Life Sciences Real Estate Market Logs Q2 Gains As Industry Expands

Lab space across the 12 largest U.S. life sciences hubs made additional gains in the second quarter, including an increase in lease rates and an overall decrease in vacancy despite more construction activity, according to a new report from CBRE.

The average vacancy rate for U.S. life sciences space registered 5.2 percent in the second quarter, down from 5.3 percent a year earlier. Average asking rent in those 12 markets increased by 5.8 percent in the second quarter from the first to $54.77 per sq. ft.

In Seattle, lab vacancy edged up quarter-over-quarter, from 8.6 percent to 9.7 percent. Rents also rose, with urban Class A asking rates reaching $83.50 while suburban Class A properties command $45.00. Tenants in the market, a measure of demand for lab space, ticked down slightly but remains robust. As of June, there are 20 companies looking for between 600,000 and 700,000 cumulative sq. ft. of lab space in Seattle.

“Seattle’s life sciences market continued its momentum of strong leasing activity in the second quarter, despite capital headwinds. Several companies finalized long-pending transactions on lab space, which reduced the live demand (‘tenants in the market’) figure. That said, the demand figures do not tell a full story – Seattle has solid market fundamentals, all of which are pointing to a resurgence in additional demand in 2022 and beyond,” said Marcus Yamamoto, senior vice president with CBRE in Seattle.

He added, “Seattle’s future in the sector remains bright; the region has the key ingredients new life sciences companies seek out for success, namely highly skilled research talent, a distinctively tightly-knit community of innovators, and an ecosystem of strong academic and industry cross-pollination.”

Nationally, developers have ramped up construction in anticipation of more demand, boosting in-process construction to 31.3 million sq. ft. in the second quarter, a gain of 2 million sq. ft. from the first quarter total. Seattle added two life sciences projects to its construction pipeline in the second quarter. The region now has six projects underway totaling 1.2 million sq. ft.

Those gains came as other indicators in the life sciences sector lost momentum. Venture capital funding has slowed this year, and initial public offerings by life sciences companies have fallen off dramatically amid a broader economic downturn.

“Few, if any, sectors are completely immune to economic cycles. Even so, the life sciences sector is buttressed by more fundamental, long-term shifts than most industries, such as advances in science and technology, expanding uses for biotechnology, and the long-term trend toward more individualized treatment,” said Matt Gardner, CBRE’s Americas Life Sciences Leader. “Indicators and market forces will shift on a quarterly or annual basis, but the underlying science continues to develop and expand.”

                                     Top Life Sciences Markets: Select Q2 Stats

Market	Market Size*	Vacancy	Sq. Ft. Under Construction	Sq. Ft. of Current Tenant Demand
Boston/Cambridge	50.5M	1.2%	14.9M	4.2M
Chicago	2M	33.6%	281,000	980,000
Denver/Boulder	4.8M	4.3%	616,381	1.3M
Los Angeles	8.7M	10.8%	793,904	934,000
New Jersey	20.4M	7%	147,000	1M
New York City	2.5M	5%	860,403	2M
Philadelphia	9.3M	7.8%	1.4M	2M
Raleigh-Durham	10.6M	11.3%	236,250	800,000
San Diego	22.9M	9.7%	1.2M	700,000
San Francisco Bay Area	32.6M	5.8%	5.1M	4.4M
Seattle	9.3M	9.7%	1.2M	700,000
Washington, DC	10.7m	1.4%	1M	848,500

*In square footage of existing lab space.