Whether it’s a single bench in an incubator or a dedicated facility, life sciences companies often pay a lot of money to buy or lease lab space. A lab bench can cost thousands of dollars per month to simply rent, and buying property is generally a multi-million dollar expenditure.
According to STAT+, a lab bench and a couple of shelves at LabCentral in the Kendall Square neighborhood of Cambridge, Massachusetts, cost one researcher $4,600 per month, back in 2019. It wasn’t just LabCentral, either. At the time, lab space cost per square foot in Kendall Square was averaging close to $100 per square foot. Despite the costs of the bench, the researcher, Scott Robinson, found that paying for the space put him at ground zero of a robust life-sciences hub.
Boston isn’t the only example of areas with high rent for lab space. According to Statista, the highest rent for laboratory and life sciences space in 2020 was in London, with average costs of $113 per square foot. New York followed behind with average per square foot prices of $105.
Access to a larger community of peers and resources is always important for founders, but sometimes it can be shocking to see the prices. $4,600 is a lot to pay per month for a small space, even if it means you’re closer to a supportive and innovative community of scientists.
Increased demand for life sciences lab space and a shortage of supply paired with the challenges and costs of constructing a new facility or converting old office space has made it harder for scientists to find lab space.
As offices have emptied, the life sciences has become a bright spot in the commercial real estate market, with investors and developers seeing strong returns on newly built properties outfitted for biotechnology and life sciences research and development. Scientists simply cannot perform their research from their homes or over the internet.
But despite many developers’ efforts to build new facilities or convert empty office space, lab space still remains scarce. The construction costs of building a new facility or converting unused office space to support the life sciences are high, and including all the necessary amenities can be challenging.
Specialized needs like chemical storage rooms, clean rooms, loading docks and freight elevators, enhanced ventilation, and powerful electrical systems, coupled with very specific building requirements—think large floor plates that are thick enough to absorb vibrations and strong enough to handle added loading—can hamper lab construction or conversion, making it difficult to keep up with demand.
Between the challenges of construction or conversion and the increased demand for space paired with limited inventory, buying and outfitting a new facility as an early-stage life sciences startup is almost impossible.
Smaller biotechs don’t typically have the capital on hand to make real estate purchases without quickly erasing what funding they do have. Instead, startups have to remain lean as they build, finding ways to access properly equipped and maintained facilities as they grow and work towards commercialization milestones.
Continue reading to learn what makes lab space so expensive and whether your company should buy or lease.
What Makes Lab Space So Expensive?
It’s not just the cost of real estate that makes buying a lab facility highly expensive. There are other reasons why lab space costs so much. Energy infrastructure and operating costs add to what it costs to buy and maintain an existing lab or convert commercial real estate to fit specific dry or wet lab needs. These costs are also part of the reason why leasing/renting lab space can be so highly priced.
A huge reason why laboratory space can be so expensive is due to the energy infrastructure needed to run daily operations. Laboratories use far more energy and water per square foot than office buildings.
Electricity is one of the largest energy infrastructure costs laboratories accrue. Lab facilities constantly rely on equipment like freezers, incubators, centrifuges, biosafety cabinets, and computers to operate, resulting in high electricity usage ranging from 30 to 100 kilowatt-hours per square foot each year, according to E Source. The additional output means that a facility’s electrical systems need to keep up with demand, or risk failing.
The building’s lights can also use a lot of electricity, depending on the type of bulb being used and the amount of time they’re on. Scientists tend to work longer hours than the average office employee, adding to the power demands and costs.
Laboratories also require more heating, ventilation, or air conditioning than the typical office building, and rely on powerful HVAC systems and fume hoods to provide ventilation and air flow as needed in different areas of the lab. These systems allow them to stay prepared for contaminants spilling or being released into the air, but often results in ventilation systems running around the clock.
Office buildings generally run their cooling and heating systems during normal business hours, and only supply a small percentage of fresh air, recirculating the majority of its air instead. A laboratory may not only need more fresh air, it may also require maintained, stable temperatures 24 hours a day to protect valuable samples and experiments.
Not all buildings will be able to support a lab’s electricity needs, and updating the existing systems or adding new electrical wiring can be expensive. Landlords and tenants will undoubtedly be on the hook for various permitting, planning, and construction costs.
In addition to equipment, facilities that store samples will often have backup generators and other redundant systems to ensure experiments are protected in case of a power outage.
Water use and plumbing in laboratories can be costly. Labs tend to use far more water per square foot than the average commercial building. The additional water is used to meet more significant cooling and processing needs. As a result, plumbing is an essential and critical part of a lab building’s infrastructure.
Furthermore, because of the materials used in R&D and production, the water often needs to run through pipes made of copper, adding to the overall cost of the facility’s infrastructure. Laboratories can also require more sinks than other commercial buildings, resulting in the need for more pipes.
In addition to large volumes of water and pipes, the water laboratories use must be extremely well filtered, often requiring filters with pore sizes in the sub-micron range. In order to ensure nothing is contaminated, purification and deionization systems are often installed. The equipment itself is expensive, as are the consumable components.
Lab facility waste management is another cost that adds to the overall expensive infrastructure of lab space. While a lot of waste can be treated like normal trash or recycling, many laboratories work with materials that cannot be disposed of in the same way as typical waste.
Facilities that work with various biohazards, hazardous chemicals, infectious diseases, biologicals, and human pathological waste need to dispose of these materials properly, relying on waste disposal services that specialize in picking up and packing laboratory waste, tracking
it, and finally disposing of it later on.
Costs for waste pickup range depending on your location, the waste management company, type and weight of the waste, and the frequency of pickups. Typical lab waste that isn’t considered hazardous will cost less to dispose of, however, hazardous chemical and medical waste can quickly become a significant expense. For example, California’s hazardous waste disposal fees in 2021 averaged $310 per ton. Although lab spaces don’t always dispose of large amounts of hazardous waste, the extra services for waste management add up.
Daily operating costs for lab space are costly, from facility and equipment management to IT infrastructure and additional receiving capabilities.
It’s not enough to simply install or update infrastructure to support laboratory operations, you need to continuously maintain the systems and components as well. Doing so can keep you ISO compliant and ensure the quality of your lab work isn’t impacted. It can cost a laboratory thousands of dollars if the building’s electricity or water stops working properly. However, paying to maintain the facility and its equipment is yet another cost that can make lab space as expensive as it is.
Many lab facilities will hire some sort of facility manager to oversee the maintenance of the building. A facility manager’s salary often ranges from $80,000 to $160,000 a year.
Maintaining lab equipment can be costly as well. Preventative maintenance and preventative maintenance contracts are often quite expensive, and, depending on how much equipment you have, will add to monthly and yearly costs of running a lab facility. However, maintaining the equipment is critical to the quality of your work, and cannot generally be overlooked.
Managing your lab equipment will come with a cost too. A typical lab manager salary is similar to a facility manager’s, often ranging from $70,000 to $130,000 a year. While your needs will depend on the type of equipment and how many units are in the space, this is another expense to add to the total cost of running a lab.
Laboratories often receive shipments daily, which can be a significant disruption to scientists and researchers. To make it easier on the staff, lab spaces often rely on team members whose roles are dedicated to handling the daily inflow of deliveries. Many consumables and reagents require immediate refrigeration as well, making it even more important that there is always someone available to handle the delivery of expensive packages.
These tasks can typically be handled by a receiving or reception team, whose salaries can range from $35,000 and up.
Should You Buy or Lease Lab Space?
Deciding whether to buy or lease/rent can be difficult despite the obvious costs of purchasing. While there are benefits to owning a building and being your own landlord, it doesn’t always make sense to purchase. Biotech companies end up using a majority of their capital expenditure budget to secure the facility and fit it out according to organizational needs.
On the other hand, leasing from an incubator or securing a commercial lease for lab space can make a lot more sense than buying. Going this route can help you:
- Quickly move into a new space: leasing lab space, you can quickly move into a new area. You can avoid the time it takes to build out or update an existing facility and start using the space, lab equipment, and any additional facilities in the building that are available and relevant to you.
- Save money on space and equipment and share operating expenses: Buying laboratory space means fully outfitting the facility, which can be extremely costly. This doesn’t always make sense for early-stage startups with limited funding. Instead, organizations can save on costs by leasing space from an incubator—it will typically have a wide range of general equipment you can use. Also, you won’t have to shoulder all the operating expenses of running a lab space on your own, only paying for your share through monthly payments.
- Scale up flexibly while keeping overhead costs low: depending on your company’s stage of development, you can access the appropriate amount of space and equipment you need without committing to unnecessary overhead costs.
- Tap into a community of peers and industry experts: incubators often house a larger community of scientists and even include mentorship services where you can speak with industry experts and get advice, network, and more. It may be possible to raise funding through the incubator program as well.
Alternatives to Leasing from an Incubator
While incubators (and accelerators that provide laboratory space) are great options for biotech startups, joining one may not always make sense, and getting accepted can be challenging.
Depending on the pricing and terms of the commercial lease, you may want to look for some alternatives. In addition to high rental rates, lab space may not even be available in your area; you might also get stuck on a long waitlist, go through a strict vetting process, and maybe even be required to part with company equity to rent lab space.
Co-working spaces are an alternative to leasing incubator space, giving scientists another option when it comes to finding a dedicated place to work. Businesses like BioLabs, Bonneville Labs, and, more recently, Dupla.Bio, offer shared and private labs spaces, equipment, and various operations support, office amenities, and business services to support scientists working in their facilities. While you don’t get access to the networking and funding opportunities an incubator provides, you can still get into a space and start working.
Need to Add Lab Equipment to Your Space?
Life sciences companies need a lot of equipment to operate, but your space or building may not always have what you need on hand. If your lab is missing an essential piece of equipment, or you need to acquire multiple instruments, lease with Excedr.
From ultra-low freezers and fume hoods to mass spectrometers, flow cytometers, and centrifuges, we can help you lease what you need from the manufacturer of your choice.
Our underwriting process is faster than traditional financing options, meaning approvals can happen within several days rather than months. If you’re in a new space and need to undergo a full outfitting, we make it easy to lease multiple instruments and keep track of payments.