One of the Hottest Sectors in Real Estate Development: Life Sciences

The Need for Lab Space

The pandemic has affected real estate in a number of ways, accelerating the relative decline of shopping malls (although these venues are thinking about creative new ways to use their space) and boosting the rise of data centers. Another sector experiencing growth is biotechnology, and the related demand for lab space. While this had been happening for years prior to 2020, COVID-19 intensified the process.

Private investment and government research dollars have poured into the life sciences space since the onset of the pandemic. Real estate firm CBRE (CBRE) says 31 million square feet of life science development was underway in the fourth quarter of 2021. That’s up by 19 million from last year’s first quarter.

Property Owners Like Life Sciences

Analysts explain property owners are increasingly looking for tenants who won’t be having employees work from home. Life sciences labs fit the bill with large and specialized equipment that requires on-site work. Also, labs historically enjoy high occupancy rates.

There are signs the sector will continue to grow, even post-pandemic, due to the massive amount of research funding coming from the US government. Private investment is also targeting life sciences, with around $8 billion poured into the sector in the fourth quarter of last year. CBRE says that number is three times higher than it was five years ago.

Geography Matters

It seems some regions of the US are better candidates for life sciences development than others. Market observers note San Francisco, San Diego, and Boston have been biotech hubs for years, and it makes sense to build labs there given available tenants.

There are a number of other US cities with large academic institutions and hospitals that are experiencing growth in the life sciences sector. These include Los Angeles, Chicago, and Houston, as well as Denver and Boulder, Colorado. Property owners may look to take advantage — especially with investment dollars flying in from both the government and Wall Street.

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