The previous decade saw explosive growth in the commercial real estate life sciences sector. They are companies that are dedicated to medical research and the development of new technologies.
Some prominent examples that may come to mind are biotech companies or pharmaceutical companies.
Significant amounts of capital have been and continue to be invested in this space, fueling a wave of medical research expansion focused on new technologies and drugs involving DNA and mRNA, stem cell research and more.
Exciting new technologies have emerged that have reignited enthusiasm in the scientific community, such as artificial intelligence and new advances in cell and gene therapies.
The COVID-19 pandemic has brought increased attention from the general public to a sector of the economy that was experiencing rapid expansion.
As soon as we invest in life sciences real estate, we must also remember that developing or investing in multi-family real estate in close proximity to life sciences facilities can be very profitable.
For example, an area home to a pharmaceutical company will be able to command higher rents than surrounding areas due to attracting higher quality tenants both directly and through tangential business. This is good for all the businesses in the surrounding area, from supermarkets, gyms, shopping centers and health care services.
We are residential professionals with a focus on multi-family housing, but many of our Class A developments sit along the “line of progress,” surrounded by life sciences infrastructure and employers.
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Real estate for life sciences companies includes laboratory space for conducting physical experiments, as well as a workplace component.
As technology has advanced, the proportion of your typical life sciences center dedicated to the workplace has improved.
Scientists and researchers are now spending increasing amounts of time with highly advanced computer modeling applications for many parts of their study that were previously unavailable.
As a consequence of these trends, these facilities today tend to have slightly more office space compared to laboratory space.
The lab space conversation may be winding down as computers play a bigger role in the studio, but that doesn’t mean it’s an afterthought in business. On the contrary, the laboratory spaces that are now in demand are more sophisticated and avant-garde than the highly specialized areas of study that are being pursued.
Like all flexible real estate, life sciences facilities need flexibility and adaptability. As different fields of research are pursued over time, laboratory space may need to be repurposed, expanded, or relocated to different regions of the facility.
Buildings that allow for this kind of adaptability have been in high demand by life sciences companies that want to stay for years and can go through several different phases of research. There is no point in developing a space that cannot be adapted as the company grows.
Demand has continued to outpace supply within this sector and shows no signs of slowing down any time soon. Listed below are a few reasons why you should consider adding a life science real estate investment to your portfolio:
1. Financing
As the old saying goes, “follow the money.”
They provide grants for scientific research and have awarded more than $100 billion in these grants in the last five decades. Also, Cushman & Wakefield released a report a year ago that showed very good growth over the past decade, along with VC investments in the sector growing from $3.7 billion to $17.4 billion.
The report also found that between 2012 and 2019, paid research and development by life sciences companies increased by 40%. A similar report from CBRE competed and found that VC funds flowing into the life sciences field are up 40 percent from a decade ago.
2. Growth:
Our development company started in Boston, Massachusetts, which is currently ranked the number one market for life sciences by multiple sources.
We saw in advance the enormous growth of the local economy fueled by the life sciences sector, which spilled over into demand for new and more excellent housing, accommodation and other industrial investments (visit our post Demand Cleaners Explained for real estate for more information). information).
This rapid expansion saw an already robust backbone of 9.6 million square feet of life sciences commercial real estate now expand to 18 million square feet, according to CoStar.
These trends are being seen across the country as venture capital funds and grants encourage those companies to seek more and more usable space for their research needs.
There is also some level of late start growth due to the timely nature involved in exploring and creating new technologies and treatments. Funding that has been raised over the course of the last decade originally led to R&D that is only now beginning to bear fruit. The push for a vaccine following the outbreak of this COVID pandemic reveals indicators of the kind of strength these companies have begun to show after years of steady progress.
Another lesson that the COVID pandemic has taught business is the demand to bring the supply chain back home.
Overreliance on foreign links in the supply chain caused problems and uncertainty during the pandemic, and companies want to avoid this by relocating, even if it incurs additional costs.
This trend will present an opportunity for the new evolution of warehousing and storage facilities for all of these supply chains.
3. Vacancy rate:
Compared to traditional commercial office real estate, lifestyle science has roughly half the vacancy rate, at 9 percent, as a national average. Strong markets like Boston and San Francisco posted exceptionally low rates of 4% and 2%, respectively, per year. It will be many years before the supply of new life sciences facilities can begin to keep pace with current demand.
4. Jobs:
In a report published by Cushman & Wakefield, it was found that job growth in the life sciences has increased by 7.5% per year since 2013. This is an incredible increase compared to the previous twenty-year period, when growth employment in this sector was 1% per year. Yet another sign that the life sciences real estate sector is in an excellent position, as employment development indicators are often some of the strongest clues to steady expansion.
5. New Markets:
Although Boston, Seattle, San Diego and San Francisco would be the superstars in the life sciences world today, the business is growing rapidly and this has started and will continue to drive growth into new markets. Today’s major life sciences markets have a higher cost of living, making it more difficult for both the employee and employer.
This is really driving new markets, including Philadelphia, Maryland, and North Carolina, to name a few. Areas with a strong backbone of research-based universities and an educated population will be in a strong position to welcome life science startups into their market.
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