In 2023, funding for life sciences companies fell from record-high levels, forcing companies to learn to do more with less. Leasing activity slowed in the sector as tenants became more cost conscious, too, according to a report from Savills.
Despite this challenge, Synnovation Therapeutics, a precision oncology company, raised nearly $70 million in Series A funding last year. This was one of the year's largest funding deals in Philadelphia. In the Boston-Cambridge market, respiratory and immunological drug developer start-up Ailos Bio raised $245 million for Phase 2 of its medication to treat severe asthma.
At the same time, federal and state level governments are working to help grow the life sciences industry, according to Savills. For instance, the Colorado Office of Economic Development and International Trade announced that 25 companies and seven researchers were awarded $7.8 million through the Advanced Industries Accelerator Program. In addition, the government has appointed Philadelphia a Regional Technical and Innovation Hub for life sciences. This is an economic development initiative program specifically aimed at accelerating growth in this industry.
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According to the report, drug discovery and biotech verticals received the most venture capital funding across all major life sciences markets. For example, the University of Maryland at Baltimore received a four-year $4 million dollar grant from the NIH to advance biomedical entrepreneurship and innovation in the region.
Overall, life sciences companies may be more comfortable making real estate decisions moving forward, which may equate to an increase in leasing activity after a notable slowdown in 2023.
In the San Diego market, ACON Laboratories subleased a nearly 100,000 square foot space from Thermo Fisher. This transpired after receiving 510(k) clearance for an over-the-counter rapid COVID-19 test. Indivior Inc., a pharmaceutical company headquartered in Virginia, plans to expand its operations to Raleigh by opening a pharmaceutical production site. Also, in the San Francisco Bay Area, Healthpeak Properties received approval for its next two phases of Vantage, a 1.7 million square foot life sciences campus that hosts tenants such as Astellas Pharma.
While leasing activity within the life sciences sector slowed in 2023, there is plenty of new inventory from developers. This shift has changed the supply and demand dynamic in favor of tenants. Life sciences tenants have begun to take advantage of these opportunities, with sizable transactions noted. AstraZeneca signing a full building lease of 198,000 square feet in Gaithersburg, Maryland, is an excellent example of this shift.
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