The life science real estate market has been showing hints of softening with an increased vacancy rate in the first quarter and a combined 44,000 square feet of negative net absorption in the country's top 13 markets, according to CBRE.
But results vary greatly by city, with the San Francisco Bay Area posting 260,000 square feet of negative net absorption while Philadelphia – home to a newly announced project – had 460,000 square feet of positive net absorption.
CBRE believes that that a continued demand for life science space should limit any future increases in vacancy, but it is still worthwhile for investors to consider emerging hubs in this space. CBRE has identified three that stand out for their size, institutions, talent and rapid growth. They are Atlanta, Nashville, and Dallas/Fort Worth.
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Of the three, Atlanta raked in the most funding from the National Institutes of Health — $708.1 million in the second quarter of 2019, CBRE reported. The city's three biggest educational institutions each claimed a share. The largest amount, $560 million, went to Emory University, while Georgia Institute of Technology received $50.4 million and Georgia State University $44.9 million.
"The institutional funding, coupled with growing venture capital activity, has produced some of the fastest life sciences industry growth of any U.S. metro area," CBRE noted.
Nashville recorded $520.9 million of NIH funding in the same period. Virtually all went to Vanderbilt University and its medical center, putting it among the top 20 largest single recipients of NIH funding in the nation.
The NIH awarded Dallas/Fort Worth $406.4 million, split among the University of Texas Southwestern Medical Center in Dallas and the University of North Texas Health Sciences Center in Fort Worth. The metro also attracted $1.6 billion in life sciences venture capital between 2018 and 2022, the eighth largest amount of any U.S. market, CBRE noted.
Georgia's universities also turn out highly qualified workers for the bioscience sector. producing 2,000 college graduates (2020 data) per year in biological and biomedical sciences, CBRE stated, noting Atlanta's 20% employment growth rate in the field in 2Q 2022. This compares to the national average of 13.7%.
Indeed, according to Georgia BIO, the state's life sciences industry association, the rate of job growth in the life sciences was more than twice that of Georgia's private sector in general.
Life sciences employment in Nashville was not far behind with a 19.3% growth rate, while Dallas/Fort Worth grew at a 17.1% rate.
The growth rates for pure R&D employment in the sector were 81% in Nashville, 44.5% in Dallas/Fort Worth, and 44.1% in Atlanta, with all three ranking in the nation's top five and outstripping the national life sciences R&D growth rate of 23.1%.
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