Revisit our chat from March 2021 with John Grady about his expertise in building life sciences spaces that become ecosystems; what has changed in the past twenty years of biomanufacturing; and how Philadelphia has become a leading biocluster.
Hi, I'm Joe Fetterman with Colliers Life Sciences Advisors. Welcome to LabNotes. We’re here today with John Grady from Wexford Science and Technology. John is the Senior Vice President for the Northeast Region [Executive] and John, thank you for being with us today.
Thanks for having me Joe, it’s great to to be with you and I’m looking forward to the conversation.
Well John, you've recently made a change. It’s [been] about a year now, I think we discussed your focus for a long time has been very Philadelphia-centric and now it's much more regional and you've been looking at the life sciences through a very important set of lenses. Tell us a little bit about your transition and kinda how you’ve gotten to this place and how you chose to come to Wexford.
Sure Joe, you're right it's just been a year that I joined Wexford. [I] spent over 21 years at PIDC working in Philadelphia around business attraction, real estate development, project finance, and community-level finance. And I’m a Philadelphia guy through and through, born here, raised here, went to school here, have worked here and I love Philadelphia. I love the region. I think it's a great place to work. I’ve been really fortunate with my career to– learning about how business grows, how regions grow, and trying to build the kind of partnerships and the kind of relationships that really can support a growing economy. A growing job base, a growing tax base, and all the benefits in terms of quality of life that are driven by those two things. A few years ago, I started to think about whether it was time to transition from PIDC and we have a great senior leadership team at PIDC. It was time for that team to be able to step up and provide their voice into the city's economic development and the future growth for the city and I knew the Wexford guys from my work.
Jim Berens, our founder based in Baltimore, has been developing on West Market Street for decades in partnership with science centers and institutions here. Joe Reagan and Pete Cramer were people that I had a huge respect for and we ended up in a conversation about their growth of the company, continued growth in Philadelphia, continued growth in the northeast part of the country, and also thinking about how the platforms that Wexford has developed over these last 15 years could become more diverse and become more flexible and where we could start seeing some cross-pollination across the platform with their academic partners and with corporate partners.
Wexford is a really unique company, a privately held company, really flexible and really focused on a mission around partnering with universities with academic medical centers, and with employers to really help build ecosystems. That sense of partnership as the driver of value in a relationship was really familiar to me from my career at PIDC, for my prior research, the 30 years I've spent in public-private development. I thought that was a really nice bridge, continuing to focus on partnerships and relationships and economic growth being able to sit in Philadelphia and keep my career in Philadelphia and be able to also, you know, start to do some work in other places. We’re active in Pittsburgh and Providence in the Northeast, we have some projects in Chicago, we have some opportunities that we’re looking at in new relationships with research partners in this territory. The stars and the moon all aligned I think. I was fortunate, and probably most importantly, that leadership team was ready to step up and take the organization and partnership with the city and the chamber to its next level.
Well John, it sounds like a perfect fit: a platform for you to leverage across a broader geography and a skillset for Wexford to leverage that is well-honed here in Philadelphia. You know, you mentioned ecosystems and I think that's a great place to jump in, because as our observation as brokers is that one of the things that Wexford really excels at is creating outstanding ecosystems for the life sciences to grow in. I’d love to explore with you what you have observed to be the critical ingredient. What do you think makes for the successful ecosystem, and what are you guys looking at as you continue to improve what you're doing?
Well I think you’re right Joe. I think the notion of creating, curating, and expanding ecosystems is central to any kind of growth discussion. It’s a little bit of the next economic development theory right for a long time, cluster theory was the real focus. And I think the growth of cluster theory around, into a model of ecosystems, is a pretty natural one. We see lots of layers [in] the successful ecosystems.
"For us, it really does start with a core partnership with University R&D, academic medical centers, [and] research institutions. That's where discovery happens, that's where talent is embedded. It starts with those universities or institutions having a desire to share and catalyze that research
into a greater impact."
So if the institution, culturally or from a business perspective, is not interested in that kind of engaged relationship, it doesn't really go anywhere. So I really think that is an important foundational goal. Once you have the willingness of those partners to engage, to continue to grow their side of the equation, then after they have that willingness to engage, that’s when we can step in. We in the second layer of the ecosystem, we need facilities, right? We need purpose-built lab buildings, space to convene people. We really believe strongly in density and proximity and walkability. We want that university researcher or graduate student to be able to walk across the street to their classroom, maybe down the street to their hospital office or clinical location, and up the block to their commercial office. We say that density and proximity is going to light the fire. When you start to do those things, then you start to create environments that are mixed-use with residential and office and retail and those environments attract talent. It’s more layers on more layers.
The other thing that we really think about is creating a platform around engagement. We want to create networks, we want to create places where talent gets together and meet people and engages people. Amicus Therapeutics came here from central New Jersey because they wanted their researchers to be able to see, you know, a Jim Wilson after work or participate in Thursday afternoon Venture Café session with their lab team. And so the layers start to build and when it's fully functioning, it’s robust, it’s diverse, and it propels itself forward. And I think that’s exactly where Philadelphia is right now, right? We’re starting to feel that propelling forward because there’s the layers and the elements of the ecosystem are starting to interlock.
John, Wexford has been developing buildings on West Market Street for 20 years. And there’s you know, there’s kind of become generations of buildings with One uCity and 3675 before it, what are the things that have changed? The tenant mix, the ratio of lab to office, what are the things you’re looking at today? Third-party offerings? It seems you guys have really learned a lot along the way and are building better and better buildings and filling them in new and different ways.
Yeah, I think there are a couple of things that have been really significant and have changed. I think if you go back to even some of our predecessor companies like when we were Townsend Capital and developed 3701 Market, I think early on we were developing buildings, right? It was a building and it was a transaction. I think what we’re doing now is we’re building community. That community is like I said, it’s dense, it’s mixed-use, it’s walkable and connects.
I think the second thing is when we were developing early on, fifteen years ago, there was a real need from our perspective and the market’s perspective for the university to play a strong role in helping to get projects off the ground. The demand side from the private sector was weaker; it was not as deep yet, and we really started – and we see this in every market, right, particularly the secondary markets we’re in like Philadelphia, Baltimore, St. Louis, and Pittsburgh – you need that first kind-of shock absorber in terms of risk. Penn and CHOP [Children’s Hospital of Philadelphia] have been tremendous partners in that regard, Drexel as well. As we move to 3675 Market, no university anchor tenants and we’ve brought in a new kind of anchor: 120,000 square feet of shared offices and labs with Cambridge Innovation Center and Biolabs as our partner and our tenant. That was a real change, right. That was acknowledging that the supply-and-demand mix in Philadelphia needed more access points for people, people needed to get a venture two, or a small office so they could get out of the academic environment and get into a commercial environment. That bridge is really critical. Over the last two years 3675 has been open, we’ve seen that just flourish. Everything we see happening up and down Market Street came out of PIDC and Biolabs.
I think the other thing about 3675 Market is when you walk in the building, you notice the difference. We put a lot of focus on the lobby and the ground-level of these buildings. Like I said, we want these buildings in the heart of our districts. We want people to walk in and out. When you walk into 3675, it feels more like a hotel than an office building. The security function is not in your face. We’ve got a great partner with Elixir and their coffee bar. We’ve got casual seating for people. The science center leases and operates the Quorum facility on the ground floor. drop-in lounge to come in any time, you don’t need an appointment or a membership, you can come in and can hang out, you’re a student or a facility member, you’re doing business in University City for the day. I think that advanced our building.
With now, with One uCity under construction, you see some of the construction behind me now, we’re taking that to the next level, building on it, now we’ve got 400,000 square feet of purpose-built lab space with labs and offices with all of the infrastructure and all of the technology that’s necessary to continue to support growing companies and attract new ones. The secret sauce in One uCity with our financial partner Ventas, and the science center as a partner, we started that building with no tenants. That’s getting ahead of the supply constraint. I think we’ve seen in the last few years, demand is being constrained by a lack of supply. There’s that fundamental issue of risk and jumping in, and at the science center we have jumped in, started that building. We leased probably a third of it before we could even see steel coming out of the ground. I think that’s a milestone for this market, that’s the transition. We’ve gone from building that suits for university and medical centers to mixed buildings with a university anchor to flexible shared space as an anchor now to more special lab space that is being driven by demand.
The final point I’ll make on that transition is rental rates. All of our clients and tenants want to pay as much as they need to pay to get space, but as a developer we need to know that if we invest in these buildings and provide the kind of upfront infrastructure in these buildings, we need to see that we can achieve rents that make that investment worthwhile. We’re seeing rents, probably you know, in the two years since we’ve delivered 3675, rents are probably up 25% over those two years. That’s great! That means you see more investors coming into the market, there’s more capital coming into the market, we’re going to be able to continue to deliver more product into the market.
John, we’ve talked together about Philadelphia’s role in gene and cell therapy. As a leading cluster, we’ve talked also about the differing needs of these gene and cell companies. Partly, and the good news is fueling that confidence you had about beginning One uCity Square, how has that changed several things; their use of the space, and to that point, the infrastructure you’re building in to allow for that use, and also how are you guys looking at cGMP activity as it relates to these cell and gene development companies?
Yes, I think you’re right. I think cell and gene therapy really has been the fuel here. Where does it start? It starts with the incredible academic research base that we have at places like Penn, Penn Health Systems, Children’s Hospital, Wistar Institute, Drexel University, that basic research driver. When you look around and see seven of the first FDA approvals are based in the science coming out of Philadelphia, anyone that’s gotten that Moderna shot in their arm, that mRNA research started across the street at Penn. You can’t replace it, that’s just an incredible opportunity. The focus that our institutions and our pharmaceutical industries have had in this market around viruses and around immune health is really proving big dividends in cell and gene therapy. I think we have to acknowledge that.
As these companies grow, it’s great that what you’re seeing is both a healthy ecosystem and a healthy client demand system. These companies are attracting talent here, they’re growing their clinical trial base, they’re attracting capital. We’re now being able to put them into the spaces they need to facilitate that growth. One of the things we’ve seen is a typical Wexford Labs office building would typically be 50% lab, 50% office, that kind of becomes your basis for design and you build your infrastructure around that. 3675 is a great example of that standard. With One uCity, we started to see interest in a higher percentage of lab space. It started to grow to 60%, in some cases we’re seeing it grow to 70%. That’s because of the intensity and the value that the lab operation drives for the company. These companies are not large organizations with huge office support. The lab and the R&D and the science is very much core to their organization’s value. I think that’s why we’re seeing more lab space in these buildings.
Our One uCity building, because we started that on spec and as we were going through the initial stages of the pandemic, we took a step back and thought about how do we deliver this building in this market in a really first-class, best in class kind of way. So we pivoted a little bit, went to a 100% outside air system for the building, wanted people to feel confident that this building was the healthiest building in market, but also have that extra flexibility about lab space and the intensity of lab space. That was a real opportunity, I think it’ll be interesting to see as we go forward does that become the new standard in this market, or do we continue to evolve the type of infrastructure that the companies are requiring that we’re able to provide?
You asked about cGMP and I don’t want to leave that. cGMP I think is one of these things that I started learning about when I was at PIDC and worked with your team a bunch on that. I think there’s broad recognition now that number one we need more manufacturing facilities and capacity in the market to support these, not only the academic institutions, but the growing companies. We are seeing users in One uCity laying out floors for cGMP process, a lot of it is early-stage process engineering, some phase one. That’s a good sign. We have some concepts we’ve been working with CDMOs around how do we bring denser cGMP space into this market, so you know maybe it’s a multi-story building, it’s not going to be a twenty-story building, but do we have a miniaturized building that can become a piece of infrastructure with those CDMO facilities and services as a core piece that people can plug into in this environment? I think that’s going to continue to grow, I think you’re going to hear more about the demand for these services.
I think it’s one of the great ways to kind of connect this dense environment in University City and the One uCity in the heart of University City with some of the larger format opportunities in the market. We talk a lot with the Pennovation site in the Lower Schuylkill river and the great work that PIDC and the ensemble are continuing to do at the Navy Yard. You can imagine an ecosystem around manufacturing here, where the really early stage stuff is happening in the core here, but as the need and the facility requirements grow, you don’t have to go to Texas or to Maryland, you can go five miles to the Navy Yard and have your phase two and your larger-scale production start here. I think there’s a great opportunity for the region to build more infrastructure around manufacturing and have us really connect into the core of academic research and early-stage entrepreneurship.
You know John, we’ll play this back in two years and look at where the Philadelphia cluster is on cGMP and manufacturing. It’s going to be really– the next two years are going to be really interesting in terms of how this all plays out.
I think we should do that, Joe! I think we should put a marker out there. Have we advanced the ball on something like manufacturing in the life sciences as a way to grow the ethos? That’s a great shared opportunity and a great shared goal we should hold ourselves accountable to.
I completely agree. You know, we could be talking all day, I’m convinced of it [John laughs]. I would be remiss, I would absolutely be remiss, if we didn’t spend a minute to just talk with you about your perspective on other markets. At PIDC, I think you had a good look at what was happening in Boston and how Philadelphia was competitive. In your role now, you’re looking at other cities that are perhaps wannabes to Philadelphia. So let’s talk a little bit about that – what are we doing really well here? What are the things that are causing other clusters to aspire to be Philadelphia? And how are we similar to or perhaps behind a little bit geography like Boston? Let’s dive into that.
There’s a lot in there, and I agree with you. My engagement in life sciences began in my PIDC days working with partners in the city and the chamber of commerce to think about as a city and a region, how do we position ourselves? We looked a lot at Boston, San Francisco, San Diego, that top tier right, and I think everybody would agree those are three places that are probably on a level of their own. When I come over to Wexford now, one of the interesting things about our platform is we’re not in those markets. We’re not in Boston, San Francisco, or San Diego. We’re very intentionally in what you might think of as second-tier cities, but second-tier cities that have first-tier research infrastructure, cities where the life sciences and more broadly the innovation are an important economic development driver to the cities and the regions.
As I mentioned in my portfolio in the Northeast here, two cities I’ve been spending a lot of time in are Providence and Pittsburgh, very similar to Philadelphia in terms of economic trajectory, transition from manufacturing, and the scale across the three cities is very different but the fundamental strategies are the same. And you’re right, if I’m in Pittsburgh or Providence, folks want to know what’s happening in Philadelphia. Philadelphia’s reputation and the messaging that’s out there about Philadelphia is really positive right now. People see capital flowing here.
When you think about what’s Philadelphia done well, I think we really are number one in supporting our research institutions. I can’t stress enough that that pipeline drives everything. I think the other things, our talent base is really unique here in Philadelphia. It’s not something you see in the second tier markets, you see some of it in Boston, but places like Boston and San Francisco have kind of turned the corner on talent. Now talent is scare and really expensive.
I had the great pleasure when I was at PIDC to help Iovance Therapeutics come here. Iovance was coming out of the Bay Area and they wanted to bring their manufacturing to Philadelphia because of the talent base. Not just that there was a lot of early start-up talent, young people ready to fill positions in labs and offices, but there was a more mature talent base. There were people coming out of that big pharma pool that’s throughout this region that’s decades old, people who were really experienced in starting companies. When you look around the landscape, you see a Joan Lau, you see people who have done this through their careers. I think that’s special and that’s something that Philadelphia’s done a great job of, attaining that talent base and supplementing it with people coming out of colleges and universities, the undergraduate, postgraduate, PHD level, and being able to have a company like Iovance come into Philadelphia and be able to plug into that is a huge advantage.
The other thing that I’d say we’re doing well is tracking capital. Our star researchers and our growing companies are always worried about capital. I look at the data Colliers puts out every quarter and we’re continuing to see big numbers, whether it’s venture whether it’s Series A or Series B, corporate investment, whether it’s acquisition. We’re starting to see a healthy supply and demand of capital and companies, and continuing to support that.
The last thing I think we’re doing well, and this would be a surprise to most Philadelphians, I think we’re getting a good message out there. We’ve beaten ourselves up for decades for not promoting ourselves, for being too Quaker, for not being proud enough of what we’re doing. I think the work that has been going on in a lot of places has been a consolidated message about cell and gene therapy especially.
"Cell and gene therapy has really brought focus to our message,
people all around the country wherever I go
with our Wexford platform,
people know what’s happening in Philadelphia."
I don’t think that was always the case, I think we were always the best kept secret and you never want to be the best kept secret, that’s not good for anyone. I really think that chambers, the city, the academic institutions, private industry, I think everyone’s pulling in the same direction here and I think that’s something that other markets are starting to notice.
John, that’s a great note to wrap up on. I really appreciate you for being a spokesman and a voice and a promoter for this cluster for years. As I said, there’s so much more to cover, you’re going to have to come back, no doubt about it, thanks so much for being with us today.
Yeah Joe, I really appreciate the invitation, the work you and your team are doing in the city and the region here. You guys are big advocates and big contributors to the success. I look forward to chapter two, three, and four when we’re ready to keep talking.
Thank you, take care.