The life sciences industry has demonstrated remarkable resilience over the past four years since the pandemic. Encompassing such disciplines as pharmaceuticals, medical technology, biotechnology, research and development, it’s played a pivotal role in medical advances — developing vaccines, treatments and innovative solutions such as home testing and mobile treatment.

In terms of CRE, life sciences demands “brick & mortar” facilities with ample square footage for not only employees, but for labs, storage, and equipment. Factor in the necessity for manufacturing facilities for medical devices and pharmaceuticals, and it’s an industry that requires an array of office and industrial space. And, because life sciences thrives in areas where information and resources can easily be shared, key markets from Boston, MA, to San Diego, CA, remained at the epicenter of most activity.

According to the San Diego Business Journal, “San Diego’s life sciences sector is faring better than many other industries in the current economic headwind environment, leading to the hypothesis of more positive economic growth in the year ahead.”

KBS Senior Vice President of Asset Management and Acquisitions Tim Helgeson said that the life sciences industry is “a major economic driver providing high salaries which continuously attract both local and out-of-state educated workers. San Diego is also home to major research universities, like UCSD and San Diego State, and offers current students convenient access to mentorship and job opportunities.”

Reflecting the outlook in the life sciences, in 2021 KBS was instrumental in the acquisition of a 296,327-square-foot Class A office complex in the heart of Sorrento Mesa, San Diego, California’s life sciences and technology marketplace.

Known as “clustering,” the propensity to have brain trusts in central locations is common for high-tech hubs, but it’s also highly beneficial to life sciences. Having an assemblage of large hospitals, universities, research institutions, biomedical and biotechnology companies allows for easy sharing of information and facilities in addition to drawing a highly educated workforce and strong investment.

“The life sciences sector is buttressed by more fundamental, long-term shifts than most industries, such as advances in science and technology, expanding uses for biotechnology, and the long-term trend toward more individualized treatment,” said Matt Gardner, CBRE’s Americas life sciences leader.

According to Clarion Partners, there’s been extraordinary demand from high-growth biotechnology and biopharma industries resulting in life sciences property investments to overperform over the past 10 years. Life sciences CRE had record years in 2020 and 2021 but began to moderate in 2022 and 2023.

The demand for specialized laboratory and R&D spaces within the life sciences sector has remained robust, driven by factors such as technological advancements, expanding biotechnology applications, and increased funding. As a result, life sciences CRE has emerged as a high-growth segment, attracting substantial investments from both private equity and government sources.

Key life sciences clusters, including “Tier 1” areas, Boston/Cambridge, MA, South San Francisco, CA, and San Diego, CA, continue to dominate the market, and these areas are now charging rents at a record high — significantly higher than the national lab average and traditional office rents, per Clarion Partners. Secondary markets, such as Austin, Texas, are also gaining traction, reflecting the sector’s broadening footprint and the decentralization of innovation hubs.

“Occupier requirements for lab and R&D space remain well above pre-pandemic levels. Furthermore, the current demand outlook is stable for the years ahead with new innovation and products driving industry expansion. Clarion Partners believes the long-term outlook remains bright for this alternative property type sector. Over the past five years, U.S. life sciences property fundamentals have remained relatively healthy. As tenant demand soared, inventory nearly doubled.”

The life sciences industry drives advancements that have the potential to transform healthcare and improve lives. As the sector continues to expand and evolve, there’s an opportunity to reimagine workspaces, foster collaboration, and reinforce the industry’s commitment to innovation. With the lifeblood support of creative and innovative CRE workspaces, life sciences organizations can ensure that they remain at the forefront of scientific discovery and healthcare innovation for years to come.

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