As a large chunk of the American population rises in age, so, too, does the opportunity to develop the new technological and medical breakthroughs that will help keep people healthy, longer.
But to discover these innovations, companies in the life sciences industry, which includes the pharmaceutical, biotechnology and medical device sectors, need laboratory space to conduct fundamental research and development. The demand for lab space has risen sharply in recent years, due largely to rapid growth in new technologies and therapies as well as research funding from venture capital and the National Institutes of Health to markets like San Francisco and San Diego in California, and Boston-Cambridge in Massachusetts, per CBRE research. Life sciences firms are also eschewing the large suburban campuses in favor of spaces situated in major urban tech markets like San Francisco and Boston. The result has been an increase in rents and new development along with reduced vacancy rates, per the CBRE 2018 U.S. Real Estate Market Outlook Life Sciences report.
“The life sciences industry has come under increasing pressure to find more innovative biological solutions,” says Ian Anderson, Director, Research & Analysis CBRE Americas Research.
“Because of the increasing amounts of data that these companies are analyzing, they need the tech talent as much as the scientific talent to thrive,” Anderson adds. “The market for lab space is growing and the supply is constrained.”
Funding Biotech Innovation
The average life expectancy in the U.S. has grown sharply, from 66.6 years for men and 73.1 for women in 1960 to 76.1 years for men and 81.1 years for women in 2016. This has been attributed, among other societal factors, to advancements in technology and increased venture capital investments in life sciences firms. Much of this investment has been focused primarily on biotechnology.
The life sciences industry has come under increasing pressure to find more innovative biological solutions.
An estimated $4 billion of the $5.3 billion raised in second quarter 2018 was invested in biotechnology-related companies, per PwC and CB Insight’s Healthcare MoneyTree™ report: Q2 2018. In 2008, there was $370 million invested in the biotechnology industry, per PwC.
In 2016, NIH provided $24.6 billion in research funding across the US, which supported 379,471 jobs and $64.799 billion in economic activity.
“What’s happening is the innovations in the chemistry side of the business, like pharmaceuticals, is being surpassed by innovations in biology, where medicines and treatments can become more personalized,” Anderson says.
Since 2001, employment in U.S. life sciences has grown by 23.5 percent, far exceeding the total job-growth rate of 10.2 percent, per CBRE Research.
But markets that specialized in pharmaceutical and medicine-manufacturing industries experienced slower growth in recent years. For instance, between 2001 and 2016 life-sciences employment in New Jersey and Philadelphia dropped by nearly 12 percent, which Anderson says is due to consolidations in the pharmaceutical industry.
“We’re seeing a lot of these companies transitioning out of these isolated suburban campuses and to those markets where the cutting-edge science, technology and R&D is happening,” says Anderson.
We will be seeing continued technological innovation in this industry, which will lead to more personalized medical and scientific treatments, which ultimately means more jobs.
Those markets, such as Boston, San Francisco, San Diego, and New York City, have leading research universities and medical institutions. These cities also boast a strong community of potential investors.
Approximately 25 percent of every dollar distributed by the NIH goes to California and Massachusetts, per CBRE Research, which has translated to high demand of commercial real estate space. In New York City, 1.7 million square feet of office space was used by life science companies and labs. In Boston, that number totals 17.8 million square feet.
In Chicago, a leader for employment in the life sciences industry, the vacancy rate was below 2 percent, per CBRE Research.
The appeal of markets in California, Chicago, Boston and New York boils down to its accessibility to both tech and life science talent.
“We will be seeing continued technological innovation in this industry, which will lead to more personalized medical and scientific treatments, which ultimately means more jobs,” says Anderson.