiny start-up technology companies cheap space.

Molecular Tool Inc., Chektec Corp., In Vitro Technologies and Adheron Corp. all want more space. But these are private companies, with fewer than 30 or 40 employees, that don't have products on the market or a lot of cash.

They don't want to pay rents higher than $20 a square foot, and they don't want to commit to long-term leases because of the riskiness of their business: In 10 years they probably will be either a multi-million dollar company or out of business. And, to top it off, they want to be in a building that will allow them to grow.

"The problem is with the real estate market in general," said Bill Struever, a real estate developer. "I can't get the bank to lend me $20 a square foot for good tenants."

Mr. Struever is a member of a group of developers, engineers and architects who have begun looking at the needs of biotechnology companies. While their survey is not complete, it appears that state and city economic development leaders are beginning to look at ways they can help ease the crunch.

"If we don't do something fairly quickly it will hurt our whole life sciences effort," said Sara Trenery, senior vice president for real estate development at the Baltimore Development Corp.

The state is considering ways to spread the risk between the company, the developer and government, said Joel Lee, deputy secretary for the Department of Economic and Employment Development.

Besides direct loans, the state could offer to guarantee a portion of a loan or a lease, which would mean a biotechnology company would not have to put as much cash into a renovation up front. In addition, Mr. Lee said he is hoping the federal government will be able to provide money.

Already, one developer, David W. Baird of Belt's Realty Services Inc. is studying the feasibility of building laboratory space for small marine biotechnology companies in two buildings in Fells Point: at Swans Wharf and the Saga Building, a warehouse on Aliceanna Street.

"In the marine biotech field we feel there is enough activity building that we may be willing to take a calculated risk," Mr. Baird said. Once the company's planning studies are complete, he said, they will find companies interested in space and then go to the state seeking some backing.

That request may be the first time the state and city officials will confront a proposal from a developer. Without government support, Mr. Baird said, the project will not go ahead.

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