Life Science: Great Promise & Rapid Growth

FASTER RENT GROWTH

ASKING RENTS ON LAB SPACE (PSF/NNN)

Q4 2008

Q4 2018

CHANGE

Baltimore

$23.40

$25.44

8.7%

Boston (Cambridge)*

$51.65**

$88.00

70.4%

DC Metro/Suburban Maryland

$19.49 ***

$28.64

46.9%

New Jersey

$18.72

$18.26

-2.5%

New York

$62.70 **** $79.00

26.0%

Philadelphia

$22.90

$23.71

3.5%

Research Triangle

$15.53

$25.07

61.4%

San Diego

$36.36

$48.60

33.7%

San Francisco & Peninsula

$35.88

$60.09

67.5%

San Francisco East Bay

$20.16

$34.83

72.8%

Seattle/Puget Sound

$29.06

$26.42

-9.1%

*Effective Rents **2015

***2009 ****2016

Source: Cushman & Wakefield Research

OCCUPANCY COSTS Laboratory occupancy costs have been rising significantly over the last several years, consistent with the overall health of the economy and the increased funding and growth of the life science sector. The rise in rental rates is driven by required return on landlord investment, typically a minimum target of 7-10% return on capital. As building and land prices rise, so do rents and operating expenses. When rising tenant improvement costs are factored in, there are significant occupancy cost increases. Real estate is typically the third-largest spend for a life science company, behind employment and R&D costs. While the natural inclination is to focus on base rent, there are other occupancy costs that are factored in as well (operating expenses, property taxes, utilities, common area maintenance, etc.) accounting for approximately 30-40% of the total occupancy costs.

10  CUSHMAN & WAKEFIELD