Biotech companies typically start out by renting benches from an incubator or shared lab space, and progress to leasing or sub-leasing a private space after raising additional capital.
Below is a guided FAQ on how to approach life sciences real estate and lab space as a biotech founder.
1. Renting benches in shared lab spaces
The simplest way to get up and running is to rent benches month-to-month at a shared lab space incubator. This is available in most major cities. These labs are “turn-key,” i.e. they have already obtained relevant permits, provide services like waste removal and have stocked the lab with basic shared equipment.
How much should I expect to pay?
Typically rent is thousands of dollars per month per bench in these facilities. A rough budget might be ~$5,000/month/bench in hub cities like Boston, and cheaper in cities with less demand. Some shared lab spaces also offer private suites (e.g. ~10 benches), which can range up to $60,000 per month.
What is the process?
Most incubators have an application process for tenants, and they can be highly selective. They typically do not want directly competitive companies in the space to avoid conflicts of interest, and they may have a specific mandate to incubate certain kinds of companies (e.g. they may require affiliation with a certain university or a focus on certain disease areas).
What equipment and services do incubators provide?
In your search, you should ask for a full list of the services and facilities that are provided at the space. Most provide shared equipment and facilities such as cell culture biosafety cabinets and fume hoods. They also provide services, such as waste removal, janitorial, glasswashing, water, gas, vacuum and LN2.
How large can I grow before I have to move?
One consideration when renting by the bench is that seats may not be directly adjacent. If your team is growing, one option is to rent a private suite or a block of benches. This allows you to still take advantage of shared services and equipment before of graduating into a larger private space. However, this option typically requires a longer-term commitment to the incubator.
How long can you stay at an incubator?
Many incubators will have a maximum term length or cap on the maximum amount of capital raised.
Do incubators take equity?
It is the norm that shared lab spaces are provided fee-for-service, not for equity. However, some incubators have seed funds attached to them, such as the Alexandria Seed Fund, Mission BioCapital, and LifeLab. While some incubators ask for the option to invest in the companies they host, we typically advise against agreeing to this term.
What else should I consider?
One other consideration is whether current tenants recommend the space. Make sure to talk to a few, especially anyone who has recently left, to get their feedback.
We’ve compiled a list of incubator and communal lab spaces in the five major biotech hubs of the US: Boston, San Francisco, New Jersey/New York, San Diego and Seattle, to help you get started.
2. Leasing private lab space
Once your company grows, you’ll want more space to accommodate increased headcount, build out custom facility needs and create an office space to define company culture.
Finding and managing your own lab space is much less straightforward than renting benches at an incubator. Spaces comes in all shapes and sizes with varying facilities and term lengths.
Options range from beautiful chrome and glass lab space to “retro-fitted” office space. We have even seen a room that was formerly a conference room, then outfitted as a cold room, and then reverted to a conference room once again. As the lessee, you’ll also have to take on all of the management responsibilities, such as permitting and finding vendors.
How do I get started?
As a first step, find a broker you trust. Brokers will help you find options, make decisions, and close the deal. When interviewing brokers, keep in mind that their incentives may not align with yours.
Many brokers are paid by the landlord and only when a deal closes. Some may also represent landlords in addition to tenants (and large landlords give them substantially more business). In our experience, the brokers mostly have the same information on all options on the market, so focus on trust and incentive alignment.
Great brokers will honestly calibrate your expectations, be responsive, move quickly, and help you push back against lease terms from landlords (even if the incentives work against them). Many brokers will ask that you work with them exclusively since they assume the cost of working with you until a deal is closed. Note that you do not need to agree to this. Work with your broker in such a way that you feel best incentivizes them to make sure you stay top of mind, you see options quickly, and they stay responsive through the process.
You’ll also need to find a real estate attorney to help negotiate the lease agreement. Find an attorney that is experienced in biotech lab leases in your market. Get referrals via other founders and investors.
Check out this list of real estate brokers and attorneys we compiled from other biotech founders.
Where should I build my lab?
Decide on location based on the science you’re working on and the stage of your company. Some factors to think about include, the proximity to hubs of talent (i.e. universities or companies in your field), where employees live, and access to public transportation. Think through the feel of the space as it relates to company culture and visualize how feasible it is to move large pieces of equipment into the space.
What is the process?
You should expect to see 5-20 options to find an option that you like. Schedule weekly calls with your broker to review openings on the market and plan tours.
Once you’ve locked in on a location, you will negotiate the essential terms of the lease or sublease with the landlord. These terms are expressed as a Letter of Intent (LOI), and when terms are agreed both parties should sign. After formally signing an LOI, the landlord should not be soliciting other offers, and at the same time, you should not be signing an LOI with any other party, as both parties should focus on negotiating the final lease and closing the deal.
In practice, in a very hot real estate market (e.g. Boston 2020-2022), landlords may never sign the LOI and prefer to keep their options open for higher bids. Therefore, always keep exploring parallel backup options until you have a signed lease.
In negotiating a lease, your real estate attorney should mostly manage the process for you, while asking for your input on any business considerations.
But, ALWAYS read the lease! While your lawyer should in theory point out anything out of the ordinary, it is still important to know what you’re on the hook for.
Expect 1-3 months to complete lease negotiations.
When should I get started?
Our advice on lead time reflects this complexity. Start your process 1 year ahead of the move-in date, and 1.5 years ahead if you expect you will have to expect to do any construction (e.g. if your lab has any non-standard requirements, or if there is low availability of move-in ready space on the market).
Note: 2019-2022 in hub cities like Boston and the Bay Area saw extremely fierce competition for lab space subleases and leases, and our advice on lead times can reflect this.
How large a space should I find?
A company with 10 people should be ~3,000 sq ft, and a company of 25 people should be ~8,000 sq ft. As a starting point, budget roughly 300 sq ft/person and expect most spaces to be set up as a 50:50 split of lab and office space.
Lease lengths are much longer than fundraising cycles. If your company is growing rapidly, consider investing in a larger space, and then sublease the unused space to another tenant.
How should I budget rental costs?
Rent is usually discussed net of real estate taxes, utilities, and maintenance costs (“triple net” or “NNN”) and calculated per square foot (“PSF”), including a share of common spaces shared with other tenants. Brokers can help you account for the all-in costs, and you should also ask to see costs from tenants from previous years.
Rents vary widely across neighborhoods and quality. In Boston, we are currently seeing rents in the $50-$180 PSF NNN, and somewhat lower in the suburbs.
If a space requires a build-out, expect to spend ~$350 PSF. Often a “tenant improvement allowance” is negotiated with the landlord as well, but amounts can vary based on demand and lease lifetime.
What infrastructure and services will I need?
Here are some considerations and recommendations:
- Consider your power and backup power requirements, and the location of outlets
- Lab spaces typically have ~6 air changes per hour. You’ll also want to consider airflow directions between tissue culture room, main lab facility, and office space. Consider the building’s ability to accommodate additional HVAC support for future additions to fume hoods or changes to relative air pressure.
- Alcoves for storage of reagents and supplies
- Alcoves for refrigerator and freezers
- Air, vacuum, natural gas lines and manifolds, or room for gas dewars
- Fume hoods
- Glasswasher, autoclave (or sterilization service option)
- Chemical / flammable storage
- Sinks may require limestone chip tank for acid/base neutralization
- Eye wash and safety shower
- LN2, air, vacuum, natural gas, gas lines and manifolds
- Medical waste removal, chemically hazardous waste removal
- Safety and EHS (Environment, Health and Safety)
- Internet and Wifi
What permits will I need?
Biology and chemistry often require several permits for lab work, and exact requirements will differ by city. Examples might include biosafety, recombinant DNA, chemicals and flammable materials storage and hazardous waste disposal. Vendors like Safety Partners and Triumvirate can help you manage permit applications and requirements.
Do you have any advice for managing a lab space buildout?
We recommend bringing on a competent project manager who has experience doing buildouts in the life sciences. They can help you understand what the landlord will give you (e.g. air, backup power, electrical) and dig into the construction schedule to give you a realistic timeline for when you can access the space. Other things to watch out for include:
- Pricing/cost: Pricing for labor and materials has gone up by 20-30% in the past year due to supply chain issues and labor shortage, so there’s increased construction and cost risks when doing tenant improvement.
- Timelines: Don’t assume delivery dates for materials will be on time given supply chain issues and get granular when asking your landlord for when you can get access to the space leading up to the occupancy date
How should I find equipment for my lab?
Finding equipment at a manageable cost can be tricky. Check out these tips that founders have shared with us to keep your equipment budget economical.
- Look for used equipment. There are companies specializing in refurbishing and selling used lab equipment (e.g. for Boston-based companies, Cambridge Scientific is a solid choice). Ebay is also a popular option.
- Rely on your network. Other start-ups may be selling equipment. Even university labs may be looking to off-load old, but functional equipment.
- Be creative. Equipment manufacturers often charge outrageous prices for simple tools like a water bath. One founder realized that a sous vide — about 1/2 or 1/3 the price of a ThermoFisher water bath — works just as well at maintaining a constant temperature!
- Buy your equipment at the end of the year, if you can. A lot of sales reps will give discounts to meet end-of-year quotas.
- This isn’t necessarily a hack, but look into financing or leasing equipment. Some founders prefer to turn the upfront expense into a monthly cost.
Conclusion + Additional Reading
Finding and choosing the right lab space can be a lengthy but crucial step for your biotech startup. We encourage you to find the right partners (e.g. brokers, legal counsel) and ask other founders who have been through this process before for their guidance.
Elsewhere, Naomi Handly of Octant has shared lessons learned from building their lab and their experience building out a lab in Emeryville in the Bay Area. The team at Savills compiled a checklist of operational and real estate considerations for startups considering moving beyond an incubator space.
Best of luck!
We are grateful to a number of founders who shared their experiences with us, including Frances Anastassacos of Nabla Bio and Jake Becraft of Strand Therapeutics. Thanks to all contributed!