Cost model: Commercial research laboratories

No comments

It has been decided that UK plc’s economic wellbeing depends on its scientific base, so billions of pounds of investment are being poured into it. The snag for construction is that labs are unlike other buildings. So, in this month’s cost model, Davis Langdon & Everest looks at what goes into a commercial scientific research laboratory

Demand for laboratory buildings

The recent announcement of increased government and Wellcome Trust funding to upgrade university research facilities is a clear indication of the rising profile of scientific research, and its potential for commercial exploitation.

The £1bn Science Research Investment Fund will build on the work of the £750m Joint Infrastructure Fund, which was established in 1998 to improve and expand UK research facilities. In addition, the science and innovation white paper published in July 2000 includes a number of proposals to support scientific research in the public and private sectors, ranging from increased funding for the regional development agencies to new rules to enable scientists to benefit from the commercial exploitation of their work. The growth rate of spin-off private research companies at UK universities is impressive: a recent survey has reported that many start-up firms are expecting to triple in size over the next two years. Dynamic growth in the private sector and the availability of funding to universities is, as a result, creating sizeable demand for new laboratory buildings and the facilities and services that support them.

Those designing and building labs must accommodate sophisticated technology and potentially hazardous processes, and must be sensitive to commercial needs. Flexibility is also an essential attribute, as technologies and research programmes change. Scientific research is fast moving and no development brief can be expected to remain unchanged. Similarly, merger and acquisition activity is such that the size and composition of client organisations can change very quickly.

How the drug development cycle affects property requirements

The typical drug development cycle starts with a discovery, continues through clinical trials, human trials and approval, and ends with quality assurance. Pharmaceutical multinationals are making great efforts to increase products’ speed to market but this cycle can still last 10 years. Of course, market pressures will reduce this for certain products.
The discovery and lead generation on which large-scale drug development programmes are based are often carried out by small or medium-sized companies that have good ideas and can react and deliver quickly. These in turn are supported by even smaller start-up companies. The pre-clinical trials are undertaken by more established independent research organisations. Multinational pharmaceutical organisations increasingly manage the whole product cycle, but their involvement intensifies at the stages of clinical and human trials. Following successful completion of trials, the licencing of a drug product and movement into production, the property requirements conclude with the establishment of a laboratory-based quality assurance regime at a production plant.

Small and medium-sized enterprises and start-up companies have very specific requirements for lab space. These firms, often funded by venture capital, have limited resources but still require high-tech, flexible space. Scientists in young companies benefit enormously from co-location, with researchers operating in different disciplines to generate “leap ideas”. As spin-offs from academic research, some of these organisations also need to maintain links with university departments. The development of “incubator” schemes, located in existing research clusters, and featuring shared technical facilities, is now seen as important in supporting the growth of the biotechnology sector. However, incubator schemes offer poor returns and low levels of investor security and, consequently, the impetus for developing buildings for them has tended to come from research charities rather than conventional property companies.

Research organisations generally start thinking about occupying bespoke laboratory space when they start looking for shareholder investment. At this point, a company needs the credibility of its “own front door” and, as it expands, concerns will grow about the need to recruit and retain high-quality staff. Commercial research organisations typically require a £10-20m development. However, in contrast to the large drugs companies that can directly fund their developments, these companies look to the commercial property market to provide accommodation. This reliance introduces a number of problems, not least that the tenants’ need for flexible, highly specialised space directly contradicts the preferences of the institutions that fund business park developments.

Building requirements of commercial research companies

Research companies need to provide top quality facilities to attract and retain staff. These facilities should be flexible enough to accommodate expansion and changes in technology. On the other hand, construction costs need to be kept relatively low, so that the available funds can be focused on research activities.

Bespoke building requirements
Research organisations do not easily fit into a standard developer’s office building. Similarly, buildings developed for laboratory users are not easy to convert to general office space. The principal differences between the building types include:

Floor plates Laboratory processes rely on mechanical ventilation. As a result, floor plates of up to 32 m can be planned, rather than the 12 m typically found in naturally ventilated business park offices.
Storey heights Labs require a minimum 1 m clear service void. In deeper plan buildings, a void of 1.5 m to 2 m may be required. As a result, floor-to-floor dimensions can range from 4.2 m to more than 5 m – significantly greater than a standard office development.
Structural grid A research lab’s structural grid must be based on the lab planning module dimension (typically ranging from 3.2 m to 3.8 m) rather than the standard office planning grid of 1.5 m.
Upper floor construction Labs require a solid slab construction to minimise vibration and to avoid the risk of contamination or infestation in floor voids. Speculative office buildings designed with raised floors are, as a result, difficult to adapt for use as labs.
Plant space Very large plant rooms, typically 15% to 20% of gross internal floor area, are required to accommodate specialist mechanical plant. Where required, the height of high-velocity fume cupboard extract vents, 3 m above the roof level, may also cause problems with the planning authorities.

Letting issues
Smaller research companies face a number of problems in securing suitable buildings. In addition to the difficulties associated with the mismatch between end-user and fund requirements, the development timeframe can also be at odds with the research programme.
Further difficulties, related to the risk profile of recently established research companies, include:

Poor covenant The short trading life of research companies, rapid merger and acquisition activity and their dependence on the success of future research activities means that, compared with other office occupiers, they do not offer a strong covenant to institutional investors.
Long leases The 25-year institutional lease does not suit the requirements of dynamic research companies.
Dependence on developer finance for fit-out works The specialist fit-out of a laboratory building can account for 50% of the development cost. A significant developer contribution may therefore be required for the fit-out works. However, because of the greater risk associated with this expenditure, the developer will want to charge a premium rent related to the fit-out investment.

Development issues 
The pace of change in research means that the development must include the capacity to respond to a brief that evolves during and after construction.
Direct liaison with senior users is difficult, as they are generally too busy to be involved in the development process. As a result, project team contact is often through facilities staff rather than the end-user. Programme pressures to speed products to the market place affect the development cycle.

Building servicesThe main challenges for those designing and installing building services in laboratories are:

Environmental controlThe mechanical services installation should provide a stable, controlled environment. It should remove contaminants from incoming air, provide stable temperature, humidity and airflow conditions, ensure the safety of staff, and dilute and safely release the by-products of experiments. The air-handling installations associated with laboratories are generally very costly – mechanical costs are typically between 34% and 39% of the total, largely because of the huge fresh air requirement that is associated with extensive fume cupboard use. The cost of piped services is also high, driven by the density of laboratory workstations and the range of services – gases, vacuums and so on – required within a particular laboratory.
Flexibility and ease of maintenance These are determined by the distribution strategy selected and the amount of spare capacity provided. The key issues involved in determining a distribution strategy within the lab are: accessibility of services, ability to isolate modification and maintenance work within a single laboratory, avoiding penetrations within the floor slab and providing services to island benches.

The distribution of services in ceiling voids or along walls in laboratories is the preferred option. Service trenches are also used in larger laboratories with island benches.
At a broader scale, the selection of an appropriate riser strategy to route ductlines and piped services throughout the building has a significant effect on development efficiency, flexibility and future maintenance. Factors involved in selecting the appropriate riser distribution strategy include: balancing net-to-gross efficiency against needs for flexibility; designing short, direct ductwork routes; and providing access for maintenance outside the laboratory.
The greatest flexibility is provided by schemes with horizontal distribution accessed by interstitial floors. However, costs related to additional building height and reduced development efficiency mean that more economical options, such as the use of external risers, are common. On schemes with deep floor plates, dedicated service corridors can also be used to provide easy access for maintenance.

Cost-effectiveness Factors that affect the economy of the services installation include long-term flexibility, ease of maintenance and reduced running costs.
Servicing flexibility can be provided by using dedicated services terminations for ductwork, piped services and distribution boards to each lab module, so facilitating easy reconfiguration to suit future uses. However, the greater density of services outlets will increase initial costs.
Running costs of laboratories related to ventilation are particularly high. The capital and running costs of ventilation systems can be reduced by adopting some of the following design options: optimising extract rates from fume cupboards using variable air-volume systems (capital costs and complexity of controls increase, but long-term energy costs are reduced), ganging fume cupboards, minimising air circulation rates during hours of low occupation and using heat reclaim.

Commissioning
The impact of commissioning these highly serviced buildings and, where appropriate, the need to obtain third-party approvals before operations begin should not be overlooked.

Design issuesLaboratory buildings should be designed to provide the occupier with the optimum balance between present function, development efficiency and future flexibility. Because of the need to provide state-of-the-art and adaptable facilities, many of the design challenges are technical. However, at the heart of the research enterprise itself are the scientists, who expect a high quality environment, and whose productivity can be affected by its design.
End-user concerns
Key issues for end-users include interaction, quality of environment and image.

Interaction between scientists in different disciplines is crucial to the development of new ideas, and is particularly important for start-ups.
For interaction to work, scientists tackling different problems need to be brought together. Interaction can occur away from workstations – in circulation routes, at tea points and in break areas. It can also be encouraged through the careful planning of larger open-plan labs. Alternatively, it can be achieved by different companies coming together – hence the popularity of the cluster. The optimisation of lab design for functionality or efficiency can result in reduced levels of interaction. Conversely, designing to encourage interaction will often decrease a development’s efficiency.
Laboratory design issues that concern research scientists include the quality of write-up areas, flexible lab space, effective heating, ventilation and air-conditioning installations, low noise, natural light, adequate storage and good quality meeting space.
Image is particularly important for younger start-ups but more mature small and medium-sized enterprises also need to project an image of “establishment”.

Cost drivers
The principal cost drivers related to design are:

Building population
Requirements for flexibility-in-use, affecting development efficiency as well as services, fit-out and structural elements
Requirements for technical interaction
Building plan, which influences services distribution as well as envelope costs
Structural grid
Depth of floor plate, which influences envelope, circulation and services costs
Floor-to-floor height, which will be affected by the depth of service void required
Lab size, layout and content, particularly relating to extent of piped services distribution and number of fume cupboards, bio-safety cabinets and other specialist equipment
Development efficiency, including requirements for plant space
Services distribution strategy
Building services design assumptions relating to air change rates, cooling loads and diversity
Security, particularly for schemes involving animal testing.

Structure
Key structural design issues include:

Designing to a grid to match the lab module
Avoiding structure-borne vibration that may affect scientific instruments or experiments
Providing the flexibility to form new openings through slabs for additional services
Co-ordination of the structural design with building services layouts.

Laboratory functions
Functional spaces in laboratories are split into three categories according to their relationship to research activities. Primary functional areas are where the research is carried out, comprising laboratories, write-up areas and offices. Secondary areas accommodate activities that directly relate to the operations of the research laboratory, including temperature-controlled rooms, dark rooms, specialist laboratories, equipment rooms and so on. Most secondary space is not dedicated to a particular laboratory function and can be distributed around a floor plate to provide for future flexibility. Some secondary functions, such as glass washing, are usually designed as a centralised facility. Tertiary functions, such as administration, stores, libraries and dining rooms, do not need to be located next to the lab.
The final layout will be determined by the relationship between different spaces, together with the floor plate circulation, servicing strategies and consideration of the daylighting of primary and secondary spaces. Daylighting is particularly important for write-up areas and the permanent workstations in secondary areas. Main laboratories are often given an outside view through glazed internal partitions to the perimeter zone.
Modular design and circulation space
A modular approach to lab space planning is widely used to ensure the co-ordination of architecture, structure, services and specialist fit-out. It must accommodate changes during design and construction, so providing the organisational framework for building-in
long-term flexibility. Modular design is closely associated with a cellular approach to laboratory design, although it is also used to plan and co-ordinate larger, open-plan labs.
The size of the planning module is determined by the activities in the laboratory. Module width ranges from 3.2 to 3.8 m, depending on the fume cupboards and aisle width required. The module’s depth will be determined by
the extent of bench space, fume cupboards, cellular space and other facilities. Depth should ideally be a multiple of width.
The layout of lab spaces, access corridors, vertical circulation and riser shafts has a big effect on the efficiency of a project. The diagrams above show variations in efficiency, that result from different arrangements of primary and secondary space.

ProcurementThe key procurement issues for labs are:

The need to respond to a changing brief during design and construction
A high degree of co-ordination of architecture, structure and services
High standards of installation and thorough testing and commissioning
The need for early cost certainty and the ability to balance cost, time and quality for organisations with limited financial resources.

The principal procurement methods that meet these criteria are:

Two-stage lump-sum tenders
The two-stage process ensures that a contractor can be involved in the co-ordination of the detailed design, and that works packages are let to specialist contractors identified by the project team. Properly constructed, it can deliver early cost certainty and an agreed basis for valuing changes. The success of a two-stage lump-sum procurement route will depend on the project team’s ability to work together to respond to changes to client requirements and other issues that emerge during construction. However, inadequate client and design preparation at the first stage and lack of adherence to design release dates as design develops in the second stage can defeat the benefits of this route.
Construction management
CM delivers many of the benefits obtained using a two-stage tender. Additional benefits are the professional management expertise of the construction manager and the potential for further overlapping design and construction. Drawbacks include lack of cost certainty in the early stages and the greater involvement of the client in project administration. Construction management will often be inappropriate for smaller schemes.
Develop and construct This method features the completion of an outline design, and the procurement and management of the works by a single organisation. Its benefits include single-point responsibility, cost certainty and simplified administration. However, it is vital to appoint independent professional advisers to monitor quality and performance issues on behalf of the client. Develop and construct can result in improved on-site co-ordination but may give the client fewer options to respond to requirements for changes to the works, and less control over post-contract variation costs.

Capital allowances for scientific research buildingsCapital allowances are available to offset some or all of organisations’ capital expenditure on buildings, plant and machinery against current and future corporation tax liabilities.
Laboratories and other scientific buildings are given special treatment in the 1990 Capital Allowances Act. Qualifying owners are entitled to a 100% initial deduction on the building cost for all parts of the building used for scientific research. The definition used by the Inland Revenue in determining entitlement is “the application of new scientific principles in an existing area of research or the application of existing principles in a new area of research”. The allowance can be a 30% saving in year one for a full-rate corporation tax payer.
In circumstances where the development or parts of it fall outside the Revenue’s definition, the high specification and extensive fittings, furniture and equipment requirements associated with laboratories often means there is a high percentage of machinery and plant that is capital-allowable within the building. It is not uncommon for 40-65% of the cost of a fully fitted laboratory building to qualify. Capital allowances for machinery and plant are recoverable on the basis of a 25%-a-year reducing balance rate. Over time, this can still add up to a sizeable overall tax saving of about 15% of project cost to a full-rate corporation tax payer.
Early consideration of capital allowances means that their recovery can be optimised. Claims for capital allowances can be facilitated by the preparation of the contract documents in formats that enable qualifying costs to be easily isolated by, for example, separating the costs of research and administration buildings.

Cost breakdownThe cost model is based on an 11 000 m2 research and development facility built for a commercial biomedical research company. The development comprises a two- and three-storey building, with separate office and laboratory wings, together with a single-storey block housing a library and restaurant. The laboratories and their associated plant rooms comprise 68% of the total area of the development, with the plant rooms occupying 19% of gross internal floor area.
The cost breakdown shows the costs of structure, finishes, services and fit-out, including the costs of the laboratory fit-out, kitchen and servery installations. Client furniture and fittings to the office areas, restaurant and library are excluded. Site preparation, external works and services, professional and statutory fees and VAT are also excluded from the cost breakdown.
Costs are given at third-quarter 2000 price levels, based on a location in a research cluster outside Cambridge. The pricing level assumes competitive procurement based on construction management. Adjustment should be made to the rates detailed in the model to account for differences in phasing, specification, site conditions, procurement route, programme and the state of the market.