Local economies derive their strength from diversity, as well as a little bit of prognostication. If Chicago wants to serve as a regional and national draw for corporate investment, it must tap those fields where high growth is expected in the near future, such as life sciences and technology.
In 2018, the National Institutes of Health, venture capitalists and corporate R&D combined to invest an estimated $125 billion in the pharmaceuticals and life sciences sectors. That level of investment is expected to grow by more than a third over the next five years.
Recently, HOK brought together a group of thought leaders, developers and architects to discuss the emerging science and technology sector in the Chicago region. Moderated by HOK’s Sarah Oppenhuizen and Daniel Niewoehner, the panelists discussed the roles that organizations can play to stimulate this expansion, as well as the ways that space can attract talent.
Chicago: Poised for growth in science and technology
COVID-19 has realigned priorities and strategies as we navigate economic recovery. According to Tom Osha, senior vice president, innovation and economic development at Wexford, this plays to Chicago’s strengths in three ways.
“The first way is the growth of intellectual capital and research, as we see talent moving into the city and institutions like Northwestern and the University of Chicago expanding their research portfolios and initiatives,” Osha said.
Additionally, institutional de-anchoring has led large organizations to partner with academics, research labs and incubators, motivating pharma and tech firms to set up spaces close to the intellectual capital, innovation and infrastructure found in research institutions. The third aspect is Chicago’s affordability compared to typical tech centers on the coasts, where the cost of doing business is becoming unsustainable.
“There is lots of pent-up demand in Chicago,” said Catherine Vorwald, director of life sciences at Sterling Bay. “As you look at the city, every cluster has the same problem: incubators are full and there’s no multi-tenant graduation space.”
Sterling Bay’s Lincoln Yards project—a 55-acre, mixed-use development along the North Branch of the Chicago River—could be the ideal home to fulfill some of this demand. The firm is also repositioning 2430 N. Halsted in Lincoln Park as a medical research lab and the development is already half leased.
The challenges of turning Chicago into a life sciences destination
Chicagoland’s massive spatial geography—larger than the state of Rhode Island—requires innovation districts to serve as hubs for research and activity. But due to the nascent nature of Chicago’s technology market, there haven’t been many intermediaries bringing together institutions and organizations. And not all properties are well-suited to the task.
“Lab buildings, especially for corporate life sciences, have very specific needs,” said Tim O’Connell, director of science and technology at HOK. “You’re not going to turn Willis Tower into a lab building; it doesn’t have the right infrastructure.”
Between institutions like the University of Chicago, Northwestern University, Argonne National Laboratory, Fermilab and others, the greater Chicago region has fantastic universities and academic assets. Translating these assets into commercial impact has been slow going, however.
“We have two national labs, four Tier 1 research universities and federal research assets and funding. What we don’t have is the commercial apparatus to catalyze growth,” said Michelle Hoffmann, senior vice president, health and life science at P33. “Chicago hasn’t been first on the list for someone starting a new venture or innovation center because we haven’t had a good story to tell. Now is the time to solidify and tell our story.”
Nurturing life sciences in Chicago
Incubators play an important role as technology firms grow from fledgling startup to world-changing organizations. Supporting these companies’ roles in the local ecosystem, as well as attracting and retaining talent, requires spaces that allow them to grow and transition.
“Part of the reason space is so important is that when a company receives a significant round of financing, they have to move quickly to execute,” said Alan Koder, director of business development, CBRE. “They have milestones to achieve and need to immediately put that capital to work. They can’t wait 12 months for a space to be designed and built. That’s lost time and money.”
According to Koder, most of these companies have similar needs; they usually require between 15,000 to 30,000 square feet of lab space, for example, with built-in flexibility. He points out that successful companies quickly outgrow their spaces and therefore don’t want to sign long-term leases. Less aggressive lease terms attract early-stage companies.
According to Hoffmann, Chicago lags other markets when it comes to lab and tech space, forcing development venture groups to take on more risk if they choose to locate here rather than a market with more certainty. One tool that Massachusetts, Texas and California have used to mitigate that risk is public investment.
“If public money isn’t available, there needs to be movement toward raising private funds and foundation money to catalyze growth,” Hoffmann said. “We must have enough resources to help organizations understand that we have already made the investment and just need their talent.”
Attracting tech companies to relocate
Buildings should be designed for the next generation, as well as with flexibility in mind for multiple use types. But if the city is serious about enticing life science firm to move to Chicago, there should be a specific area of focus.
“If we try to do everything great or everything at once, we end up doing nothing really well,” said Koder. “We should evaluate the current industries in the city and determine how life sciences could leverage or intersect with them.”
As Hoffmann pointed out, business owners and entrepreneurs are always on the lookout for new talent to drive their innovation. Chicago’s government and business leaders need to step up their endorsement, promoting all that Chicagoland has to offer and show we can do it as well or better than any other market.
“Both the mayor and governor’s strategic plans prioritize life sciences and healthcare,” Vorwald said. “But the city needs all the various stakeholders to collaborate. Organizations like World Business Chicago are integral to drawing attention to the city as a great place to live, work, play and grow.”