Issues Facing Conversion of Office/Retail Space to Lab Space

On behalf of Sayer Regan & Thayer of Sayer Regan & Thayer, LLP posted on Wednesday, December 7, 2022.

The the pandemic forced the closure of many offices, whether for financial, practical, social, health reasons - or all of the above. While many have opened again in recent months, the damage has been done, leaving offices all across cities such as Providence vacant. One industry that hasn’t taken a hit is the life sciences industry, which hit a record high of 1.9 million workers this year. This has led to increased demand for 34 percent more laboratory space than a year ago, according to a Newmark report.

While it’s relatively easy for traditional office workers to conduct their work from home via Zoom, it’s impossible for scientists to conduct experiments and lab work in their kitchens. This has fueled the need for more lab space, particularly in large cities. With so many offices lying vacant, it’s a no-brainer that many of those labs would want to take advantage of that space.

Well, it may sound great on paper for many, for others, feathers are getting ruffled. Legal conflicts with neighbors and city officials are a stark reality in light of this trend. Parties on both side of the matter are seeking legal counsel and assistance from business, commercial real estate and zoning lawyers as they navigate these murky waters.

The Demand For Conversions

Conversions are much more cost effective and quick to set up than ground-up construction. The demand for lab space, especially in premier biomedical research hubs is being prompted by strong government funding, venture capitalism and public markets – the combination of which is leading to biotechnology company expansions all around.

The commercial real estate industry in Providence and other major metro areas could be saved from the devastating economic impacts of the COVID-19 pandemic by allowing conversions of vacant office space into lab space. The upside to conversions can’t be ignored, with vacancy at five percent and the life sciences sector starting to expand beyond traditional boundaries. Lab conversions aren’t just happening in the city proper, but are spreading out to suburbs such as Watertown, Waltham, Somerville, and Lexington.

That’s because developers and office owners are recognizing the stable long-term demand and value of lab conversions, which are now trading in the $1,700 to $1800 per sq. ft. range and lab rents at more than $100 per square feet, according to Wealth Management.

Life science companies are steadily and quickly growing, often experiencing double to triple growth in 24 to 36 months.

And it’s not just commercial office space that’s being used for laboratory operations. Retail space is fair game as well. One development and investment team in nearby Massachusetts is planning to convert three 120,000-square-foot retail properties into lab and research space.

Logistics

There are many logistics to consider when converting office space to lab space. It’s not possible for a lab to just move in. There are many retrofits that have to take place first to make the space suitable and safe for laboratory operations, which often involve potentially hazardous materials and chemicals.

One common complaint among neighbors involves the obtrusive, noisy and tall HVAC systems (sometimes reaching more than 30 feet on a rooftop) that lab buildings require, points out the Boston Globe. Other big complaints revolve around the safety in spaces where hazardous materials are being handled and the round-the-clock operations typical of labs, marked by heavy foot traffic and lights 24/7.

This blowback is taking place right in the middle of a huge wave of retrofits and renovations, with millions of square feet of office space facing conversion within the life sciences industry. Because lab developers are starting to spread out from downtown locations into the denser, tree-lined suburbs, this isn’t sitting well with nervous neighbors and wary city officials.

To resolve these conflicts, many are heading to court to handle legal disputes. More and more building owners are suing the Zoning Board of Appeal over denials of lab conversions, with neighbors (home and small business owners alike) hot on their heels with their own lawsuits.

Politicians and decision makers are caught between a rock and hard place, as they certainly do recognize the large role that biotech companies are playing in boosting the region’s economy as they finally emerge from the dark cloud of the pandemic. But they also know they have to listen to the concerns of their constituents in light of so many conversion proposals coming at them seemingly every week. With little precedence in this area, the conversion of office space to lab space is a hot bed issue affecting all major cities and surrounding suburbs across the country.

Contact Sayer Regan & Thayer for Real Estate Law in Rhode Island

Here at Sayer Regan and Thayer, we are skilled in all legal areas that affect this issue, including business law, commercial real estate, and land use and zoning. No matter which side of the issue you’re on, we can provide guidance. We welcome you to contact us today, as we serve both Rhode Island and southeastern Massachusetts.