According to a recent report from CBRE, Chicago ranks No. 6 for job growth out of the Top 25 life sciences markets in the U.S. To establish itself as a prominent hub on par with the coastal life sciences clusters in Boston and San Francisco, Chicago needs to enhance its offering in the areas of funding, talent, real estate and infrastructure. While the city has made many positive strides toward becoming a life sciences destination, there are four key steps city and state leaders can take to accelerate this process.
1. Enhance Long-Term Tax Credits and Other Incentives
To attract life sciences companies to Chicago, the city needs to have purpose-built labs and manufacturing facilities available for them to occupy—and developing these facilities is expensive. According to some developers, purpose-built life sciences buildings, which have highly specialized utility and infrastructure requirements, can be 25-30% more costly to build than traditional offices. Long-term tax credits are one of the primary vehicles available to offset these high costs, but tax credits in the state of Illinois are not competitive with those in other states: Illinois ranks 35th in the nation for tax incentives aimed at businesses.
In addition to tax credits, municipalities can take other measures to help spur the development of lab space and position themselves as destinations for the life sciences industry. For example, California revised building codes to accommodate an “L occupancy,” which allows chemicals used in life sciences research and manufacturing to be stored on higher floors of a building, making additional space available to life sciences tenants. Philadelphia and the “Research Triangle” region in Raleigh-Durham, North Carolina have also used tax credits and other incentives to bolster their emerging clusters. Illinois is starting to follow suit: in October 2021, Governor JB Pritzker announced a $15.4 million investment as part of its Wet Lab Capital program to support eight new wet lab spaces throughout the state. While this program is a step in the right direction, establishing Chicago as a competitive life sciences hub requires long-term commitment from a larger coalition of public and private stakeholders.
2. Cultivate an Ecosystem That Attracts VC Funding
Venture capital (VC) can provide critical funding to life sciences companies and institutions, especially in their early stages. But according to research from JLL, Chicago ranks 15th in all funding among top life sciences markets. As capital conservation becomes top-of-mind due to rising interest rates and concerns about the possibility of a recession, lower-funded markets are likely to see even fewer capital inflows from VC investors.
Chicago needs to engage with the VC community to reinforce its value as an emerging life sciences cluster worthy of investment. One way to increase the city’s appeal in the eyes of VCs is to establish incubators, innovation districts and other partnerships with local universities. Large institutions putting their money where their mouth is to support life sciences firms helps create a healthy foundation for both innovative start-ups and established industry titans, which drives appeal for investors.
In 2022, Chicago’s Northwestern University received more than $500 million in grants from the National Institutes of Health (NIH) to fund medical research. The University of Chicago, Loyola University, University of Illinois, and Rush University also have robust research programs that can help support a thriving pipeline to life sciences business development. Joint efforts between academic institutions and business, like University of California San Francisco’s (UCSF) CoLabs incubator and plug-in labs in the San Francisco Bay Area and The 78 Chicago’s partnership with the University of Illinois’ Discovery Partners Institute strengthen a city’s life sciences ecosystem and help make it a more attractive candidate for VC funding.
BioLabs, an international co-working space for life science startups that provides young companies with the space to test, develop and grow their game-changing ideas, is slated to open its first Chicago location in Spring of 2023 on the second floor of a redeveloped life sciences building formerly owned and operated by Lurie Children’s Hospital. As Chicago demonstrates a steady pattern of development in its life sciences ecosystem, VCs will be more inclined to deploy funding in support of these growing enterprises.
Additionally, Chicago offers a much more affordable price point for high-tech lab space than costlier coastal cities. With averages from $30 to $60 per square foot, compared to coastal hubs that can range as high as $90, Chicago offers a substantial cost benefit to start-up enterprises, making the area more attractive for VC investors.
3. Become a Destination of Choice for Top Industry Talent
For life sciences companies, proximity to talent plays a significant role in selecting a location. In some cases, one lead scientist can be the deciding factor in determining where to establish a new facility. Fortunately, Chicago has a strong pipeline of life sciences talent—and as more brand-new, state-of-the-art facilities are built, the city will become even more attractive to scientists who want to work in a high-quality lab environment. As labs and research facilities emerge in different neighborhoods, Chicago’s life sciences ecosystem will be accessible to a diverse talent pool while remaining in close enough proximity to achieve the benefits of a “cluster.”
Chicago’s emerging status as a life sciences hub also offers industry professionals the selling point of new, Class A building inventory. For example, a brand-new 16-story tower under development by Mark Goodman & Associates in Chicago’s uber-popular Fulton Market neighborhood will house office space and wet labs for life sciences tenants. The project, located at 400 North Elizabeth St., is the first purpose-built lab and research and development building in Chicago designed specifically to accommodate the rapidly growing life sciences and biotechnology industry.
Amenities also play an important role in attracting life sciences talent. In addition to high-quality lab space, scientists and other staff are increasingly looking to work in the kind of “campus” environment made famous by tech companies in Silicon Valley. Outdoor space as well as on-site bars, restaurants, fitness options and other amenities are in demand.
When it comes to delivering these shiny new labs and amenity-rich campuses, up-and-coming markets like Chicago often face a “chicken vs. egg” conundrum. Life sciences companies want to locate their enterprises in clusters that can provide the talent and real estate inventory they need to be successful, but developers hesitate to build without the assurance that a robust tenant population already exists. But there are bright spots on the horizon: The Innovation District at the 78, for example, is a planned 200,000 square-foot Chicago innovation hub that will feature 11 acres of mixed-use supporting building, riverfront development and green and open space, mirroring some of the most successful innovation districts in other parts of the country.
4. Build the Infrastructure to Support Long-Term Growth
Cities that have cultivated thriving life sciences clusters have made a purposeful effort to satisfy the industry’s unique infrastructure needs. First, encouraging life sciences development in designated neighborhoods displays a city’s commitment to supporting the industry. Boston and San Francisco are good examples of cities that concentrated life sciences activity in a way that provided for companies’ needs without disrupting the daily lives of residents. Creating an industry cluster requires a collective effort, and Chicago is still early in this process.
Second, beyond physical proximity, the other crucial infrastructure need for life sciences development is electricity. Labs and other life sciences facilities can consume twice as much electrical power as a traditional office building. Companies need reliable capacity from local electrical grids and in some cases, space on the roof of their buildings for a sizeable generator. West Coast life sciences clusters have also explored supplementing the industry’s electrical needs with solar power. Energy infrastructure that can continue to deliver the capacity and flexibility these firms demand is a critical element of facilitating growth in Chicago’s life sciences industry.
Chicago’s Commonwealth Edison (ComEd) is capable of keeping up with this demand but must be engaged to build substations in advance of the coming growth. In the past, PMA has worked with ComEd to develop substations in Streeterville for the large concentration of hospital space that has been built there since the mid-1990s. A similar method can and should be taken for lab development.
As the Midwest’s largest metropolis and the home of world-class academic institutions, cultural attractions and entrepreneurship, Chicago is the ideal destination for a flourishing life sciences hub between the major clusters on the East and West Coasts. To accelerate growth, the city must galvanize stakeholders to increase funding, attract talent and enhance infrastructure. The life sciences industry continues to be a bright spot in a tumultuous U.S. economy, and Chicago’s journey to becoming the next destination for this dynamic sector is well underway.
