Gap Widening Between Supply and Voracious Demand for New US Life Sciences Real Estate: CBRE Report

Demand for new lab space exceeds speculative construction in most top life sciences hubs, including San Diego, New Jersey, Philadelphia, Washington, DC

December 2, 2021

Life sciences PR

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 sq. ft. 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 sq. ft. That gap has widened steadily since last year; Even as construction has ramped up considerably, growth in demand continues to outpace it.

“Life sciences labs quickly have quickly become a highly sought-after property type for both tenants and investors,” said Ian Anderson, CBRE’s Americas Head of Office Research. “This intense demand for lab space is the natural result of a global push for new medicines begetting strong funding and hiring in the life sciences sector.”

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.

Those factors have boosted the lab-space market in U.S. life sciences hubs to varying degrees.

 Market*  TIM** Spec construction
Lab vacancy
 Boston-Cambridge  6 million
 9.3 million
 Chicago  350,000  583,454  19.7%
 Denver-Boulder  1.5 million
 635,000  1.8%
 Los Angeles
 446,000  65,269  5.3%
 New Jersey
 1.3 million
 222,500  9.1%
 New York City
 1.6 million
 1.6 million
 Philadelphia  2 million
 916,726  13.9%
 Raleigh-Durham  897,000  1.2 million
 San Diego
 3.8 million
 1.9 million
 San Francisco Bay Area
 3 million
 3 million
Seattle  1.2 million
 1.1 million
 DC/Baltimore  1.8 million
 544,000  1.9%
 Total  23.8 million
 21 million

* Alphabetical order
** Tenants in Market: A measure of the amount of new space tenants are seeking

To read the full report, click here.

About CBRE Group, Inc.
CBRE Group, Inc. (NYSE: CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2021 revenue). The company has more than 105,000 employees (excluding Turner & Townsend employees) serving clients in more than 100 countries. CBRE established an office in Bangkok in 1988, followed by its Phuket office in 2004. CBRE serves a diverse range of clients with an integrated suite of services, including property sales and leasing; investment management; appraisal and valuation; strategic research and consulting property management; facilities, transaction and project management. Please visit our website at www.cbre.co.th.