Philly Life Sciences Surges into Number Four Spot of U.S. Hubs

Philly Life Sciences Surges into Number Four Spot of U.S. Hubs

Ecosystem growth is driven by new real estate developments and a loosening of venture capital funding, which supports the expansion of workforce programs.

By Alex Keown | May 30, 2024

At the forefront of gene, cell, and mRNA therapy R&D, the Philadelphia life sciences market is one of the fastest-growing industry clusters in the United States in terms of funding, real estate development and increasing talent.

An industry snapshot shows the Philadelphia region, which includes the suburbs, as well as parts of New Jersey and Delaware, is a key location for life sciences with strong market fundamentals. Overall, Colliers ranks Philadelphia fourth in its 2024 Life Sciences Report which analyzes leading and up-and-coming hubs across the United States. The Colliers rankings are based upon several industry drivers, such as venture capital funding, NIH funding, completion of life sciences degrees, as well as real estate inventory and demand.

Even with the economic slow-down at the end of 2023, more than 20 million square feet of life sciences space came online across the United States, the most on record, Colliers reported. Another 36 million square feet of space is being developed. As expected, the majority of new space, completed and under construction, is found in the major hubs, particularly Boston and San Francisco.

Philadelphia’s life sciences real estate market is robust. The area boasts about 23.7 million square feet of industry space. That puts Philadelphia in the fourth position behind San Diego (23.9 million square feet), Boston (50.4 million square feet) and San Francisco (50.6 million square feet). Life sciences real estate in Philadelphia rents for about $65 per square foot, marking it as the sixth most-expensive hub in the U.S. Boston and New York take the top two spots for highest rent per square foot at $110 and $105, respectively.

There is an estimated 7.7% vacancy rate in Philadelphia. But, Colliers notes about 2.5 million square feet of space is currently under construction for the life sciences. This could cause the vacancy rate to rise in the short term but, as funding activity recovers and more projects move forward, Colliers predicts that vacancy rate will fall.

“The vacancy rate increased because of new purpose-built facilities but remained below 10%. The high interest-rate environment resulted in a pause in construction and redevelopment starts, allowing demand to catch up with supply and calming concerns about overbuilding,” Colliers reported.

The report adds that about 45% of the space under construction is pre-committed by companies such as Spark Therapeutics, WuXi, and SmartLabs. More than 1.5 million square feet of new development space is located in the growing Station District, now home to Spark Therapeutics, Cabaletta Bio, AskBio, and Ceptur Therapeutics.

Joseph Fetterman, Executive Vice President of the Philadelphia Tri-State Region at Colliers, said Philadelphia is in a “good, healthy position” as a life sciences hub. With its continued importance in the gene and cell therapy space, Philadelphia and its role in developing mRNA for the COVID-19 vaccines, Philadelphia continues to shine as a top hub, Fetterman said. He pointed to multiple life sciences developments, such as the $290 million life sciences project being developed in University City, Budd Bioworks and Schuylkill Yards, which is where Spark Therapeutics will have its headquarters, as signs of progress in the city. These developments will allow companies to expand their operations and headcounts.

Additionally, Philadelphia’s demand for incubator space for startup and early-stage companies remained healthy, Fetterman said.

The Colliers report ranks Philadelphia fourth for new biomed graduates. There were an estimated 3,758 people who earned their new life sciences degrees. Those numbers remain on par with the 3,732 biomed graduates in the Philadelphia region last year, according to the Colliers 2023 Winter report. This year, Boston churned out the most graduates with 5,267, followed by New York’s 4,737 and the San Francisco area, which had 3,886 graduates. While the Colliers report highlighted the recent biomed graduates, Fetterman noted the real estate figures highlighted in the report are also an indicator of headcount needs in Philadelphia. In order for companies to effectively use the new developments, they will have to have the necessary talent, Fetterman said.

As existing companies expand, or as new companies launch, Philadelphia offers multiple life sciences training programs. Some of those programs include:

The Wistar Institute

The 2022 BioBuzz Workforce Champion of the Year, the Wistar Institute, located on the University of Pennsylvania campus, offers the Biomedical Technician Training Program that provides training and career opportunities for the life sciences.

University City Science Center

The University City Science Centers offers multiple workforce development programs, including Building an Understanding of Lab Basics (BULB), which is a free, five-week, hands-on laboratory training program. The mission of the BULB program is to connect people who do not have specialized degrees to job opportunities in high-growth STEM industries.

Jefferson Institute for Bioprocessing (JIB)

JIB provides critical training in biomanufacturing and bioprocessing for next-generation biologics, vaccines, and cell and gene therapies. JIB provides comprehensive training in commercial single-use processing equipment for undergraduate and graduate students, as well as working professionals who are expanding their skill sets.

Keystone LifeSci Collaborative

Announced in March of this year, the Keystone LifeSci Collaborative was launched, in part, to enhance regional competitiveness in the life sciences industry. Members of the organization, which includes stakeholders from multiple life sciences companies and institutions in the Philadelphia region, plan to collaborate on workforce challenges that will support the development and manufacturing of new therapies.

A significant portion of the new construction space has been developed for research, which in turn has boosted demand for biomanufacturing facilities, Colliers reported. Fetterman pointed to biomanufacturing jobs as an important lynchpin in the expanding Philadelphia life sciences ecosystem. Because these roles do not typically require advanced degrees, Fetterman noted biomanufacturing roles have the potential to become game-changing and life-changing career opportunities in Philadelphia, which has a high poverty rate.

In addition to available space, available funds will also support expanding headcount in the Philadelphia life sciences market. The Colliers report focused on two funding sources in its report, the National Institutes of Health and venture capital organizations. In terms of NIH funding, Philadelphia came in sixth place with $1.4 billion, slightly behind the Maryland region, which secured $1.6 billion. Boston led the way with $3.5 billion in NIH funding.

Across the industry, VC funding slowed in 2023. With $500 million in reported VC funding, Philadelphia ranked seventh, tied with Maryland and Orange County. In the fourth quarter, Colliers notes that three Philadelphia-based companies, Aro Bioptherapeutics, Vivodyne and Vittoria Biotherapeutics together raised almost $100 million. Boston took the lion’s share of VC funds. That ecosystem secured about $8.2 billion from venture companies.

“Things are going well in Philadelphia. I think Philadelphia is right where it wants to be,” Fetterman said.

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Alex Keown is a freelance journalist who writes about a variety of subjects including the pharma, biotech, and life science industries. Prior to freelancing, Alex has served as a staff writer and editor for several publications.