Skip to content
Link copied to clipboard

Navy Yard returns to its roots while some Philly start-ups depart for the suburbs

Rob Frantz moved his growing firm, Kinetic Ceramics, from California to Philly's Navy Yard business center four years ago, seeking "innovation energy" with other young firms. Now he's opted to leave.

Robert Frantz, holding one of the high-tech piezoelectric pumps made by his firm, Kinetic Ceramics, which senses from fluid pressures when it's time to switch on. Seeking start-up energy, Frantz moved his company from Philadelphia's growing but increasingly big-employer-dominated Navy Yard to the suburban Spring House Innovation Center in 2020.
Robert Frantz, holding one of the high-tech piezoelectric pumps made by his firm, Kinetic Ceramics, which senses from fluid pressures when it's time to switch on. Seeking start-up energy, Frantz moved his company from Philadelphia's growing but increasingly big-employer-dominated Navy Yard to the suburban Spring House Innovation Center in 2020.Read moreKinetic Ceramics

Twenty years after far-sighted officials began marketing the former naval base in South Philadelphia as the Navy Yard business center for growing private firms, its largest employer is — the Navy.

Of the 15,000 men and women who officials say work in the new and repurposed buildings on the Delaware River at the foot of Broad Street (up from 10,000 seven years ago), nearly 4,000 work for the U.S. Navy.

It’s by far the base’s largest employer, ahead of such corporations as Urban Outfitters (No. 2, with just over 2,000 staff on site), GlaxoSmithKline, Axalta, Tastykake, Jefferson Health, RevZilla, WuXi AppTec, and scores more.

The main military unit at the base, the Naval Surface Warfare Center, does engineering work for guided-missile cruisers and has added nearly 1,000 jobs at the yard since it broke off from another Navy unit in Bethesda, Md., five years ago.

The Navy has grown so much that it’s asking for 23 acres back, to supplement the 200 it still occupies, according to Jennifer Tran, on-site marketing director for the Philadelphia Authority for Industrial Development, or PAID, which created the site.

But can success and a handful of dominant employers spoil a good thing? With 95% of Navy Yard business space leased, are the Navy and the larger corporate employers crowding out the start-up and biotech firms that planners and promoters hoped to attract?

To be sure, there are worse problems to have besides a full shipload of tenants. And developers are working to create more space for life science companies, both at the Navy Yard and other city sites.

Rob Frantz, a former fighter pilot and ex-GlaxoSmithKline executive who moved his specialized pumps company, Kinetic Ceramics, to the yard from Northern California in 2016, has seen the naval yard crunch firsthand.

“What I found over the last three years at the Navy Yard, it’s nice, but big companies are taking over, rather than small companies in shared space,” Frantz said. “It wasn’t that innovative, high-pulse feeling.”

Frantz had wanted his dozen staffers to be part of “all the innovation going on at that part of the campus,” which he had observed in 2013 as an executive at Glaxo’s new building on Crescent Drive. Frantz saw the same energy as a visitor to state-funded Ben Franklin Technology Center of Southeastern Pennsylvania’s nearby Navy Yard headquarters, a font of start-up cash and advice.

In the spring, Frantz moved his growing company from the yard to Spring House, into a suburban campus that Horsham developer MRA Group has fitted into the former Rohm and Haas labs in Montgomery County. He says he once again feels that innovation energy at Spring House because of neighbors like Jefferson’s biotech center, another Philadelphia transplant.

There’s even a very familiar face — Mark de Grandpre, an executive with Ben Franklin Technology Partners who had worked out of the Naval Yard and had assisted Frantz’s company there. De Grandpre has lately been working out of the Spring House center and once again began helping Frantz.

The Spring House Innovation Park, as it’s called, also has stores, a brewpub, and a conference center, all on a more intimate scale than the Navy Yard and closer to many staffers’ suburban homes.

“COVID has really pushed people to the suburbs,” said de Grandpre, who adds cheerfully that he has never seen the local golf courses so crowded.

WuXi Biologics, a 2015 spin-off from China-based contract gene- and cell-therapy maker that employs 600 at its four Navy Yard buildings, also picked a suburban location. It’s placing up to 100 employees at a former Glaxo office center in Upper Merion Township, dubbed Discovery Labs, which, like Spring House, is also being redeveloped for small companies.

WuXi spokesperson Shi Ruyi cited “the talented workforce” in the neighborhood, where Merck, Glaxo, and other big drugmakers employ thousands. It also plans larger centers outside of Boston and New York.

Elsewhere in the suburbs, the Pennsylvania Biotechnology Center of Bucks County in Doylestown recently announced a nearly $20 million expansion. At Hankin Group’s Eagleview center in Exton, Chester County, “our neighbors are Frontage and Takeda and DSM Biomedical,” a contract manufacturer that competes with WuXi, says Rich Fitzgerald, chief financial officer at Immunome, a newly public cell-therapy maker.

Suburban sites offer “affordable space and a great talent base,” with “a lot of parking” for manufacturing workers, says Joerg Ahlgrimm, a former pharma executive who moved to the Main Line from California (via Switzerland) to serve as Discovery’s president in October. “These people are on site, they work in shifts, and that is often easy to achieve in a suburban location.”

For companies already set up outside the city, moving to Philly can be a tough sell. “I’m trying to convince [his company] to open a satellite office in Center City, where I live,” said Scott Applebaum, of Trevena Inc., in Chesterbrook. The firm hired him as chief legal and compliance officer in February, before raising $50 million from public investors to develop its painkiller Olinvyk.

The outer counties are cozy: “There’s a good mass of critical business people in the suburbs,” says Trevena’s chief financial officer Barry Shin, a veteran biotech investment banker who joined the company last year and previously worked nearby at Shire Pharmaceuticals. With “proximity to turnpike and major areas, it was a good place to draw talent from. There are so many pharma industries around here.”

Shin was squeezed from his former Philadelphia office at another biotech start-up, at 3000 Market St., the former Evening Bulletin building in Philly’s University City last year. “We got kicked out when Spark Therapeutics took the whole building,” Shin said.

The city’s dominant office landlord, Brandywine Realty Trust, had hoped to keep developing 3000 Market as a center for small firms like Context, but finally concluded it was better off signing a 12-year lease with Spark.

Spark, founded by Children’s Hospital of Philadelphia gene therapists and purchased last winter by Swiss drug giant Roche for $4 billion, is also making a suburban move: It has agreed to buy a lab campus in Glenolden in Delaware County for its R&D center. University of Pennsylvania gene-therapy pioneer Carl June’s company, Tmunity, is locating its factory still further out, in Norristown.

“It’s great to see” so many moves by cash-rich biotechs, added Shin. “We’re not Cambridge, Mass., but it does remind me of the early days of Cambridge when so much talent was coming out of the local universities to start companies. Anyway, from Chesterbrook, we can still pull talent out of Philadelphia.”

Jerry Sweeney, Brandywine’s chief, hasn’t abandoned small biotechs. He’s turning six floors of its nearby Cira office tower in West Philadelphia into labs. About 34,000 square feet, a quarter of that total, is “preleased,” Sweeney told investors in a conference call last week. He hopes to start a proposed 500,000-square-foot “life science building” less than two blocks west at 3141 Market St. next year.

But, as at the Navy Yard, much of the demand for lab and office space in University City is from the big current employers — Penn, Children’s Hospital of Philadelphia, the Wistar Institute, and other “anchor institutions,” as Sweeney calls them, and their many affiliates.

Questioned by analysts, Sweeney acknowledged that suburban competition, citing the Discovery site among its rivals.

Life sciences firms prefer new buildings, he added, but those take “two to three years to deliver.” That can be a problem in a red-hot market where gene- and cell-therapy firms without products or clients can raise millions in initial public stock offerings and want prime space fast.

But don’t count the city out. “The Navy Yard has been very successful, particularly in the life sciences space,” and still has room to grow, said developer John Gattuso, who helped lure business to the neighborhood as an executive of the former Liberty Property Trust. He’s now building a 137,000-square-foot biotech factory there for San Carlos, Calif.-based Iovance Biotherapeutics.

Pennovation, the University of Pennsylvania’s start-up and business-partnership center at the former DuPont paint factory across the Schuylkill from Penn’s main campus, is also expanding to a second building (also by MRA), with other units planned. The original Pennovation has been a haven for start-ups like Cocoa Press, Penn grad Evan Weinstein’s 3D chocolate-making-equipment developer.

Gattuso’s firm also has a fix for the Navy Yard: He’s proposed a 130,000-square-foot life sciences facility for multiple tenants at 2500 League Island. “In the 35 years I’ve been doing this, I’ve never seen an industry that has been as mobile as the life sciences sector, particularly gene and cell therapy,” he said.

Like Raleigh, N.C., Philadelphia is less expensive than the industry investment centers — Boston, San Francisco, and San Diego — and Gattuso says the city has experienced staffers who can help firms like Iovance move in fast.

Small firms are more mobile than ever, agreed Mark Trabbold, a Ben Franklin Technology Partner executive. “We work with some very early stage companies ― a couple people, a couple laptops, a case of Mountain Dew,” he said.

It remains unclear how Philadelphia and other cities will survive “work-from-home, [virus] fears surrounding mass transit, a challenging economy, ” and the “general suburban shift driven by aging millennials,” William A. Crow, real estate stock analyst at Raymond James & Associates, told clients in a report last week.

But at least Brandywine has hedged its bets. It also owns some of the Philadelphia area’s high-rent suburban properties.