Last year, according to the Real Deal, records were shattered for the number of New York City commercial spaces leased to businesses and firms in the life sciences sector.
According to the report, the square footage surged to more than 433,000 square feet in 2021, nearly triple the space leased in 2020 and more than the combined space leased in the sector from 2014 to 2021. Not surprisingly, Manhattan boasts the highest concentration of commercial space leased to life sciences firms — about 1.4 million square feet. Equally not surprising, as reported, “the availability rate for ready-to-use lab space cratered to 3.3%,” and asking rents have increased to $114 per square foot. As a result, Long Island City and Brooklyn are growing in popularity with life sciences commercial tenants. Given the surge in demand for space by life sciences firms, it is helpful to consider some of the unique issues and challenges faced when negotiating commercial leases. Here are a few of the most critical issues.
Heavy regulation and knowing what the life sciences commercial tenant does
The life science industry- including biotech, pharmaceuticals, genetics labs, medical device developers, animal testing firms, etc.- are among the most heavily regulated companies at the state and federal levels. These regulatory requirements and frameworks must be known and incorporated into the finalized commercial lease. As just one example, research facilities dealing with biological matter are coded by the Centers for Disease Control for “Biosafety Level” based on the degree of risk to employees, to the nearby community (including other tenants in the building), and the environment. Biosafety Level 1 (“BSL-1”) is the lowest, and BSL-4 is the highest. BSL-1 is coded for facilities handling microorganisms not known to cause disease regularly, while BSL-4 is coded for labs that work on highly fatal pathogens.
For obvious reasons, the commercial lease for a BSL-1 will be qualitatively different from that for a BSL-4 facility. Likewise, commercial leasing in the life sciences sector may not need to account for biosafety if, for example, the firm does no biological testing and merely produces medical devices or non-biology-based pharmaceuticals.
Factors to be considered
From just this one example, some critical issues must be handled in the lease, including:
- Non-biological hazardous material storage, use, and disposal
- Biohazard material storage, use, and disposal
- Security provisions concerning the space being leased and emissions and discharge of hazards and materials
- Build-out requirements unique to life sciences firms
- Compliance with permits, codes, fire safety, and other requirements
- Insurance coverage
- Requirements of returning the space to pre-lease physical and safety conditions — life science physical layout requirements are often difficult and expensive to return to the pre-lease condition
- Liability provisions in the event of a biohazard escape
- Responsibility for remediation in the event of contamination
- Utility usage includes the need for high levels of air coolant, air purification, and electricity — who has control of HVAC and utility systems?
- Lessor inspection rights and accounting
- Carbon emission impacts, levels, and compliance — per NYC’s new Ordinance
These are some of the unique issues concerning life sciences commercial leases. But attorneys cannot ignore typical leasing issues such as breach of lease defaults, lease assignments, indemnifications, recording leases, and all the other common provisions of an NYC commercial lease.
Contact the NYC Commercial Lease Negotiators at Wright Law Firm NYC Today
Call the experienced New York commercial lease and real estate attorneys at Wright Law Firm NYC for more information. We provide commercial real estate legal services for the NYC business community. To schedule a consultation, contact our office by e-mail or call us at (212) 619-1500.