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I-270 Biotech Corridor Q1 2022 Report
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Demand Continues to Outpace Supply
As expected, a historic 2021 set the stage for an increasingly prolific start to the new year. While exuberance around the Boston, Bay Area, and San Diego markets remains justified, the performance of the Maryland market is garnering significant attention from occupiers and investors alike. Tenant demand remains steady with 595,000 SF of YTD leasing activity – a 60% increase over last year’s record pace. Accordingly, rents continue to ascend to new heights, which has further charged capital markets activity that will usher in the next wave of badly needed supply.
*Includes executed leases, subleases, user-acquisitions and leases under current negotiation.
3 Trends to Watch
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New Supply is on the Way
1.8M SF set to deliver in the next 24-months– R&D Ground Up: 539K SF – 88% pre-committed
– R&D Conversion: 578K SF – 37% pre-committed
– GMP Ground Up: 730K SF – 5% pre-committed -
Demand Outpaces Supply for All Product Types
3.3M SF of active tenants in the market – far greater than the near-term available supply
– R&D Requirements: 1.1M SF (2.4X availability)
– GMP Requirements: 2.2M SF (2.3X availability)
66% of the active requirements are for biomanufacturing space – confirmation of the demand wave we expected from all of the recent R&D advancements -
Net New Entrants Drive Demand
Access to the Corridor’s labor pool attracted 900K SF of activity from outside of the market in 2021, including three notable transactions >85K SF: Ellume, Horizon, TCR2
We are experiencing more of the same in 2022 as 67% of the active tenant requirements are from companies looking to establish a MD presence
Read the Washington Business Journal article highlighting Tommy Cleaver and the team's three key factors driving Maryland's growth.
I-270 Breakdown
| Existing Supply | Vacancy Rate | Availability Rate | Under Construction / Conversion | |
|---|---|---|---|---|
| Shady Grove | 3.9M SF | 0.0% | 4.9% | 781K SF |
| Gaithersburg | 2.9M SF | 0.1% | 14.7% | 495K SF |
| Frederick | 2.6M SF | 10.2% | 18.7% | 392K SF |
| Parklawn | 1.1M SF | 5.3% | 9.3% | 49K SF |
| Germantown | 492K SF | 0.0% | 8.4% | 131K SF |
| I-270 TOTAL | 10.9M SF | 3.0% | 11.3% | 1.8M SF |
Notes:
1. Availability Rate includes subleases and projects under construction/conversion slated to deliver in the next 12-24 mos.
Trend Highlight: Supply Constraints Contribute to the Emergence of Alternative Clusters
While Shady Grove and Gaithersburg continue to drive 84% of the R&D activity by volume, supply constraints have contributed to the rise of Germantown and Frederick as viable alternatives.
Germantown has fared particularly well as sustained demand for lab ready shell and spec suites has eliminated the historical rent discount to the Shady Grove and Gaithersburg clusters. Previously priced at a 30-40% reduction, rental rates have converged to comparable levels with the most recent lease executions at $40 NNN.
Capital Markets Update
The sustained strength of the leasing fundamentals continues to fuel robust capital markets activity propelling existing market participants to expand their local footprint while new institutional capital competes to enter the market. There are nearly $500M of deals currently under contract or formally on the market. Activity is still dominated by conversion and development profiles; however, cash flowing opportunities are beginning to present themselves as successful execution plans come to fruition.
Q1 2022 By the Numbers
Realizing Potential in Maryland Life Sciences
Leverage CBRE’s industry leading life sciences platform to access the deepest and most aggressive pool of investment capital for an array of investment opportunities within Maryland’s BioTech Corridor.
I-270 Biotech Corridor Deal Highlights
Horizon Therapeutics plc announced today that it has signed a long-term, full-building lease with Alexandria Real Estate Equities, Inc. to be the first tenant at the Alexandria Center®...
