2023 U.S. Life Sciences Outlook
Rising Uncertainty Amid Burgeoning Scientific Discovery
April 3, 2023 20 Minute Read
- After record years in 2020 and 2021, growth of the U.S. life sciences industry has returned to a more normal pace in 2023, although demand for lab/R&D space remains well above pre-pandemic levels.
- Life sciences employment reached a record high at the start of 2023, although the rate of growth slowed. The San Francisco Bay Area, Boston/Cambridge and Seattle were the fastest-growing markets last year.
- Recent turmoil in the banking system may cause further reductions in venture capital funding to the industry this year. Nevertheless, Q1 2023 VC funding is on pace to exceed pre-pandemic levels by roughly 20%. Robust industry R&D expenditures and public funding from the National Institutes of Health are still supporting growth.
- CBRE forecasts that total life sciences lab/R&D space may increase by more than 20% over the next two years, as a record-high amount of new construction is currently underway. This likely will push the vacancy rate up moderately.
- Lab/R&D vacancies are rising but remain well below their long-term average. Rents are still rising in most of the nation’s markets, albeit at a slower pace than in the past several years.
- Life sciences investment sales volume is down to pre-pandemic levels, but pricing remains high with cap rates at record lows amid robust investor sentiment.
- Industry growth this year depends on whether an economic recession occurs, as well as the stability of financial markets, but history shows the life sciences industry is more immune to these challenges than other sectors.
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