Life Sciences Real Estate Sector Getting Big Boost from COVID Research Demand

Life Sciences Real Estate Sector Getting Big Boost from COVID Research Demand

Commercial News » San Diego Edition | By Michael Gerrity | October 16, 2020 8:00 AM ET

According to CBRE, the pandemic has accelerated momentum in the U.S. life sciences industry, particularly amid the race to produce a COVID-19 vaccine and develop other medicines for human ailments. The sector, which has reached new highs this year in R&D employment and venture-capital funding, is seeing a surge in demand for life sciences real estate in markets from longstanding centers like Boston to emerging hubs such as Pittsburgh.
The decades-long expansion of the life sciences industry, which accelerated with the mapping of the human genome in 2003, has pushed vacancy rates for lab space near all-time lows in many markets, fueled rent growth and spurred new development that, nonetheless, still isn't keeping pace with demand.
For example, CBRE found that speculative construction of life sciences facilities in the 13 largest U.S. markets totaled roughly 13.9 million sq. ft., as of July, which falls short of the cumulative 14.7 million sq. ft. of life sciences space that companies currently are seeking in those markets. Lab-space vacancy averaged 6.1 percent across the 13 largest life sciences markets at the end of the second quarter, and rents are rising in most.
The real estate gains have come as venture-capital investment in the sector grew to a rolling annual total of $17.8 billion in the second quarter, the largest amount on record, according to the PwC/CB Insights MoneyTree survey. Employment in U.S. biotechnology research and development professions exceeded 220,000 in July, extending a decade-long growth trajectory.
"Interest in the life sciences sector from developers, investors and financial backers already was strong in recent years, and the unfortunate arrival of COVID-19 brought even more attention and capital into the sector," said Steve Purpura, a Vice Chairman leading CBRE's Life Sciences Practice in the Northeast U.S. "That has boosted the market for lab space across the U.S., not only in the industry's flagship markets like San Francisco, Boston and San Diego but also in emerging research centers such as New York City, Philadelphia, Raleigh-Durham and Seattle."
CBRE identified the top U.S. life sciences markets by assessing each market's life-sciences job base, the size of its lab-space inventory, and the amount of funding it attracts from venture capital firms and the National Institutes of Health.
Largest U.S. Life Sciences Markets.jpg

CBRE's determined its list of emerging life-sciences markets through a slightly narrower set of criteria. Those markets are (in order): Pittsburgh, Houston, Austin, Detroit, Phoenix, Dallas-Fort Worth, St. Louis, Atlanta, Portland and Minneapolis.
Investors continue to consider lab and R&D space to be slightly more valuable on average than conventional office space, a trend that began in 2015.
"Nearly every indicator points to increasing demand for life sciences real estate in the U.S., be it expanding R&D employment, public and private investment in combatting the pandemic, or the health needs of our aging population," said Ian Anderson, CBRE Americas Head of Office Research. "The factors fueling this sector are great enough to support demand for more lab space in the top markets and beyond."

Real Estate Listings Showcase

This website uses cookies to improve user experience. By using our website you consent in accordance with our Cookie Policy. Read More