Life Sciences Industry to Drive U.S. Office Market Growth in 2018
Biggest gains in R&D focused markets like San Diego, Boston and San Francisco
According to a new report by CBRE, multiple factors are propelling the U.S. life-science industry in 2018, and by extension the real estate that supports it, to strong growth, thereby positioning research-and-development centers like Boston and California's Bay Area for outsized gains.
While many U.S. industries are navigating fundamental disruption, the life-sciences industry - which includes pharmaceuticals, biotechnology and medical-device manufacturing - is on a long-term expansion track. CBRE's report examines the generators of the industry's sustained growth, including the aging U.S. population, increases in public and private funding, hefty job gains and robust construction of lab and R&D space.
"Many solid trends support strong growth going forward for the life-sciences sector, especially in major R&D markets," said Ian Anderson, CBRE Director of Research and Analysis and lead author of the report. "The market for lab space offers several secular growth drivers and constrained supply."
CBRE's report outlines factors expanding the life-sciences market, including the nine-year gain in average life expectancy in the U.S. since the 1960s, rapid advances in life-sciences technology and increases in funding from the National Institutes of Health and venture-capital sources. For example, venture capital investment in the U.S. life-sciences industry now is 53 percent greater than 10 years ago.
Those growth drivers have delivered significant results. Employment in U.S. life sciences has risen by 23.5 percent since 2001, outpacing the overall job-growth rate of 10.2 percent. Lab-space vacancy rates are tight in primary life-sciences markets, registering at less than 2 percent in Chicago, 4 percent in the Bay Area and less than 5 percent in Boston. And rent growth is robust, including a 50 percent increase in Boston's Cambridge submarket since 2013.
"When you look at the landscape of investment opportunities within the commercial real estate sector, few asset classes offer as compelling a case for near-term optimism as the life-sciences industry," said Scott Marshall, CBRE President of Advisory & Transaction Services | Investor Leasing. "Our team has analyzed the labor trends and found that, especially in Massachusetts and California, there are significant growth opportunities within the life-sciences industries going forward."
CBRE's analysis found that regions with high concentrations of research and development jobs also saw the highest growth in their overall life-sciences job bases in the past 15 years. That indicates continued strong growth for leading R&D markets such as Boston, the San Francisco Bay Area, San Diego and Raleigh, N.C.
In contrast, markets focused more on the pharmaceutical and medicine-manufacturing industries, such as Chicago, Philadelphia and New Jersey, likely will grow at a slower pace than the R&D markets.