U.S. Life Sciences Real Estate Market Slows to More Sustainable Pace in Q2
Lab vacancy rises, but employment continues to grow; Philadelphia, Washington, DC, among markets registering increases in demand
July 27, 2023
Vacancy for lab space across the 13 largest U.S. life sciences markets registered 9% in the second quarter, up two percentage points from the first quarter and up four points from a year earlier. The average asking rent increased by 3% from the first quarter to $66.31 per sq. ft. mainly due to completed construction of new, high-end lab space.
The vacancy increase resulted mostly from the newly completed construction, which added 3.4 million sq. ft. of lab space to the 13-market total. That newly completed space was 45% leased prior to completion.
Additional measures point to continued growth for the sector. U.S. life sciences employment growth, while slowing in recent months, still exceeds the rate of overall U.S. job growth. Announced layoffs in the sector declined from February through June.
“The life sciences sector has gone from 150 mph to 100 mph, but the underlying science is robust and healthy,” said Matt Gardner, CBRE Americas Life Sciences Leader. “The volume of second- and third-stage clinical drug trials continues to grow. Laid off talent is finding work with other companies in the sector. The easing of historically tight vacancy will benefit occupiers.”
Mr. Gardner pointed to biomanufacturing as an example of a rapidly expanding portion of the life sciences sector. Biomanufacturing refers to several processes using biology, such as microbes, to make therapies, energy and advanced materials.
Meanwhile, the pipeline of new U.S. lab space under development, while sizeable, is slowing.
“We’re seeing a less speculative, more responsible investment curve,” Mr. Gardner said.
Top Life Sciences Markets: Select Q2 Stats
|Market||Market Size*||Vacancy||Sq. Ft. Under Construction||Sq. Ft. of Current Tenant Demand|
|Boston-Cambridge||56 million||5.1%||17.1 million||2.1 million|
|Chicago||2 million||43.9%||479,963||1.3 million|
|Los Angeles||6.3 million||15.1%||730,287||1.2 million|
|New Jersey||16.7 million||9.9%||582,057||440,000|
|New York City||3 million||10.7%||459,079||1.2 million|
|Philadelphia||10.8 million||12.4%||2.7 million||785,500|
|San Diego||24.2 million||9.7%||5.1 million||1.2 million|
|San Francisco Bay Area||36.3 million||11%||10 million||2.9 million|
|Seattle||8.5 million||7.4%||1.3 million||349,000|
|Washington, DC-Baltimore||12.9 million||3.5%||1.6 million||318,500|
*In square footage of existing lab space.
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