The previous decade has seen explosive growth in the life sciences sector of commercial real estate. These are companies involved in medical research and the development of new technologies.
Some prominent examples that may come to mind are biotechnology companies or pharmaceutical companies.
Considerable capital has been and continues to be invested in this space, resulting in a strong expansion of medical research focused on new technologies and drugs involving DNA and mRNA, stem cell research, and more.
Exciting new technologies have emerged that have rekindled the enthusiasm of the scientific community, such as artificial intelligence and new breakthroughs in cell and gene therapies.
The COVID-19 pandemic has drawn widespread public attention to a sector of the economy that was experiencing rapid expansion.
When investing in life science real estate, it should also be remembered that developing or investing in multi-family real estate near life science facilities can be very profitable.
For example, an area with the headquarters of a pharmaceutical company may charge higher rents than surrounding areas due to the influx of higher quality tenants both directly and through tangential businesses. It’s good for all the businesses around – grocery stores, gyms, malls, and health services.
We are residential pros targeting multifamily, but a number of our Class A developments are in the ‘progress line’, surrounded by infrastructure and life science employers.
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Real estate for life science companies includes laboratory space for performing physical experiments as well as a workplace element.
As technology has advanced, the share of your typical life science center devoted to the workplace has improved.
Scientists and researchers are now spending more and more time with highly advanced computer modeling applications for many elements of their study that were not previously available.
Due to these trends, these facilities today tend to have a bit more office space compared to lab space.
The talk of lab space may diminish as computers play a bigger role in learning, but that doesn’t mean it’s an afterthought in business. On the contrary, the laboratory spaces currently in demand are more sophisticated and state-of-the-art than as highly specialized fields of study are pursued.
Like all flexible real estate, life science facilities need flexibility and adaptability. As distinct areas of research are pursued over time, laboratory space may need to be reallocated, expanded, or moved to different regions of the facility.
Buildings that allow for this kind of adaptability have been in high demand by life science companies that want to stick around for years and can go through several distinct research phases. There is no point in arranging a space that does not accommodate the growth of the business.
Demand continued to outstrip supply in this sector and it showed no signs of slowing down anytime soon. Below are a few reasons why you should consider adding a life science real estate investment to your portfolio:
As the old saying goes, “follow the money”.
They provide grants for scientific research and have awarded over $100 billion of such grants over the past five decades. Additionally, Cushman & Wakefield released a report a year ago that showed very good growth over the past decade, with venture capital investments in the sector growing from $3.7 billion to 17, $4 billion.
The report also revealed that between 2012 and 2019, paid research and development by life sciences companies increased by 40%. A similar report by CBRE agrees, finding that venture capital funds entering the life sciences space are up 40% from a decade ago.
Our development company started in Boston, MA, which is currently considered the premier life sciences market by multiple sources.
We have seen from the outset the huge growth in the local economy driven by the life sciences sector, which has translated into demand for housing, accommodation and other newer and more industrial new investment. excellent (visit our article Demand Cleaners for Real Estate Explained for more information).
This rapid expansion has seen an already strong backbone of 9.6 million square feet of commercial life sciences real estate expand to 18 million square feet now, according to CoStar.
These trends are being seen across the country as venture capital funds and grants encourage these companies to seek more and more usable space for their research needs.
There is also some level of stunted growth due to the expedient nature involved in exploring and creating new technologies and treatments. The funding that has been poured in over the last decade has initially led to R&D that is just beginning to bear fruit. The push for a vaccine after the outbreak of this COVID pandemic reveals indicators of the kind of muscle these companies have begun to build after years of steady progress.
Another lesson the COVID pandemic has taught business is the demand to bring the supply chain home.
Over-reliance on foreign ties in the supply chain has caused problems and created uncertainty throughout the pandemic and companies want to prevent this by outsourcing, even if it comes with additional costs.
This trend will present an opportunity for the further evolution of warehouses and storage facilities for all these supply chains.
3. Vacancy rate:
Compared to traditional office commercial real estate, Lifestyle Science has about half the vacancy rate, at 9%, when considering a national average. Strong markets like Boston and San Francisco saw exceptionally low rates of 4% and 2%, respectively, annually. It will be many years before the supply of new life science facilities can begin to keep pace with current demand.
In a report published by Cushman & Wakefield, it was discovered that job growth in the life sciences has increased by 7.5% per year since 2013. This is an incredible increase compared to the previous twenty-year period, when employment growth in this sector was 1% per year. Yet another indication that life science real estate is in a fantastic position, as employment development indicators are generally one of the strongest clues to stable expansion.
5. New markets:
Although Boston, Seattle, San Diego and San Francisco would be the superstars of the life sciences world today, the company is growing rapidly and it has begun and will continue to drive growth in new markets. Today’s major life sciences markets all have a higher cost of living, making it difficult for employees and employers alike.
It’s really pushing into new markets, including Philadelphia, Maryland, and North Carolina, to name a few. Regions with a strong network of research-intensive universities and an educated population will be in a good position to welcome new life sciences companies to their market.
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