Space is a new environment. A clean slate. As far as we know devoid of even simple life. A new environment where living creatures have never prospered requires new creatures that have never existed. While machines are being developed to take people and other machines into space, organisms need to be developed to allow us to stay there and build an economy and society.
DARPA has already begun exploring the possibilities of genetically modified or synthetically created organisms with which to terraform Mars. However the creation of of genetically modified animals has any number of other applications. Plants with increased oxygen producing ability. Bacteria for breaking down asteroids. Modified food producing organisms for colonies. Organisms that can convert human waste into bioluminescent light instead of using electricity. And even bacteria which could solve health hazards to humans caused by radiation or low gravity.
The reason genetic engineering has not been widely accepted and experiences great resistance on Earth is the fact that genetic engineering is considered unnatural. To introduce a man-made plant or organism into the Earth ecosystem is generally considered dangerous due to the side-effects that may arise. An example could be that weeds can adopt a genetically engineered resistance to common herbicides. Or that genetically modified food has detrimental health affects.
These potential problems with genetically engineered organisms is due to their foreignness to the normal ecosystem. Something which evolves 200 years in one or two affects its competition and consumers in ways not anticipated. It is the reaction of the environment which causes opposition to genetic modification not the modified species themselves.
Another argument to genetic modification has been the ethical question of if humans should exercise such powers. This is a question that cannot be answered in this essay. Though, as a guess, this question is still based on the protection of the natural environment.
In space there is no natural environment. It is a microwaved wasteland with no biology. For this reason many of the arguments for using biologically or synthetically engineered organisms fall apart. There is not an ecosystem to ruin with the introduction of a designed-for-space organism.
However, there will still be resistance to the use of such organisms. This something which space bio-engineering firms will have to be prepared for. Just as deserts and forests are preserved from irrigation or clearing to preserve their natural beauty, so to may barren planets be defended from terraformation. This is a legal question which will have to be addressed in future as such applications as terraformation go from theory to fact.
Also, while at the moment introduction of genetically modified organisms may be acceptable in space the industry must be careful in future to ensure that created ecosystems are kept clear of dangerous or invasive species.
From a business perspective bioengineering could be comparable to any other human space product in market size, perhaps even larger as terraformation becomes a possibility. But on the smaller scale humans, being natural creatures, require natural solutions to space survival. A typical technological carbon scrubber on a space station in not as effective or efficient as a common plant. But rare is the plant that collects high volumes of CO2 and can flourish in the low temperatures of Mars.
Not only are new organisms needed for space, they are required. The new environments are so foreign to anything that exists on Earth that finding an existing species to perform some task may be nearly impossible. (excluding bacteria that can survive in space while in hibernation) Selective breeding and cross breeding would be far to slow. Just as one has to leap a hundred miles straight up to reach space so must organic life "leap" in survival skills and production to survive in space. Genetic engineering is the only method available to make that leap.