According to CBRE's newly released Q3, 2022 New York City Life Science data, demand from life science tenants in search of lab space in New York City remained robust as premium products became available.
During Q3 2022, demand for space reached 2.1 million sq. ft., while new lab space under construction or redevelopment was 866,013 sq. ft.
Three of the four projects underway are spaces being converted into labs, including Elevate Research Properties' 400,000 sq. ft. of lab exclusive space at West End Labs (125 West End Avenue) in Manhattan and more than 200,000 sq. ft. of lab exclusive space at Longfellow's Hatch (43-10 23rd Street) in Long Island City.
The average asking rent in Manhattan for lab exclusive space was $120.17 NNN per sq. ft. at the end of the third quarter, while overall New York City lab exclusive space posted an average asking rent of $106.58 NNN per sq. ft. Both figures are 2% off their all-time highs. The occupancy-ready, pre-built availability rate in Manhattan for lab exclusive space during Q3 was 3.8%, while the overall New York City rate for such space was 7.2%.
"Lab leasing activity was strong in the third quarter as many large hospitals and life sciences companies take advantage of New York City's deep pool of highly educated workers," said David Stockel of CBRE. "We are seeing an increase in demand and leasing momentum compared to previous years, and we are confident that the life sciences sector will continue to grow throughout the area."
For the second consecutive year lab leasing activity in NYC surpassed 300,000 sq. ft. through the first three quarters. The four biggest lease commitments during the third quarter were in Manhattan: a 55,600 sq. ft. lease by the New York University School of Medicine at 345 Park Avenue South, followed by a 50,500 sq. ft. lease by Mount Sinai Hospital at 525 West 57th Street. Eikon Therapeutics' 25,000 sq. ft. lease and Stabilix Therapeutics' 13,000 sq. ft. lease were both at Alexandria Center Manhattan. The fifth largest was Histowiz's 10,000 sq. ft. lease in Queens at Alexandria Center Long Island City.
Nationwide, the average lab vacancy rate across the top 12 U.S. life sciences hubs increased to 5.3% in the third quarter, up 30 basis points (bps) from the second quarter according to the U.S. Life Sciences Q3 2022 report. Still, the vacancy rate was down 30 bps compared to the first quarter of 2021.
The vacancy rate rose partly because developers completed 2.1 million sq. ft. of space last quarter in the 12 markets, outpacing new absorption of 363,047 sq. ft. Labs under construction now total 37.4 million sq. ft., of which more than a quarter are under lease.
U.S. life sciences employment increased by 5.4% in the third quarter from a year earlier. Venture capital funding declined by 29% in the third quarter from the second, with quarterly funding volume returning to pre-pandemic levels.
Top Life Sciences Markets: Select Q3 2022 Stats