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.
The NYC metro area attracted an all-time high $2.9 billion in National Institute of Health (NIH) funding in 2020, according to the CBRE report. In addition, the funding gap between the nation’s leading life science cluster, Boston/Cambridge, and NYC contracted to just $22 million in 2020, down from $367 million in 2016.
Moreover, venture capital funding to life sciences companies across the New York region totaled a hefty $2 billion in the 12 months ended in March. In fact, the pace of venture capital funding in 2021 is off to its strongest annual start ever.
“NYC’s 2021 life science leasing activity has already surpassed 2020’s full year total with Mt. Sinai’s 165,000 sq. ft. commitment for Lab/R&D and office space in Manhattan,” said Nicole Russo, Director of Research & Analysis for the New York Tri-State Region. “With a vacancy rate of just 1.9%, ready, pre-built lab space in NYC remains in short supply as demand continues to explode.”
There are currently 43 tenants in the NYC market looking for 1.12 million sq. ft. of lab space. There is 1.9 million sq. ft. of potential lab space currently under construction to meet this demand, according to the CBRE report.
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.
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
