CBRE Report: San Francisco Bay Area Among the Top Three Fastest-Growing Life Sciences Markets in 2022

The life sciences industry in the San Francisco Bay Area is one of the fastest-growing life sciences markets in the U.S., adding the most jobs of the top 13 life sciences metros, according to a new report from CBRE. While the life sciences sector is not immune to the current economic slowdown, the San Francisco Bay Area’s increases in employment and federal funding exceeded national averages.

The San Francisco Bay Area had the largest life sciences employment growth (27%) of the top 13 U.S. life sciences markets from 2019 to Q2 2022, outpacing Boston as the leading metro for life sciences employment. Of the total life sciences jobs in the San Francisco Bay Area, 40% were in research & development, the third highest of the top life sciences markets. Nationally, job growth for life sciences professions gained 4.1% in January 2023 down from 6.4% a year prior.

Industry fundamentals in the San Francisco Bay Area remain strong, supporting the employment growth in life sciences. Record high investment over the past several years has also pushed more science into the clinical stage, signaling the potential for even further rapid growth in the coming years,” said Gregg Domanico, Vice Chairman with CBRE’s Life Science Practice in the Bay Area.

Increase in Clinical Trials

Other indicators, especially in drug discovery and development, point to more growth for life sciences. Globally, the number of clinical trials increased to 444,567 by March 2023, up 36% from 2020, according to the U.S. National Library of Medicine. In the U.S., the number of new Phase 2 and 3 clinical trials – when life sciences companies most often expand their operations – ramped up over the past decade to exceed 3,000 in each of the past three years.

Additional indicators: Annual funding from the National Institutes of Health has risen by 62% in the past decade, including an increase to $47.5 billion this year from $45.2 billion last. The San Francisco Bay Area received more than $2 billion in NIH funding in 2022, the fourth highest total, up 17.6% from 2019.

And U.S. life sciences companies had a cumulative $200 billion in cash reserves last year, a decline from the previous three years but still higher than 2018 and before. That capital could be a resource for mergers and acquisitions of smaller biotech companies.

Real Estate Impact

Meanwhile, developers remain optimistic about the trajectory of life sciences in the long run. The San Francisco Bay Area had the second largest development pipeline of the top markets, with 9.3 million sq. ft. under construction, more than one-third of which (3.9 million sq. ft.) is expected to deliver in 2023.

CBRE forecasts that cumulative square footage of lab space in the largest 13 U.S. life sciences markets will increase by another 22% within the next two years, having already expanded by 47% in the past five years, to 220 million sq. ft. as projects currently under construction are completed.

New construction will likely increase lab vacancy in many markets. Lab vacancy in the San Francisco Bay Area was 6.3% in Q4 2022, slightly higher than the U.S. lab vacancy at 5.7%, though it remains low relative to many other real estate sectors.

Despite market headwinds, life science companies continue to grow. The top leases in the Bay Area were new leases and expansions, signs pointing to resilience of the sector,” said James Bennett, Vice Chairman with CBRE’s Life Science Practice in the Bay Area.

CBRE’s report includes an analysis of the largest 30 U.S. life sciences leases of 2022, illustrating a concentration of big leases in the traditional life sciences hubs but also several in additional markets.

Market-by-Market Share of Largest 30 U.S. Life Sciences Leases of 2022

To read the full report, click here.