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Pandemic Stokes Already Robust Demand for Real Estate in the Life Sciences Sector

Washington, DC | October 15, 2020
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Washington, D.C.- Baltimore Market Ranks Fourth in CBRE’s Analysis of Life Sciences Hubs Due To Its Established Base of Employment, Universities, and Funding

Washington, D.C. – Oct. 15, 2020 – The pandemic has accelerated momentum in the U.S. life sciences industry, particularly amid the race to produce a COVID-19 vaccine and develop other medicines for human ailments. That has meant more growth for metros like the Washington, D.C.- Baltimore area, which ranks fourth on CBRE’s list of the largest U.S. life sciences markets in its new report on the sector.

Nationally, the life sciences sector has reached new highs this year in R&D employment and venture-capital funding. Those and other factors have resulted in a surge in demand for life sciences real estate in markets from longstanding centers like Boston and the San Francisco Bay Area to emerging hubs such as Pittsburgh, according to a new report from CBRE.

“The Washington, D.C.- Baltimore life sciences market has seen significant venture capital and government funding pour into the industry over the last year. We are tracking strong tenant demand, which will require new development in the area to accommodate future growth. The lack of supply also continues to push rental rates higher, reaching $40 triple net,” said Kevin Reap, First Vice President at CBRE.

The D.C.-Baltimore region collected the nation’s third-highest amount of NIH funding in fiscal year 2019 ($1.9 billion), driven by the perennially biggest recipient of funding, Johns Hopkins University.  Venture capital funding has surged over the past two years. Between Q2 2017 and Q2 2020, this market was one of the fastest growing in the nation for life sciences venture capital funding, despite moderating over the past year. Construction also has ramped up in the Washington, D.C.-Baltimore market with 430,000 sq. ft. of new supply underway, the majority of which is build-to-suit. The market’s vacancy rate is a scant 5.2 percent.

CBRE identified the top U.S. life sciences markets by assessing each market’s life-sciences job base, the size of its lab-space inventory, and the amount of funding it attracts from venture capital firms and the National Institutes of Health.

Largest U.S. Life Sciences Markets

  • 1.)Boston-Cambridge

8.) New York City

  • 2.)San Francisco Bay Area

9.) Seattle

  • 3.)San Diego

10.) Los Angeles

  • 4.)Washington, D.C.-Baltimore

11.) Chicago

  • 5.)Raleigh-Durham

12.) Orange County, CA.

  • 6.)New Jersey

13.) Denver-Boulder

  • 7.)Philadelphia

 


CBRE’s determined its list of emerging life-sciences markets through a slightly narrower set of criteria. Those markets are (in order): Pittsburgh, Houston, Austin, Detroit, Phoenix, Dallas-Fort Worth, St. Louis, Atlanta, Portland and Minneapolis.

Overall, the life-sciences industry is building on its momentum. Venture-capital investment in the sector grew to a rolling annual total of $17.8 billion in the second quarter, the largest amount on record, according to the PwC/CB Insights MoneyTree survey. Employment in U.S. biotechnology research and development professions exceeded 220,000 in July, extending a decade-long growth trajectory.

Investors continue to consider lab and R&D space to be slightly more valuable on average than conventional office space, a trend that began in 2015. Lab-space vacancy averaged 6.1 percent in the 13 largest U.S. life-sciences markets in the second quarter in comparison to the overall office vacancy rate of 11.7 percent.

 “Nearly every indicator points to increasing demand for life sciences real estate in the U.S., be it expanding R&D employment, public and private investment in combatting the pandemic, or the health needs of our aging population,” said Ian Anderson, CBRE Americas Head of Office Research. “The factors fueling this sector are great enough to support demand for more lab space in the top markets and beyond.”

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 2019 revenue). The company has more than 100,000 employees (excluding affiliates) and serves real estate investors and occupiers through more than 530 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated 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.

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