Life Sciences Sector Activity Captivates Investors

Investor interest in life sciences real estate has jumped during the pandemic, sector analysts say.  

Tom Leahy, Senior Director of EMEA Analytics at Real Capital Analytics, New York, said interest in the life sciences sector has exploded. “While the shadow of remote working has undermined office property demand, R&D-type properties have proved immune,” he said

Leahy said more than $11 billion has been spent on R&D properties globally this year, compared with $16 billion in 2020, which was the second-strongest year on record for the sector. “The surge is reflected in client questions to the Real Capital Analytics team of analysts: the group has fielded more data queries so far this year than in all of 2020,” he said.

Life sciences asset pricing chart courtesy Real Capital Analytics

Jonathan Varholak, Vice Chairman with the CBRE Boston Consulting practice, said the pandemic pushed life sciences into warp speed. “You can’t do chemistry from home,” he told Bloomberg News.

MBA NewsLink recently interviewed JLL Executive Director of U.S. Life Sciences Markets Travis McCready, Managing Director Zach Bowyer and Senior Vice President Erik Hill about the sector

“Properties that are located in life science growth markets (including San Francisco, Boston, LA/Orange County, & the North Carolina Research Triangle) are receiving multiple offers, often at above asking price,” Hill said. “Cap rates in these areas are continuing to compress, with many sales now solidly in the 4 percent cap range and some sales closing with sub-4 percent rates.”

Hill said recent advancements in gene therapies, intelligent drug development and telemedicine are driving demand for this sector. He noted that global pharma sales exceeded $1 trillion in both 2019 and 2020, signaling more investment likely will come into this space.

An RCA pricing analysis showed the average price per square foot for R&D assets in the U.S. and Europe increased by 10 percent over the last 12 months. “This rate of growth outstrips the industrial sector in both geographies over the same period,” Leahy said.