2023 March Life Sciences Update

Real Estate Fundamentals Remain Strong Amid Rising Risk Factors

Despite some headwinds, underlying fundamentals for the life sciences sector remain healthy. Asking rents grew across most markets in 2022, however, there was softening in a handful of markets. In 2022, U.S. asking rents grew 55% higher than pre-pandemic 2019 levels across the 12 largest markets tracked by Cushman & Wakefield, however, the YoY growth has slowed to 9%. UK rents have grown 79% since pre-pandemic levels and YoY growth is strong at 50%. Annual rent growth was strong across most markets, growing by double digits in nine of the 15 markets tracked. The five markets that saw the strongest YoY rent growth included Oxford (+71%), Seattle (+65%), London (+55%), Cambridge (+31%) and Philadelphia (+21%). Rent fell in three of the 15 markets: Boston (-3.9%), New York City (-2.4%) and Los Angeles-Orange County (-0.6%). Despite this YoY decline, rents are currently higher than year-end 2019 pre-pandemic levels, up 14% in Boston, 12% in New York City and 43% in Los Angeles-Orange County.

Vacancy rates remain low in most markets, with nine of the 15 markets falling below 10%. The average vacancy rate across all markets was 9.2% at year-end, a 70-bps increase over 2021. The five markets with the lowest vacancy rates included Cambridge (0.1%), London (0.3%), Philadelphia (1.3%), Oxford (2%) and Los Angeles-Orange County (4.5%). Vacancy rates increased in seven of the 15 markets. U.S. vacant sublease inventory increased 65% from year-end 2021 levels. Current sublease space, however, accounts for just 1.6% of total inventory in the U.S. This is slightly higher for markets with more vacant sublease space, including the San Francisco Bay Area (3.7%) and Raleigh Durham (4%).

Life Sciences: Current Rent & 3-Year Growth

Total Vacancy Rates by Components

New York City Chicago Raleigh-Durham Denver SF Bay Area Seattle Boston New Jersey Suburban MD San Diego LA-Orange County Oxford Philadelphia London Cambridge

0.1%

120%

$140

0.3%

$120

100%

1.3%

2.0%

$100

80%

4.5%

$80

5.3%

60%

5.5%

$60

8.7%

40%

$40

9.9%

11.0% 10.6%

20%

$20

0%

$0

15.1% 14.8%

24.7%

27.7%

0.0%

10.0%

20.0%

30.0%

40.0%

Rent

Rent Change 2019-2022 (rhs)

Direct Vacancy Sublease Vacancy

* Rents adjusted to reflect occupier costs of office to lab conversion

Source: Cushman & Wakefield Research

Source: Cushman & Wakefield Research

5 / CUSHMAN & WAKEFIELD

LIFE SCIENCES UPDATE | 2023 MARCH