Life Science: Great Promise & Rapid Growth

In key life science real estate markets the inventory of lab space is rising twice as fast as the overall office inventory.

Impact on Real Estate Life science companies have been an important driver of economic growth and commercial real estate demand in the markets in which this sector is concentrated. These companies require specialized lab space for research along with office space. The rapid growth in this sector has generally outpaced supply and kept lab market vacancy rates tighter than overall office markets. INVENTORY The life science sector generally does not constitute a major percentage of real estate space in any market. But its share has increased over time as the amount of space used for life science has grown faster than the overall market. In the major markets highlighted in this report the total life science inventory has increased nearly 10% since 2014, while total office inventory in these markets has risen at less than half that pace (4.7%). LAB VACANCY In nearly every major market where the life science sector is concentrated the lab vacancy rate is declining as the demand for this space has grown even more rapidly.

Q4 2008

Q4 2018

CHANGE

Baltimore

16.1%

9.8%

-630 BPS

Boston (Cambridge)

12.2%

0.7%

-1,150 BPS

DC Metro/ Suburban Maryland

9.8%*

4.7%

-510 BPS

New Jersey

12.3%

13.6%

130 BPS

New York

19.9%**

22.3%

240 BPS

Philadelphia

6.2%

2.6%

-360 BPS

Research Triangle, NC

10.7%

19.3%

860 BPS

San Diego

5.90%

6.2%

30 BPS

San Francisco & Peninsula

18.3%

6.2%

-12,100 BPS

San Francisco East Bay

31.1%

8.8%

-2,230 BPS

Seattle/ Puget Sound

9.4%

3.2%

-620 BPS

* 2009 ** 2014 Source: Cushman & Wakefield Research

Since the 2008 recession, the vacancy rate for lab space has fallen dramatically, especially in the core life science markets. In Cambridge, MA the vacancy rate has fallen below 1.0% while in San Francisco and East Bay (Oakland) vacancy has plunged. And in most cases, the markets that have experienced an increase in vacancy like New York City are adding substantially to inventory. San Diego for example has added more than 2.0 msf of space (+14.5%) in the past four years.

8  CUSHMAN & WAKEFIELD