Laboratory/R&D Trends

Although there is a record 12.5 million sq. ft. of conversion projects currently under construction, their share of the total construction pipeline fell to 31% in Q4 2022 from a high of 43% in Q1 2021.

Figure 20: Lab/R&D Inventory in Top 13 U.S. Markets

Source: CBRE Research, Q4 2022.

Figure 21: Lab/R&D Construction Trends in Top 13 U.S. Markets

Source: CBRE Research, Q4 2022.

New construction has shifted away from primarily core submarkets to peripheral ones. Figure 22 shows the geographic dispersion of new construction over the past several years in the nation’s premier life sciences markets of Boston-Cambridge, San Francisco Bay Area and San Diego, where the share of all new construction in their core submarkets has fallen to an average of 40% in 2022 from 90% in 2018 and 2019.

With lower demand and a record amount of new construction underway, lab/R&D vacancy rates have started to increase in most markets. While vacancy rates in the nation’s 13 leading life sciences markets remain below their long-term averages, the margin between them is tightening.

Figure 22: Location of Lab/R&D Construction Patterns in Boston, San Francisco Bay Area and San Diego

Source: CBRE Research, Q4 2022.
Note: Premier submarkets include Cambridge (Boston), South San Francisco (SF Bay Area) and Torrey Pines, UTC and Sorrento Mesa/Valley (San Diego).

Figure 23: Lab/R&D Vacancy Rates

Source: CBRE Research, Q4 2022.

Average asking rents for lab/R&D space increased in the second half of last year. In some markets, more generous tenant improvement allowances supported higher rents. However, average rents in some of the most sought-after submarkets either stabilized or declined (Figure 25). For example, average rents in San Diego’s Torrey Pines and Boston’s Cambridge submarkets fell by 2% and 3%, respectively, last year.

Figure 24: Lab/R&D Average Asking Rent (top 13 markets)

Source: CBRE Research, Q4 2022.

Figure 25: Year-over-Year Change in Lab/R&D Rents by Submarket (Q4 2022 vs. Q4 2021)

Source: CBRE Research, Q4 2022.