The Small Space Marketplace

List Your Space

Find Space

Home About Us Executive Subscriber Membership RENTV Conferences Newsletter Contact Us Advertise
February 9, 2025
 Search RENTV
   Go!
 The REview
 News
News Home Page
Southern California
Northern California
Pacific Northwest
Texas/Southwest
Retail
Multifamily
Financing
Prop. Management
Archives
Press Releases
 R. E. Marketplace
Service Providers
JobWorks
Property Spotlight
 RENTV  Conferences
Subscriber Login:
  
Email      
    Go!
Password      
Forgot Password?



WHAT'S NEW
Printer-friendly Version   Email an Associate
Limited Supply, Increasing Demand Driving Increased Real Estate Costs in the Life Sciences Sector

2/06/19

This report was provided by real estate services firm Cushman & Wakefield

Increased investment and employment in the life sciences sector has driven life sciences related real estate to new heights, according to Cushman & Wakefield’s new report, Life Science: Great Promise & Rapid Growth. The research provides a big-picture overview of the life sciences sector and its impact on commercial real estate as well as more granular insights into 13 top life sciences markets in the U.S. and Canada.

Thanks to an influx of venture capital as well as billions of dollars in funding from the National Institute of Health, the life sciences sector has grown nearly five times as fast as the economy since 2000, adding 85,000 jobs, with roughly 70% of that job growth (61,000) in the past eight years. This is primarily a response to an aging population with increased longevity. By 2030, there will be 73 million Americans aged 65 or older, equating to 20.6% of the population, compared with 40.5 million Americas in this cohort in 2010.

“Life sciences has been, and will continue to be, a major growth driver for the U.S. economy for decades,” said Greg Bisconti, Cushman & Wakefield Executive Director and leader of the firm’s Life Sciences Advisory Group. “Essentially the tech area of healthcare, the life sciences sector has become a broad and growing collection of everything from diagnostics, genetic reading and writing and personalized medicine to medical device technology, pharmaceutical research and development, and much more.

“Those forces, in turn, drive increased demand for lab space in both gateway and secondary markets across North America,” Bisconti concluded.

Over the past decade, basically two sets of forces have been driving the acceleration of growth in this sector – demand for health services soars as the population ages and the technology enabling life science leads to greater supply of new products, which in turn has led to historically high investment in this sector.

For its life sciences report, Cushman & Wakefield surveyed approximately 125 msf of lab space in 11 key U.S. markets with life sciences clusters. (The firm also follows the lab-space market in numerous secondary and tertiary lab markets). Lab space vacancy is 8.4% in these 11 U.S. markets, well below the 11.6% vacancy rate for all office space and the national office vacancy rate of 13.3%.

In Cambridge, MA, the vacancy rate has fallen below 1.0%, while in San Francisco and Oakland, vacancy also has plunged. In most cases, markets that have experienced an increase in vacancy, such as New York, are adding substantially to inventory. San Diego, for example, has added more than 2.0 msf of space (+14.5%) in the past four years.

Across the sector in the U.S., average lab space rent has increased 33.2% in the past decade, compared with a 17% increase for U.S. office space. In extreme cases like Boston/Cambridge, NNN asking rents hover around $88 per square foot (psf), a 70.4% increase over the past 10 years.

In addition to Boston/Cambridge, top life sciences markets’ current psf, NNN rents (and percentage increase over the past decade) include: East Bay, $34.83 (72.8% growth); Research Triangle, N.C., $25.07, (61.4% growth); San Francisco and Peninsula, $60.09 (67.5% growth); DC Metro/Suburban Maryland $28.64 (46.9% growth); San Diego, $48.60 (33.7% growth); New York, $79 (26% growth); Baltimore, $25.44 (8.7% growth); Philadelphia, $23.71 (3.5% growth); New Jersey, $18.26 (-2.5% growth); and Seattle/Puget Sound, $26.42 (-9.1% growth).

“Life science companies have been an important driver of economic growth and commercial real estate development, and space serving this sector is in high demand,” said Ken McCarthy, Cushman & Wakefield Principal Economist and Americas Head of Applied Research. “These companies require specialized lab space for research along with office space. Life sciences’ rapid growth has generally outpaced lab-space supply despite a 10% increase in inventory over the past five years, and kept lab market vacancy rates tighter than overall office markets.”

More on San Francisco Bay Area

The San Francisco Bay Area has a long history as a major life science hub, most notably with Genentech coining South San Francisco as the “Birthplace of Biotechnology” in 1976. The bulk of the life science activity is located on the San Francisco Peninsula but the surrounding markets are active and growing. San Francisco’s East Bay life science market is a growing and dynamic mix of long-established companies and exciting venture-funded research companies.

Cole Speers, Associate Director, Research with Cushman & Wakefield focusing on the San Francisco Peninsula and actively engaged in the life sciences/biotech real estate sectors, said, “Virtually every new life science project that has broken ground over the last several years in the SF Peninsula market has been fully pre-leased well before completion, with the exception of a few properties—but even then a portion of those facilities are either pre-leased or experiencing strong interest. There are massive amounts of transactions that are being executed before space is even available.”

Matt Squires, Executive Managing Director in the firm’s Burlingame office, said, “Another growing trend helping meet the strong market demand is the conversion of existing Class A properties to life science uses. We have already seen multiple projects that have done this, which in turn has greatly increased interest as well as leasing activity within the project itself, as landlords look to attract tenants, especially large-scale users. New projects are also changing entitlements to accommodate life sciences for this reason. Furthermore, new institutional ownership groups are jumping into the sector with an emphasis and interest on converting existing projects to incubator and growth projects due to the high demand and lack of small research space.”

Squires added, “Additionally, new developers are combating the Peninsula’s lack of available land by building upwards. The recently constructed Genesis Towers Phase II is the first high-rise lab structure of its kind with 20 stories of lab and office space.”

Speers noted, “To some degree, demand for life sciences space has quickly become higher than traditional office, especially in North San Mateo County (South San Francisco) but also across other submarkets south along the peninsula.”

“The East Bay life sciences sector is experiencing unprecedented surge in demand, from both young start-up companies and as well as expansion needs from established companies,” said Marc Ward, Managing Director with Cushman & Wakefield’s Oakland office. “The 100% pre-leasing of Wareham Development’s 265k sf EmeryStation West is testament to the growing depth of this sector in the East Bay.”

Ward added, “In the San Francisco Bay Area, there is a symbiotic relationship between the life sciences sector, the robust venture capital market and the world class public research institutions such as Stanford, UC Berkeley and UC San Francisco—all which are also in close proximity. These relationships are on full display at the moment, as record amounts of private capital are being invested in Bay Area Life Science companies whose research and staff continue to be trained and supplemented by our educational institutions. This has all helped to support a strong biotech ecosystem within our region for many years, as well as fuel future growth.”





Return to the Archive page


 


 


 
 
 



Home | About Us | Newsletter | Contact Us | Executive Subscriber Membership | Executive Subscriber Home | Advertise
Southern California | Northern California | Pacific Northwest | Southwest | Retail | Multifamily | Financing | Property Management
Archives | Press Releases | Service Providers | JobWorks | Property Listings

Copyright © 2025 by RENTV, All Rights Reserved
Website designed by Regency Web Services, Inc. and powered by Lightning Media