Chicago Built for a Biotech Boom That Hasn’t Arrived

Chicago’s life-sciences market is still waiting for its breakout moment.

It is the smallest of any major U.S. hub by square footage, yet it has a vacancy rate of 43.3 percent, more than double the average across the country’s leading biotech markets, according to CBRE.

The average vacancy for the lab and research-and-development sector across the top 13 metros rose to 21.4 percent in the first quarter, with leading markets Boston, San Diego and San Francisco all hovering just above that mark.

Chicago, by comparison, has struggled to fill a wave of developments delivered over the past two years, with at least one major development sitting empty.

With 2.1 million square feet of inventory, Chicago is the smallest of 13 markets tracked by CBRE, with less inventory than smaller cities like Raleigh-Durham and Seattle. Developers rushed to meet what was once considered untapped demand at the turn of the decade, but leasing didn’t keep pace.

One positive metric is that Chicago has the second-highest number of life sciences firms seeking space among the 13 cities, only behind the Boston metro, with 50 tenants searching for leases, according to the report. The Denver metro, for one, has over a million more square feet of space than Chicago with 3.1 million square feet and 14 tenants seeking space. Seattle, with 9.6 million square feet of inventory, has 9 tenants seeking space and a vacancy rate of 15 percent.

Industry experts point to Chicago’s lack of growth-stage biotech companies and a crucial network of talent, capital, services and institutions as reasons why its market has lagged behind its peers.

Chicago’s market also has a sprawl problem.

While dozens of biotech firms have space in Boston’s Kendall Square area, for example, Chicago’s lab locales have little to no proximity to one another, and no direct connections with strong research institutions like the University of Chicago or Northwestern — except for the 300,000-square-foot Hyde Park Labs, developed by Trammell Crow Company and Beacon Capital in partnership with UChicago.

Dallas-based CBRE subsidiary Trammell Crow’s Hyde Park Labs, slated to open later this year, will host university labs, a science incubator led by UChicago’s entrepreneurship center and the first location for IBM’s next-generation quantum computer.

The development is 20 percent pre-leased and accounts for more than a quarter of all vacant life sciences space in the city, according to CBRE. The vacancy rate would have landed closer to 37 percent excluding Hyde Park Labs.

Meanwhile, Sterling Bay’s eight-story Lincoln Yards life-sciences building has never been occupied. And its Lincoln Park Bioscience Center at 2430 North Halsted Street was listed for sale last October, when it was 41 percent leased to two tenants.

A handful of legacy firms like AbbVie and Abbott maintain a presence in the region, the Chicago Business Journal reported. But the city hasn’t established the startup pipeline and investor ecosystem of mature life-science metros.

There are bright spots. Demand is growing for biomanufacturing space, and newer players like Portal Innovations and the Chan Zuckerberg Biohub have added capacity for early-stage ventures.