Life Science Laboratory Construction Conundrum: Build New vs. Renovate

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Researched by Industrial Info Resources (Sugar Land, Texas)--According to Industrial Info's Pharmaceutical Tracker - Online Database, there are approximately $3 billion in laboratory-related construction starts in the second quarter of this year. Approximately $2.5 billion is slated for new construction and $500 million for renovation. While new construction is clearly the leader in life science construction, companies and institutions must still ponder the economics and benefits of renovating current space or building new laboratory space from scratch.

Click on the image at right for a graph detailing pharma-bio construction starts in the second quarter of 2013.

Currently, pharmaceutical and biotechnology firms are at a crossroads. With the continuing patent cliff triggering a plethora of patent expirations, companies are slashing budgets, including research and development (R&D) expenditures, to augment their bottom lines. This reduction in R&D investment is a short-term solution to increase profitability but, in the long term, may not prove to be sustainable. As a consequence, pharmaceutical companies are looking to maintain their drug pipelines by sourcing their drug candidates via mergers and acquisitions, venture capital investments, licensing/co-development deals, and partnerships with universities, spreading the risk and cost of drug development. Whichever strategic course is taken, there will be an increased need to construct supplementary and up-to-date laboratories.

Institutes of higher learning also face a similar dilemma. With increased pressure to produce high-caliber life science-related graduates, institutes must offer the proper infrastructure to facilitate the need of science-related coursework and research. Many university buildings are outdated, and decisions must be made on whether to build new laboratories or renovate existing buildings.

The latest trend in laboratory design and construction reflects spaces that are social, open and flexible, as opposed to the closed laboratory blueprint. This contemporary layout allows for greater interaction among colleagues, and it facilitates the sharing of mental and physical capital. Considering new construction, the company or institution may construct a high-tech, collaborative and state-of-the-art facility with accommodations for any future growth without the encumbrances and logistics of a renovation.

Many may think that it is significantly cheaper to renovate an older building than build new. However, the core and shell of a new laboratory constitutes only 30% to 40% of the cost, while the interior, equipment and MEP systems account for approximately 60% to 70% of the project total. By the time most companies contemplate a renovation, the HVAC system is typically beyond its useful life. This means replacing boilers handling units and chillers (if the building is not on central plant distribution), and this usually accounts for 35% to 40% of the replacement costs. Also, the building that is to be renovated may be occupied, and thus requires a phased approach and time-consuming space planning logistics.

Another consideration when contemplating laboratory space renovation is the proverbial "hidden costs." Older buildings may have structural defects that are not obvious without penetrating walls, ceilings and floors. Also, today's wet labs typically demand a 16-foot floor slab separation, and this may be a barrier to any renovation project.

Even with all the barriers involved in renovation, it still might be the best option, especially if the facility has been well-maintained, the cost of energy upgrades produce a seven-year payback, the HVAC and plumbing systems only require minimal upgrades and the proposed renovation demonstrates considerable capital cost savings. Also, renovations typically have a shorter construction timeline, as little as six to nine months, as opposed to a new laboratory with a timeline of one to three years.

There is no doubt that for life science companies and universities to remain competitive, research and development space will have to be procured. However, there will always be a debate about whether to renovate current space or build a new facility. The question can only be answered through proper due diligence of economics and logistics by institutional entities, life science firms, consulting engineers and architects on a case-by-case basis.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.