Dallas, TX

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

Lab employee in personal protective equipment working at a computer

Momentum slowed in the second quarter for the U.S. life sciences real estate market, though several indicators portend long-term expansion for the sector, according to a new report from CBRE.

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
Denver-Boulder 3 million 8.3% 309,226 580,000
Houston 2.8 million 29% - 175,000
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
Raleigh-Durham 9.3 million 8.7% 465,366 657,700
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.

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 2023 revenue). The company has more than 130,000 employees (including Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.