Based on a new report by CBRE, demand for new life sciences lab space is outpacing speculative construction in the top 12 U.S. life sciences hubs as the industry rapidly expands amid a global race for new drug development.
Life sciences companies collectively sought nearly 23.8 million sq. ft. of new lab space across those 12 markets in this year's third quarter. That exceeds the amount of lab space under spec construction - meaning space being built without a tenant already signed - by nearly 2.8 million sq. ft. That gap has widened steadily since last year; Even as construction has ramped up considerably, growth in demand continues to outpace it.
"Life sciences labs are quickly becoming a highly sought-after property type for both tenants and investors," said Ian Anderson, CBRE's Americas Head of Office Research. "This intense demand for lab space is the natural result of a global push for new medicines begetting strong funding and hiring in the life sciences sector."
Many factors are fueling the life sciences market, including global demand for vaccines for COVID-19 and viruses like it. Initial public offerings for life sciences companies in the U.S. are on pace for a record year of raising roughly $13 billion. Venture-capital funding for U.S. life sciences companies exceeded $30 billion, the most on record, in the 12 months ended in September. Job growth in U.S. biotech and research & development sectors registered a 12.1 percent gain in September from a year earlier.
This growth has led to similarly striking figures for life sciences real estate. The U.S. vacancy rate for lab and research & development space stands at 4.9 percent, including just 1.1 percent in the Boston-Cambridge market and New York City. Average asking rents increased by 7.5 percent in the top 12 markets in September from March of this year.