Life Science Outperforms Most Niche Sectors
Life science real estate capital markets activity reached a new record last year as investment volume climbed to $18.4 billion, “reflecting immense investor demand and continued liquidity in the cluster markets,” Newmark said in a Life Science Overview and Market Cluster report.
Newmark, New York, called life science one of the top performing niche sectors in real estate “as both tenant and investor demand for laboratory, incubator and biomanufacturing space have accelerated throughout the COVID-19 pandemic.”
CBRE, Dallas, said U.S. life science employment climbed last year, with year-over-year growth in biotech R&D employment growing 10.8 percent compared to total non-farm employment’s 4.5 percent. Venture capital funding in the life science sector hit a record $32.5 billion in 2021, the firm said in its U.S. Life Sciences Report.
CBRE said lab R&D construction totaled 31.6 million square feet for both new developments and conversions across the top 12 life science markets last year as developers sought to keep pace with growing demand. “Speculative construction was on par with tenant demand; however, many under-construction projects may not deliver until 2023 or 2024, leaving fewer options for nearer-term requirements,” the report said.
The Newmark report said the 10 largest life science M&A transactions last year totaled more than $130 billion, driven by the continued growth of the world’s largest pharmaceutical and biotechnology firms including Merck, Illumina and Thermo Fisher Scientific.
Lab R&D vacancies remain low in most of the top 12 U.S. life science markets, CBRE reported. With little available inventory, national average asking rents continued to increase, rising 7.7 percent during the fourth quarter to $67.03.
Newmark reported pricing for Class A product in top urban life science markets such as Cambridge, Mass., South San Francisco and Sorrento Mesa, Calif., and South Lake Union, Wash., exceeded $1,000 per square foot in 2021, “with high water mark pricing closer to $2,000 per square foot for best-in-class assets.”
