Demand for new life sciences lab space is outpacing speculative construction in the top 12 U.S. life sciences hubs as the industry rapidly expands amid a global race for new drug development, according to a new report from CBRE. And with the U.S. vacancy rate for existing lab and research & development space at a record low of 4.9 percent—including just 1.1 percent in the Boston-Cambridge market and New York City—average asking rents are skyrocketing in the top 12 markets, jumping 7.5 percent in September compared to March 2021.
Life sciences companies collectively sought nearly 23.8 million square feet of new lab space across those 12 markets in this year’s third quarter. That exceeds the amount of lab space under spec construction – meaning space being built without a tenant already signed – by nearly 2.8 million square feet. That gap has widened steadily since last year; Even as construction has ramped up considerably, growth in demand continues to outpace it.
Greater Phoenix is beginning to emerge as a competitive life science hub. With an increase of 8.5 percent, Greater Phoenix boasted the highest total life sciences job growth of all markets between 2019 and 2020, ending last year with 22,000 jobs in the sector.
“Phoenix continues to draw national attention as a hub for cancer diagnosis and treatment,” said Phoenix-based First Vice President David Barrett. “The Valley’s life science providers benefit from a strong support infrastructure, technical talent from the university and community college systems, an established research medical community, access to logistical support from both coasts, along with the availability of land to accommodate new construction.”
He added, “Whereas in the past, Phoenix might have been considered for ‘incubator-size” expansion — a few thousand feet of lab and adding relatively few jobs — the overall mindset has changed with those same companies considering significantly larger footprints that will translate into thousands of new, high paying jobs in the Valley.”
Many factors are fueling the life sciences market, including global demand for vaccines for COVID-19 and viruses like it. Initial public offerings for life sciences companies in the U.S. are on pace for a record year of raising roughly $13 billion. Venture-capital funding for U.S. life sciences companies exceeded $30 billion, the most on record, in the 12 months ended in September. Job growth in U.S. biotech and research & development sectors registered a 12.1 percent gain in September from a year earlier.
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