Development of Life Science Space Outpaced by Sector's Rapid Growth
Escalating demand for new life science laboratory space is outpacing speculative construction in one of the nation’s fastest-growing types of commercial real estate. A new report from brokerage CBRE points to several cities where the amount of speculative lab space under construction trails demand from companies scouting those regions for life science space. While about 21 million square feet of biotech space is under construction in the nation’s 12 largest life sciences markets, tenants are in the market for 23.8 million square feet.
“Life sciences labs have quickly become a highly sought-after property type for both tenants and investors,” said Ian Anderson, CBRE’s Americas head of office research. “The 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.”
Much of this activity was underway before the pandemic, and the push for coronavirus vaccines and treatments has ramped up the flow of venture and government funding, spurring biotech firm expansion. The Boston-Cambridge region, with the highest amount of spec construction at 9.3 million square feet, also has the tightest lab vacancy rate at 1.1% and the highest amount of space being sought out by tenants at 6 million square feet. Developers in the biggest biotech hubs are finding much of their speculative space preleased long before expected project completion dates.
“We are currently tracking life sciences tenant demand in San Diego at 3.5 times historical averages,” said Ted Jacobs, who heads CBRE’s life science practice in that region, noting San Diego’s biotech vacancy rate of 2.2% is even tighter than the San Francisco Bay Area’s 2.6%
Scarcity of space means rising rents, and there are several regions where tenants are looking for much more biotech space than is currently being built, meaning more construction and conversion projects are probably on the way. Those include Denver, Los Angeles, North Jersey, Philadelphia, Seattle and the Baltimore-Washington area.
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