Ontario's Wet Lab Funding Shortage Could Drive Innovation Exodus

Ontario’s scientists have made life saving discoveries affecting millions of individuals worldwide and our research output continues to rank highly on a global scale. Despite these remarkable achievements, our life sciences sector is not properly commercializing these discoveries, and thus not successfully transforming these intellectual achievements into tangible economic value. Historically, the two key challenges facing the sector have been the lack of wet lab space, which is decreasing our ability to develop and retain venture-backed life sciences companies, and the companies’ lack of funding to pay for the space. 

A wet lab is a specialized laboratory space designed to meet all the unique needs for conducting, testing and refining pre-clinical research while meeting the latest safety and environmental regulations. One size does not fit all: different types of wet lab are needed for different types of drug development ranging from small molecules to biologics to cell and gene therapies.

A sufficient inventory of wet lab “graduation” space is critical to growing Ontario’s life sciences sector. That’s because, once researchers have outgrown the lab space available in our academic institutions and hospitals, their options to commercialize their research in Canada have historically been limited, in part, due to the lack of wet lab space.  “Graduating” Step-up and Scale-up companies need to lease space within months after receiving an investment commitment, but have minimal capital and time for fit-up so the space must be turn-key.

Similar to the broader national trend, Ontario has experienced a critical shortage of multi-tenant, private-sector graduate laboratory spaces. Yet, current construction and proposed construction will only address a fraction of the demand. Without graduation space, we will continue to lose our best, growth-potential companies to the jurisdictions that are building space; investment attraction efforts will be futile; and efforts to enhance capital and talent will only benefit other jurisdictions (notably the United States).

The Ontario Wet Labs Coalition brings together industry groups, universities, developers, brokers and research entities. The Coalition determined that in the most optimistic case, 20% of wet lab demand would be addressed in the next two years. The result, hundreds of early-stage life sciences companies are a flight risk. 

The root of the problem lies in a self-perpetuating cycle that has kept Ontario's wet lab inventory low: wet lab development costs are capital-intensive, often ranging three to five times higher than standard office development, and this significant capital allocation compels developers to seek robust assurances of tenants' long-term financial capacity to meet the lease commitments. However, graduation companies often have insufficient financial covenants because they are typically pre-revenue and the terms of venture capital funding do not typically provide for capital/build-out expenditures. Furthermore, the burn rate on venture capital is typically two to three years, which is significantly less than the lease requirements of developers.

Recent developments, however, hint at the possibility of meaningful change. Catalyst, a 155,000-square-foot building in the Junction neighbourhood in Toronto, developed by Seeker Labs, will be ready for occupancy this fall in Q4 2025. Seeker believes that in order to achieve cutting-edge discoveries and build our local ecosystem, we need access to game-changing innovation facilities. So Catalyst has been designed and built to provide scientists with the optimal environment needed to create a virtuous cycle of research and commercial success.

In today's evolving ecosystem of life science and scientific innovation, the need for flexible and efficient laboratory spaces has never been more critical. Seeker’s vision is to address this need by offering smaller, pre-built lab spaces designed expressly for early-stage research and development companies. Attributes include minimal setup time, removing the requirement of capital-intensive fit-out with major cost overrun exposure and shorter lease terms to match the growth cycles of companies that make up the burgeoning Canadian ecosystem.

Other jurisdictions have successfully increased their inventory of wet lab space, including Boston, New York City, and Philadelphia. The key lessons from those regions are that government, at all levels, has a pivotal role to play in “priming the pump” and stimulating public-private partnerships over the long term

The Ontario Wet Labs Coalition will continue to advocate to the government to collaborate on ways of growing wet lab graduation space much more quickly, providing data and confidence for the growth of larger multi-tenant projects. If we don’t, we’ll continue to lose companies to other jurisdictions, along with the jobs, revenue and new opportunities with them.