Life Sciences Will Continue Its Wild Tear In 2022
Even as construction ramps up, demand continues, driven in part by the ongoing need for vaccines for COVID-19 and other viruses.
The gap continues to widen between supply and demand in the life sciences sector across the largest US cities, with companies in the space seeking nearly 24 million square feet of new real estate in the third quarter alone.
That figure exceeds the amount of lab space under spec construction, according to new research from CBRE, by nearly 2.8 million sq. ft. And the pace of demand shows no sign of slowing, the firm maintains: even as construction ramps up, demand continues apace, driven in part by the ongoing need for vaccines for COVID-19 and other viruses.
Premier markets are leading the way for the sector, with Boston, San Francisco, and San Diego dominating. Those three markets captured 70% of all venture capital in the US last quarter.
However, Raleigh-Durham, Philadelphia, and Washington D.C. are all fielding rapid growth, and the Sun Belt cities of Dallas, Atlanta, and Phoenix are surprising contenders as well, according to CBRE.
The firm suggests that the market has “never been stronger,” with all-time highs reached in funding, job growth and creation, and demand. CBRE also contends that the near-term outlook for life sciences remains bright.
“Life sciences labs quickly are 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.”
CBRE reports that IPOs for life sciences companies in the U.S. should have a record year in 2021, with approximately $13 billion raised so far, while VC funding in the sector hit a historic high of $30 billion in the year ending in September. Job growth has also exceeded 12% in the biotech and R&D sectors, and life sciences firms are offering a range of amenities from convenience stores to dry cleaning and on-site childcare to woo workers.
The impact on CRE has been stark: the US vacancy rate for lab and research & development space is at 4.9% nationally, with Boston-Cambridge and New York City each at a record low of 1.1% Average asking rents also ticked up 7.5% in the top 12 markets CBRE tracks from March to September of this year.
Lab space is also transforming, with less “wet” lab space and a greater emphasis on collaboration and idea generation, CBRE notes.