Biotech and Real Estate

So the city of Pittsburgh is betting tens of millions of dollars in local tax money on a real estate development that will max out at 400 high-paying, and terribly scientifically sexy, jobs. Is the money worth it?

Pro: For years and years, Pittsburgh has desperately wanted the cachet that comes with being a high-tech R&D powerhouse, and especially the cachet that comes with being a biotech powerhouse. The startup economy is surprisingly buzz-dependent; buzz begets cash. Creating lab space for a few of the university biotech startups coming out of Oakland can help sustain a bit of the buzz that accompanies a cluster of firms. And if Pitt, UPMC, and CMU can offload some of their tech transfer startup costs onto private real estate companies and the public sector, then the cost/benefit equation favors a higher rate of university spinouts. It takes money to make money, and -- sunk costs be damned -- given the research base that Pittsburgh has in Oakland already, it would be foolish not to pull out the stops to make the most of such a concentration of talent.

Con: Biotech is a long-range, capital intensive play that has never -- anywhere -- matured into a real regional player on its own. Maybe the biotech economy is about to turn -- at least in some sectors (here's a link to a recent Economist story about the coming breakdown in the Big Pharma drug development model). Well-timed and well-placed bets on small companies there may pay off big -- some day. But if the city and the state -- cash-strapped as they are -- are going to put public money into economic development, and they want to put it into speculative high tech sectors, why not put it somewhere where the upfront capital costs are a lot lower -- like specialized software?