Growth Slows in Top Biotech Hubs, Jobless Claims Decline, Mortgage Rates Rise for Sixth Week

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Projects such as the one at Innovation Square have made Boston among the highest-demand markets for life science space, though biotech investment nationwide has been declining this year from record 2021 levels. (Related Beal)

By Lou Hirsh CoStar News September 29, 2022 | 3:30 P.M.

Growth Slows in Top Biotech Hubs

Demand for U.S. life science space remains well above historic levels, though the high rate of growth in the past few years is slowing as investors rethink capital deployment and startups focus on preserving funds in what’s become a volatile economy, according to a new report from brokerage JLL.

Boston, San Francisco and San Diego keep their longtime positions as the top three regions for biotech demand among the nation’s 15 largest cluster markets. Those three still have among the tightest vacancy rates as tenant requirements for new space outpaces new construction and continues to put new projects into development.

“The long-term potential of the sector remains materially unchanged since 2021,” Travis McCready, head of life sciences for JLL’s Americas division, said in a statement this week.

“Innovation is happening at a more rapid pace than ever before, the fruits of research into cell and gene therapy are just now being harvested, and revenue growth has taken off in the past five years as the sector becomes larger, an atypical growth track.”

Private capital for biotech research startups remains resilient, accounting for $21.5 billion in U.S. funding through Aug. 31. That’s nearly $2 billion more than what was raised in the same period of 2020 but 38% below the same time in 2021, JLL researchers said.

The convergence of science and technology, which has accelerated during the pandemic, has helped fuel growth in other emerging biotech hubs, including Pittsburgh at No. 11, Houston at No. 13 and Los Angeles at No. 17 in the latest JLL ranking.

JLL noted that the highest-ranked biotech markets tend to grab most U.S. leasing, funding and real estate investment, and that’s now been the case for decades for the three top regions. But other regions are gradually growing by offering lower land and development costs, along with talent pools tied to science programs at local universities. Jobless Claims Decline

Initial claims dropped for unemployment insurance by 16,000 from the prior week to total 193,000 for the week ended Sept. 24, the Labor Department reported Thursday.

In another sign of what remains a strong job market despite inflation and rising interest rates, the four-week moving average for initial claims declined 8,750 to 207,000.

The total for continued weeks’ claims in all programs, tracked on a more delayed basis, was approximately 1.3 million for the week ended Sept. 10. That marked an increase of about 6,800 from from the previous week but was far down from approximately 5 million in the comparable week of 2021. Mortgage Rates Rise for Sixth Week

Mortgage rates increased for the sixth consecutive week, with 30-year fixed-rate mortgages averaging 6.7%, according to the latest weekly survey of lenders released Thursday by Freddie Mac. The same mortgages averaged 6.29% last week and 3.01% a year ago.

The government-sponsored issuer of mortgages said 15-year, fixed-rate mortgages were averaging 5.96%, compared with 5.44% a week ago and 2.28% in the comparable week of 2021. Rates overall are at their highest since 2008, and the difference between the lowest and highest rates now being offered for the same type of loan has also grown significantly in the past few weeks.

“The uncertainty and volatility in financial markets is heavily impacting mortgage rates,” Freddie Mac Chief Economist Sam Khater said in a statement. “Our survey indicates that the range of weekly rate quotes for the 30-year fixed-rate mortgage has more than doubled over last year.”

Freddie Mac said conditions warrant more careful shopping around for loans by potential home buyers because the widening range of rates now being offered means those who borrow at the high end could be paying several hundred dollars more per month than others for the same type of loan.



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