Life-science lab space has emerged as a coveted sector of commercial real estate as hefty increases in funding and employment have fueled both demand for lab space and construction of it in leading U.S. life-science markets, according to a new report from CBRE. These factors have contributed to growth in markets like Denver, which is the tenth-largest U.S. life sciences market in the U.S. in terms of square footage of lab space.
In the first quarter of 2021, Colorado’s life science industry raised a record $704 million in funding from public, private and federal sources. Currently, 33 life sciences companies are searching for a cumulative 1.6 million sq. ft. of lab space in the Denver-Boulder area.
Only 635,000 sq. ft. of space is planned for new construction, including a 93,834-sq.-ft. speculative Bioscience 5 project at the Fitzsimons Innovation Community. An additional 540,000 sq. ft. of conversions of other uses to lab space is planned for the Boulder/Longmont market. The region’s vacancy rate sits at just 3.8% as a result of strong leasing activity since Q3 2020. Demand for space has increased 87.7% in the last nine months.
The Fitzsimons Innovation Community and the adjacent $5.8 billion Anschutz Medical Campus are one of the largest bioscience developments in the nation, representing the second-largest economic engine in Colorado behind Denver International Airport. The Denver area is seeing strong investor interest in life science properties as the barriers to entry and minimal ownership turnover in the premier life science markets are driving buyers to look at markets like Denver.
“Record-setting private investment and NIH funding are contributing to robust demand in Colorado’s life-sciences sector. Meanwhile, the limited supply of turnkey or shell lab space is pushing rents higher and creating opportunity for property owners in the region. With increased funding, a strong labor pool, and renowned medical universities, the sector is poised for continued growth,” said Erik Abrahamson, a First Vice President in CBRE specializing in life-sciences and Denver-Boulder area commercial real estate.
Nationally, companies actively seeking life-science real estate in the first quarter targeted a cumulative 19.3 million sq. ft. of lab space in the top 12 U.S. life-science markets, according to CBRE’s Midyear U.S. Life Sciences report. This represents more than 12 percent of the total existing life sciences space across these markets — a rate of demand that is fueling ongoing construction of lab space.
U.S. lab space under construction totaled 18.9 million sq. ft. at the end of this year’s first quarter. Meanwhile, tight vacancy — averaging just 5.6 percent across those markets — is causing lab rents to rise to record levels in the leading life-science hubs of Boston, the San Francisco Bay Area and San Diego.
The $10 billion in venture capital awarded to U.S. life sciences companies in the first quarter marked a record, exceeding the previous high in last year’s fourth quarter by roughly 60 percent, according to the PwC Moneytree Explorer survey. U.S. life-sciences employment has risen by 15.6 percent since April 2017, outpacing the growth of the larger tech industry.
|
Market |
Demand (sq. ft.) |
In-Progress Construction |
Venture Capital Awards* |
|
Boston |
4.75M |
5.8M |
$9.6B |
|
SF Bay Area |
2.9M |
2.8M |
$6.3B |
|
San Diego |
2.8M |
3.3M |
$4.6B |
|
Denver-Boulder |
1.6M |
635,319 |
$276M |
|
Philadelphia |
1.5M |
1.5M |
$761M |
|
New Jersey |
1.2M |
147,000 |
$98M |
|
New York City |
1.1M |
1.9M |
$1.9B (metro area) |
|
Wash D.C. |
1.1M |
472,500 |
$698M |
|
Raleigh-Durham |
839,000 |
380,000 |
$469M |
|
Chicago |
597,500 |
704,454 |
$492M |
|
Seattle |
500,000 |
913,000 |
$1.1B |
|
Los Angeles |
417,000 |
229,398 |
$283M** |
- For 12 months ending in March 2021
** Includes Orange County
To download the 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 2020 revenue). The company has more than 100,000 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.
