March 2025 Life Sciences Update

First page Table of contents 1 Next page Last page

Animated publication

LIFE SCIENCES UPDATE

MARCH 2025

CONTENTS

05 Driver: Clinical

01 Key Takeaways

02 Leasing Market Fundamentals

03 U.S. Life Sciences Capital Markets

04 Driver: Labor

Trials and Approvals

08 Emerging Markets

09 Europe

06 Driver: Global Funding

07 Industry Trends to Watch

10 Market Summaries

CONTENTS

Key Takeaways

Industry Trends To Watch • Questions abound as the sector faces pivotal trends that could shape its structure and trajectory. • Life sciences companies are embracing artificial intelligence (AI) to improve workflows, accelerate novel drug development and streamline clinical trials. • Uncertainty around drug pricing has grown with a new administration, with potential tariffs adding further pressure on pricing and manufacturing. • The global Contract Development and Manufacturing Organization (CDMO) sector is likely to be affected as the U.S. government continues to push for increased domestic pharmaceutical production through legislation and tariffs.

Leasing Market Fundamentals

• Supply continues to outpace demand, leading to some softness in asking rent growth and increased vacancy rates in many markets. • A deceleration in the construction pipeline is expected to help rebalance supply and demand in the sector. • In 2025, occupiers looking to expand or move into new space will have plenty of choices. • Sales volume rose in 2025 as the broader commercial real estate (CRE) investment market began to recover. • Capitalization (cap) rates remain higher as buyers evaluate income potential and debt opportunities in the market. • Total returns have taken a hit, turning negative for the last three years, aligning with trends across other property types. • Labor: While slack in the labor market has improved talent availability, some positions remain difficult to fill. • Clinical trials and approvals: After lagging in 2024, activity is expected to rise in 2025, driven by a robust pipeline of new drug development. • Funding: Overall funding picked up in 2024 but remains below recent cycle highs. With uncertainty around U.S. government funding, private sector investment is expected to gain momentum in 2025. U.S. Capital Markets Drivers

Emerging Markets • Growth in emerging markets continues to accelerate as they grow their life sciences inventory and offer unique opportunities.

Spotlight On Europe • The European life sciences market enters 2025 with greater confidence. While macro conditions remain uncertain, an improvement in debt markets and venture capital flows should support a further improvement in corporate activity and greater occupier confidence. • With increased investment in late-stage business models and the integration of AI to optimize R&D strategies and lab design, momentum in the market is set to pick up.

Cushman & Wakefield

CONTENTS

LEASING MARKET FUNDAMENTALS

Cushman & Wakefield

Rent Growth Slowed to 3%

CONTENTS

• Overall asking rent growth has softened year-over-year (YOY). Growth remained positive at an average of 3% across the markets in this chart. Asking rents are still 22% higher than in 2022. • Despite the deceleration in asking rents, four markets posted strong double-digit rent growth YOY: Denver (+26%), Los Angeles Orange County (+18%), Chicago (+13%), and Cambridge, UK (+10%). • Asking rents declined YOY in four of the 16 markets: New York City (-14%), Boston (- 11%), San Diego (-3.6%), and Philadelphia (-1.1%). • The increase in available vacant sublease space in many of these markets has applied downward pressure on asking rents, as sublease space is typically priced below direct space. • Softer demand and an increase in vacant sublease space translated to lower asking rents in some markets. However, strong appetite for highly amenitized, newly constructed Class A space is expected to push asking rents higher as a significant amount of new space delivers through 2025.

Q4 2024 Change Q4 2024 vs. Q4 2023 (RHS)

Change Q4 2024 vs. Q4 2022 (RHS)

$175

120%

100%

$150

80%

$125

60%

$100

40%

$75

Change in Overall Asking Rents

20%

Overall Average Asking Rent (psf)

$50

$25

-20%

-40%

Markets with Rent Declines in H1 2024

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

Source: Cushman & Wakefield Research; RHS=Right Hand Side

5 5

Cushman & Wakefield

U.S. Life Sciences Rent Premium

CONTENTS

Overall Asking Rents as of Q4 2024

• Despite softening rents in the life sciences sector, they continue to command a premium over office rents. Across the 12 U.S. markets Cushman & Wakefield tracks, life sciences rents are 44% higher than office rents in the same locations. • In markets like Philadelphia and Boston, that rent premium is much higher, reaching 79% and 75%, respectively. • While rents may soften further in some oversupplied markets, the sustained premium in life sciences will continue to make it an attractive asset to investors.

Life Sciences

Office

$90

$80

$70

$60

$50

$40

$30

$20

$10

Source: Cushman & Wakefield Research; *SS=Same Store markets

6 6

Cushman & Wakefield

Vacancy Rates Have Risen Across Most Markets

CONTENTS

• The average vacancy rate across the 16 tracked markets reached 20.5% in the fourth quarter of 2024, rising 250 basis points (bps) from the second quarter of 2024. Softer demand and a wave of vacant new construction completions have pushed vacancy rates higher in most markets. • The vacancy rate ticked down YOY in four markets: Leiden, Netherlands (-190 bps), New Jersey (-160 bps), Philadelphia (-31 bps), and Los Angeles-Orange County (-14 bps). • Total net absorption in the U.S. remained negative for the second consecutive year. Still, four of the 12 U.S. markets — Boston, Chicago, Los Angeles-Orange County and New Jersey — posted positive absorption in 2024. • The total market vacancy rate has increased due to the influx of vacant sublease space and some new construction projects delivering vacant. This trend should start winding down in 2025 as the life sciences construction pipeline contracts and occupiers absorb more available space.

Overall Vacancy Rate by Market

Q4 2024

Q4 2023

Average Q4 2024

42.0%

40%

35%

31.8%

30.3%

30%

26.0%

23.6%

25%

20.5%

20.4% 20.4%

19.4%

20%

15.5% 15.5%

14.0%

15%

8.2%

10%

4.8% 4.5% 3.2%

1.9%

Source: Cushman & Wakefield Research

7 7

Cushman & Wakefield

U.S. Vacant Sublease Space Has Increased

CONTENTS

• The rise in vacant sublease space is driving both higher overall vacancy rates and softer market rents in the U.S. • Across the 12 U.S. markets, sublease vacancy increased 50 bps YOY, reaching 3.3% by the fourth quarter of 2024. • Some markets, including Boston, San Diego, New Jersey and Denver, posted a YOY drop in total vacant sublease space.

Sublease Vacancy Rate by Market

Q4 2024 Q4 2023

6.4%

3.7% 3.5%

3.4%

3.3%

3.0%

2.6%

2.5%

0.7% 0.6%

0.2% 0.1%

Source: Cushman & Wakefield Research

8 8

Cushman & Wakefield

Inventory Growth Has Decelerated

CONTENTS

• The pace of inventory growth has slowed across most markets. In the U.S., Boston experienced the fastest growth in the last five years, adding nearly 19 million square feet (msf) of new lab and cGMP space since 2020. Such a large influx of new space has pushed up the vacancy rate in Boston, prompting a slowdown in the current pipeline to 10% of existing inventory. • The San Francisco Bay Area also added a significant amount of new space to the market, with nearly 9 msf of new construction since 2020. The Bay Area’s construction pipeline has also slowed, now representing just 7.6% of total inventory. • Construction activity remains stronger in emerging European markets. In the UK, projects under construction account for 29% of current inventory, with London poised to nearly triple its total inventory. Likewise, Leiden, Netherlands, will more than double its current inventory.

Current Inventory and Under Construction

Current Inventory

Under Construction

U/C as % of Inventory (RHS)

60%

3.7

50%

4.9

40%

30%

MSF

3.6

1.8

1.0

20%

0.0 0.0

1.1

0.3

10%

0.2

1.0

0.0

1.7 0.5

U/C off chart: London-153% and Leiden-185%

Source: Cushman & Wakefield Research

9 9

Cushman & Wakefield

U.S. Construction Pipeline Contracts Further

CONTENTS

Inventory Under Construction

• The U.S. construction pipeline began

declining in the third quarter of 2023 after peaking at 17% of total inventory. By year end 2024, construction activity had slowed to 7.0% of total inventory. • Softening demand for space and a high volume of deliveries expected to deliver vacant have dampened construction activity.

Under Construction

% of Total Inventory (RHS)

20%

18%

17%

16%

14%

15%

Millions Square Feet

Percent of Total Inventory

12%

10%

11%

10%

8% 8%

7% 8%

Q1 2021

Q2 2021

Q3 2021

Q4 2021

Q1 2022

Q2 2022

Q3 2022

Q4 2022

Q1 2023

Q2 2023

Q3 2023

Q4 2023

Q1 2024

Q2 2024

Q3 2024

Q4 2024

Source: Cushman & Wakefield Research

10 10

Cushman & Wakefield

Nearly 15 MSF Set To Deliver in the U.S. by 2026, With 44% Pre-leased

CONTENTS

Expected Construction Completions: US Markets 2025-2026

• Of the nearly 16 msf currently under

construction in the U.S., the bulk of it — 14 msf — is due for completion in 2025. This marks a significant slowdown in the life sciences construction pipeline, with less than 2 msf expected to deliver beyond 2025. • The San Francisco Bay Area is expected to add the most space in 2025, with nearly 4 msf expected to deliver. With 85% of this space currently available, a large portion will likely deliver vacant in 2025, putting further pressure on the Bay Area’s vacancy rate. • The Boston market, which has seen the highest volume of vacant new space delivered, has slowed its construction pipeline. Of the 3 msf slated for delivery this year, only 51% remains available — a figure that may drop as more tenants commit to new space.

Pre-leased

Available

100%

0.1

90%

80%

0.4

2.1

2.0

70%

60%

3.2

0.3

50%

0.5

0.2

1.7

40%

Percent Available and Pre-leased (Under Construction in MSF)

30%

0.4

1.9

1.4

20%

10%

0.5

0.04

Boston

SF Bay Area San Diego Philadelphia

Seattle

New Jersey

Chicago

Denver

Source: Cushman & Wakefield Research

11 11

Cushman & Wakefield

Venture Capital Funding and Leasing Activity Are Closely Aligned

CONTENTS

Four-Quarter Rolling Average

• There is a strong correlation between VC funding for life sciences companies and total leasing activity in the U.S. Significant increases in funding often align with higher leasing activity, suggesting that as VC capital flows into the market, leasing activity tends to rise. Conversely, when VC capital contracts, leasing activity typically follows suit. relationship between capital raised and space leased. Companies currently raising capital are generally in the late stages of development, with capital primarily allocated to clinical trials. • For leasing activity to pick up, VC capital flows will need to increase further to allow more companies to plan capital expenditures that involve leasing new space. • In recent quarters, there has been an inverse

Seed to Early Stage

Later Stage

Total Leasing (RHS)

Linear (Later Stage)

Linear (Total Leasing (RHS))

Total Leasing (MSF)

VC Funding (in $billions)

2021 Q1

2021 Q2

2022 Q1

2021 Q3

2023 Q1

2021 Q4

2024 Q1

2020 Q1

2022 Q2

2022 Q3

2023 Q2

2023 Q3

2022 Q4

2024 Q2

2023 Q4

2024 Q3

2020 Q2

2020 Q3

2024 Q4

2020 Q4

Source: PitchBook Data, Inc.; *Data has not been reviewed by PitchBook analysts, Cushman & Wakefield Research; RHS=Right Hand Side

12 12

Cushman & Wakefield

Improved Alignment of Inventory and Job Growth

CONTENTS

US Life Sciences Job and Inventory Growth

• Since 2015, life sciences inventory has grown 5.3% annually outpacing employment growth of 3.4% per year. • Through 2026, life sciences inventory is expected to grow an average of 3.2% annually, and employment is expected to grow an additional 2% per year. This change in pace brings inventory growth and employment growth into closer alignment, with further stabilization expected beyond 2026.

Inventory

Life Sciences Jobs (RHS)

250

1,600

1,400

200

1,200

150

1,000

Jobs (In Thousands)

Inventory ( MSF)

100

800

600

400

2015 2016 2017 2018 2019 2020 2021

2022 2023 2024 2025F 2026F

Source: Lightcast, Cushman & Wakefield Research

13 13

Cushman & Wakefield

CONTENTS

U.S. LIFE SCIENCES CAPITAL MARKETS

Cushman & Wakefield

Investment Sales Activity Ticked Up in 2024

CONTENTS

R&D Annual Sales Volume

• R&D sales volume totaled $7.2 billion in 2024, up 33% YOY. Despite strong deal flow in 2024, the market remains significantly below peak 2021-2022 levels and lags the 10-year annual average. • The number of deals closed in 2024 also rose, totaling 233 — a 32% YOY increase — but still below the 10-year average.

Sales Volume

# of Deals

$25

500

$20

400

• At year-end 2024, the average deal size held steady at $31 million.

• While the R&D/ life sciences sector

represents a fraction of total U.S. property sales, the sector faced similar headwinds. Higher interest rates pushed debt pricing higher, suppressing deal volume. • Looking forward, interest rates are expected to stay elevated in 2025. Deal volume will likely remain restrained given the higher-for longer interest rate environment and the softening fundamentals in the life sciences leasing market.

$15

300

$10

200

Number of Deals

$7.2

Sales Volume, 4-Qtr Rolling ($Billions)

$5.5

100

Source: MSCI Real Capital Analytics, Cushman & Wakefield Research; R&D is used as a proxy for life sciences sales of laboratory and cGMP properties.

15 15

Cushman & Wakefield

Pricing Trends Lower

CONTENTS

R&D Pricing and Cap Rates

• Pricing softened in 2024, with the price per square foot (psf) falling 14% YOY to $255 psf. At this level, pricing is down roughly 38% from its peak and is below the 10-year average. • Average cap rates rose at year-end to 6.7% on a four-quarter rolling basis, up 100 bps from their 2022 lows. • With interest rates remaining at higher levels, cap rates are expected to remain higher as the cost of capital remains elevated. Buyers will need to continue to balance higher debt costs with potential acquisition opportunities.

Average of PSF/PPU

Average of CapRate

$500

7.5%

$400

7.0%

$300

6.5%

•

$200

6.0%

Sales Price PSF, 4-Qtr Rolling Average

Capitalization Rate, 4-Qtr Rolling Average

$100

5.5%

5.0%

2017

2021

2015

2018

2016

2019

2022

2023

2024

2020

Source: MSCI Real Capital Analytics, Cushman & Wakefield Research

16 16

Cushman & Wakefield

Activity Increased in Metros Yet Remains Muted

CONTENTS

Top 10 Metros by Sales Volume

• Most of the top 10 U.S. metros saw a rebound in sales volume in 2024. Only San Diego, New York City and Los Angeles saw volumes decline over the past year. • Boston’s deal volume reached $2.1 billion in 2024, up 51% YOY — though still just one quarter of its peak 2021 levels. • The San Francisco metro recorded $1.2 billion in sales, a 20% YOY increase, but remains below its 2021 peak.

2024 2023

$2,086

Boston Metro

$1,213

SF Metro

$528

Dallas

$428

Seattle

$424

San Diego

$317

NYC Metro

$255

LA Metro

$242

Austin

$188

DC Metro

$159

Phoenix

$500

$1,000

$1,500

$2,000

$2,500

Sales Volume ($Millions)

Source: MSCI Real Capital Analytics, Cushman & Wakefield Research

17 17

Cushman & Wakefield

Total Returns Have Declined Across Most Property Types

CONTENTS

Annualized Total Returns

Annualized Income Returns

• Commercial real estate total returns have declined over the last three years, according to data from the National Council of Real Estate Investment Fiduciaries (NCREIF), which tracks privately held properties. • Returns for life sciences subtypes turned negative as well despite existing rent premiums. The drop in total returns is primarily due to falling valuations, as the appreciation portion of returns turned negative — sometimes by double digits. • Income returns for life sciences properties have remained healthy over the last three years.

Industrial

Office

Industrial

Office

Industrial: Life Sciences

Office: Life Sciences

Industrial: Life Sciences

Office: Life Sciences

Total Index

15%

10%

• Industrial life sciences properties posted relatively flat income returns.

Office life sciences properties experienced growth from 4.1% five years ago to 4.8% in 2024, on par with the total NCREIF index’s one -year return for 2024.

•

-5%

-10%

-15%

1 Year

2Year

3 Year

4 Year

5 Year

1 Year

2Year

3 Year

4 Year

5 Year

Source: NCREIF, Cushman & Wakefield Research

18 18

Cushman & Wakefield

CONTENTS

DRIVER: LABOR

Cushman & Wakefield

Employment Growth Drives Construction Activity

CONTENTS

Projected Growth in Labor Pool and Lab Inventory

• Robust life sciences employment growth has driven construction activity in many markets.

• Boston and the San Francisco Bay Area lead the country in construction pipelines, with 4.9 msf and 3.7 msf currently under construction, respectively. • Boston’s space utilization rate is 298 sf per employee, with employment forecast to grow of 12% through 2029. At this rate, nearly 4 msf of space will be needed to accommodate future growth. The current pipeline of nearly 5 msf and vacant space in the market will easily accommodate this growth. • In the San Francisco Bay Area, the utilization rate is 307 sf per employee. With employment expected to grow 7.7% by 2029, nearly 3 msf of space will be needed. This demand can be met by the nearly 4 msf pipeline and the vacant space in the market.

20%

Oxford, UK

Seattle

15%

Boston

10%

Denver

SF Bay Area

Raleigh-Durham

San Diego

Forecasted Labor Growth (2024-2029)

Suburban Maryland

Cambridge, UK

New Jersey

Philadelphia

Los Angeles-OC

Off Chart: London UC: 153% Labor Growth: 16%

New York City

Chicago

-5%

10%

15%

20%

25%

30%

35%

40%

Under Construction as % of Current Inventory

Source: Lightcast, Cushman & Wakefield Research

20 20

Cushman & Wakefield

Hub and Secondary Markets Have the Largest Employment Base

CONTENTS

Life Sciences Total Employment by Market (MSA), 2024

• Life sciences employment is concentrated in the top 10 markets, which account for 67% of life sciences employment. • Cushman & Wakefield defines a hub market as those with a large employment base and significant lab and cGMP inventory. Most hub markets rank in the top 10 for employment, along with secondary markets like New York, New Jersey, Los Angeles-Orange County and Chicago. employment growth has been robust in all markets — rising 31% in emerging markets, 26% in hub markets and 16% in secondary markets. • The employment forecast calls for growth to decelerate over the next five years but remain positive. Emerging markets are forecast to grow 9.6%, followed by hub markets at 7.3% and secondary markets at 2.5%. • Major life sciences employment hubs will continue to be drivers of life sciences and lab real estate. Watch for large secondary markets such as New York, New Jersey, Los Angeles-Orange County and Chicago to be growth spots for life sciences in the coming years. • Over the last five years, life sciences

Hub

Secondary

Emerging

Philadelphia New Jersey New York Boston SF Bay Area

Phoenix Atlanta Salt Lake City Dallas/Ft. Worth Vancouver, Canada Indianapolis Cambridge, UK Oxford, UK Montréal. Canada Seattle Houston Toronto, Canada Raleigh-Durham Detroit/Ann Arbor Chicago Los Angeles-OC Florida Suburban Maryland San Diego

Denver Austin London, UK

10 20 30 40 50 60 70 80 90 100 110 120 130

Thousands

Source: Lightcast

21 21

Cushman & Wakefield

Increased Slack in U.S. Life Sciences Labor Market

CONTENTS

US Life Sciences Job Postings Continued to Decelerate in 2024

• Life sciences job postings and hirings lagged in 2024, with job postings down 8.3% YOY and hirings down 2.1% YOY. Despite the lower hiring rate, hiring outpaced job posting by 24%, meaning that most job postings were being filled more easily than the 2021-2022 period when labor was constrained. • Layoffs in the sector added slack to the labor market, making it easier for some companies to hire in 2024. However, job postings had an intensity ratio of 3-to-1, meaning each unique job was posted an average of three times — highlighting ongoing challenges in staffing in-demand positions.

Avg. Monthly Hires

Avg. Monthly Postings

Monthly Hires and Postings (Thousands)

Jul 2021

Jul 2019

Jul 2022

Jul 2023

Jul 2024

Jan 2021

Jul 2020

Jan 2019

Oct 2021

Apr 2021

Oct 2019

Apr 2019

Jan 2022

Jan 2023

Jan 2024

Oct 2022

Oct 2023

Apr 2022

Jan 2020

Apr 2023

Oct 2024

Apr 2024

Oct 2020

Apr 2020

Source: Lightcast

22 22

Cushman & Wakefield

Localized Challenges Remain

CONTENTS

Top 20 Markets – Job Postings 2024

• Filling open positions remains challenging in some markets, with employers posting job openings up to four times to fill specific roles.

Median Posting Duration

Total Postings

Unique Postings

Total Postings

Unique Postings

MSA

• The New York metro area had the most unique postings, with nearly 3,000

companies seeking to fill over 20,000 jobs in 2024. These roles were posted an average of three times, reflecting the difficulty in filling some of these positions.

New York, NY

60,804 20,268

Raleigh-Durham, NC 17,605 5,020

Boston-Cambridge, MA

Miami, FL

16,977 5,659

44,394 14,798

Seattle, WA

16,278 5,426

• In the Boston MSA, just over 2,000

Los Angeles, CA

41,040 13,680

companies sought to fill nearly 15,000 jobs, with postings also appearing multiple times, with a median duration of 26 days.

San Diego, CA

15,762 5,254

SF Bay Area, CA 39,039 13,013

Phoenix, AZ

14,535 4,845

Chicago, IL

36,699 12,233

St. Louis, MO

13,407 4,469

Philadelphia, PA

30,699 10,233

Detroit, MI

12,717 4,239

Houston, TX

26,334 8,778

Atlanta, GA

12,548 6,274

Dallas, TX

22,917

7,639

Denver, CO

12,225 4,075

Minneapolis, MN

19,083

6,361

Indianapolis, IN

11,832 3,944

Suburban Maryland 18,936 9,468

Hub Market

Source: Lightcast

23 23

Cushman & Wakefield

In-Demand Occupations Remain Difficult to Fill

CONTENTS

2024 Top 10 U.S. Life Sciences Occupations

• In 2024, half of all U.S. life sciences job openings were concentrated in two occupations: clinical laboratory technologists and technicians, and medical scientists. • There were over 145,000 job openings for clinical lab technologists and technicians, with each position posted an average of three times, highlighting the difficulty of filling these roles. • Both medical scientists and natural science manager jobs also had an average intensity ratio of 3-to-1, but they also had a longer median posting duration of 26 and 27 days, respectively. • The top five posted job titles: laboratory technician, medical laboratory scientist, medical laboratory technician, laboratory assistant and clinical research coordinator. • The top five skills sought: biology, chemistry, medical laboratory, laboratory equipment and laboratory testing. • Education requirements: 75% of postings requested that applicants have a bachelor’s degree or higher. • Other key trends among employers:

Total Postings

Unique Postings

Median Posting Duration (RHS)

460

410

360

310

260

210

160

2024 1H Job Postings (Thousands)

110

Median Posting Duration (Days)

Other

Chemists

Technicians

Epidemiologists

Clinical Laboratory Technologists and

Chemical Engineers

Science Technicians

Chemical Technicians

Biological Technicians

Biological Scientists, All

Agricultural Technicians

Life, Physical, and Social

Medical Scientists, Except

Natural Sciences Managers

Source: Lightcast

24 24

Cushman & Wakefield

CONTENTS

DRIVER: CLINICAL

TRIALS AND APPROVALS

Cushman & Wakefield

The Pipeline of Active Clinical Trials Remains Robust Globally

CONTENTS

All Currently Active Global Clinical Trials

Number of Global Active Clinical Trials By Start Year and Phase

• Reaching a clinical trial stage continues to be critical for companies seeking funding. Advancing from early Phase 1 to Phase 2 demonstrates growth and a potential path to FDA approval, strengthening investor confidence in a company’s path to clinical trial success. • Currently, Phase 2 trails account for 42% of all clinical trials in the global pipeline, and 18%, have advanced to Phase 3, where FDA approval is possible. • Most active clinical trials were initiated in 2023, with 39% now in Phase 2. Although fewer clinical trials started in 2024, a significant portion have already advanced to Phase 2 (37%) and Phase 3 (15%). • Clinical trials in Phases 1-3 generally require human participants in the studies. As more companies advance to a clinical trials stage, their need for space increases.

Early Phase 1

Phase 1

Phase 2 Phase 3 Phase 4

Early Phase 1 4%

3,500

3,000

Phase 4 10%

2,500

Phase 1 26%

Phase 3 18%

2,000

1,500

1,000

Phase 2 42%

500

2020 2021

2022

2023

2024

Source: Clinicaltrials.gov

26 26

Cushman & Wakefield

Novel Drug and Biological Approvals Lagged in 2024

CONTENTS

FDA Drug and Biological Approvals

• After reaching a five-year high in 2023, drug and biological approvals totaled 67 in 20241.

• Despite approvals lagging last year’s record, they surpassed the 10-year average, reflecting continued efficiency in the FDA’s approval process.

Novel Drug Approvals

Biological Approvals

• Evaluate’s recent report projects up to 71 novel drug approvals in 2025.

• Drug approvals are influenced by several factors such as the complexity of drugs under development and scientific advances in understanding diseases and their targets. • Once a drug is approved by the FDA, it can be marketed and distributed to healthcare providers and patients. This new cash flow enables a company to invest in additional lab space and R&D for projects in the pipeline. To meet increased production needs, manufacturers often need additional space to produce the product. • FDA approvals provide several benefits to the life sciences sector, including boosting investor enthusiasm, and validating innovative technologies and methodologies often used in drug development.

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

1. 2025 Preview, Evaluate

Source: U.S. Food and Drug Administration

27 27

Cushman & Wakefield

Site Selection Is Key to Successful Clinical Trials

CONTENTS

Active Clinical Trials by Market

• Choosing the right site is vital for the success and efficiency of a clinical trial. Inadequate site selection can lead to poor quality data, elevated costs and prolonged timelines. • To mitigate these risks, sponsors seek sites with a proven track record of success. They look for an experienced and well-trained staff, a large patient population and access to top-tier facilities, hospitals and research institutions. to initiating clinical trials, companies consider lab infrastructure to ensure seamless trial execution. Proximity to a firm's existing footprint offers several benefits, including: • At the early stages of development and prior

Current Inventory (MSF)

Number of Active Trials (In Thousands)

Enhanced communication and coordination between the research and clinical teams

•

• Improved monitoring and oversight

• Efficiency in allocation of staff and equipment

• Familiarity with regulatory standards

• Facilitated patient recruitment, as firms leverage their relationship with local healthcare networks

Total Active Clinical Trials

Inventory Trials Started in 2023 Trials Started in 2024

• Markets with an existing life sciences

ecosystem, including a robustly built-out life sciences inventory, offer key opportunities for companies seeking to launch new clinical trials.

Source: Clinicaltrials.gov

28 28

Cushman & Wakefield

CONTENTS

DRIVER: GLOBAL FUNDING

Cushman & Wakefield

Uptick in 2024 Global Funding Levels

CONTENTS

Venture Capital

Public Offerings

• Global VC funding rose 4% YOY in 2024. This was still below the recent cyclical high, but 6% higher than the 10-year average — a sign of renewed investor confidence. Europe and North America saw deal volume increase in 2024, with European VC deals totaling $8.6 billion (+19% YOY) and North America totaling $31.5 billion (+17% YOY). APAC saw VC deal volume decline, with 2024 totaling $5.2 billion (-45% YOY). • While the initial public offerings (IPO) sector remains subdued, 2024 saw a slight uptick with offerings totaling $11.6 billion (+22% YOY). European IPO activity surged to $2.8 billion (+3,000% YOY). Both North America and APAC saw slower IPO activity in 2024, with North America deal volume at $4.4 billion (-10% YOY) and APAC at $2.4 billion (-4% YOY). • With investor optimism rising for 2025, funding levels may exceed 2024 levels. Venture capital is vital to the life sciences sector. As companies are funded from startup to later-stage funding rounds, they can put capital to work by increasing headcount and expanding their footprints.

North America Europe APAC

$40

$100

$90

$35

$80

$30

$70

$25

$60

$20

$50

$40

Billions USD

$15

$30

$10

$20

$10

2017

2021

2015

2018

2016

2019

2014

2022

2023

2024

2020

2017

2021

2015

2018

2016

2019

2014

2022

2023

2024

2020

Source: PitchBook Data, Inc.; *Data has not been reviewed by PitchBook analysts

30 30

Cushman & Wakefield

NIH Funding Slowed in 2024 and Is Expected To Drop Further with Budget Cuts

CONTENTS

Total Annual US Funding Over Time

• National Institutes of Health (NIH) awards fell to $35.1 billion in 2024, an 8% YOY decline, primarily due to a flat YOY budget that constrained agency resources. • For 2025, the NIH has proposed a $50.1 billion budget, nearly unchanged from 2024’s budget of $49.9 billion. However, recent agency announcements on reducing overhead funding will affect award levels in 2025.

$40

$38

$36

• On Feb. 7, the NIH announced that future awards will cap ”indirect funding” at 15%, a

$34

move expected to save the agency approximately $4 billion in 2025.

$32

• Indirect funding is usually used by research institutions for expenses such as rent, utilities, equipment and administrative salaries. While cuts to university and hospital funding may not directly impact the private sector, the interconnected nature of the sector suggests potential effects on innovation. • Uncertainty around cuts remains, however, the administration’s cost -cutting goals are clear that future budgets will likely be slimmer.

$30

$28 Billions USD

$26

$24

$22

$20

2010 2011

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

2022 2023 2024

Source: U.S. National Institutes of Health, Cushman & Wakefield Research

31 31

Cushman & Wakefield

Multiple Funding Sources Drive the Growth of Life Sciences

CONTENTS

Funding by Source

• Funding for the life sciences sector comes from three primary sources: government funding through the NIH, private investment through VC, and pharmaceutical (pharma) companies funding their own R&D. • A surge in funding from 2020 through 2022 drove increased demand for life sciences real estate, as companies expanded startups sought their first lab or cGMP facilities. remained relatively level since 2022, the steep drop off in VC funding has greatly impacted the CRE sector, softening demand for space. The recent uptick in VC funding is a positive sign that the private sector is starting to come back. A significant increase in VC funding will likely precede a recovery of the life sciences CRE fundamentals. • While both pharma and NIH funding

Pharma R&D (Domestic)

NIH

U.S. VC Funding

$200

$180

$160

$140

$120

$100

$80

Funding (in $Billions)

$60

$40

$20

2010 2011

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

2022 2023 2024

Source: Clinicaltrials.gov, Pitchbook, NIH, Statista

32 32

Cushman & Wakefield

Biotech Gave Back Gains at Year-end 2024

CONTENTS

• Public biotech stocks rallied through most of 2024 after suffering though a down year in 2023. However, by year-end, the Nasdaq Biotech Index had given back most of its gains, closing near its starting point for the year. • Despite this decline, pricing was stronger than the three-year average and on par with the five-year average. • Biotech stocks are highly sensitive to overall market fluctuations and react sharply to economic and geopolitical uncertainty. As a result, public biotechs must be prepared for volatility in the market. • Interest rate cuts were positively received by the industry, however, since rates are expected to remain higher for longer, some of that sentiment has faded.

Daily

3 Year Avg

5 Year Avg

5,500

5,000

4,500

4,000

3,500

3,000

Biotech - Share price, (Index 1-Nov-1993=200, NSA)

2,500

2,000

2Jan15

2Jan16 2Jan17

2Jan18 2Jan19 2Jan20 2Jan21

2Jan22 2Jan23 2Jan24

Source: The Nasdaq Stock Market, Inc. (NASDAQ), Cushman & Wakefield Research

33 33

Cushman & Wakefield

CONTENTS

INDUSTRY TRENDS TO WATCH

Cushman & Wakefield

How is the Industry Preparing for AI?

CONTENTS

Global AI-Life Sciences Venture Capital Funding

• While the world discusses whether AI is hype or reality, it’s not surprising that an industry focused on innovation has been implementing AI into its business over the last few years. Main applications include: • Drug Discovery: There have already been notable applications. The 2024 Nobel Prize for chemistry was awarded to a team that used AI to predict protein structures. The industry aims to use AI to identify novel molecules for drug development. • Clinical Trials: AI is streamlining the clinical trials process through digital twins, which simulate patient responses to treatments, potentially accelerating drug development timelines.

Capital Invested

Deal Count (RHS)

$18,000

1000

900

$16,000

800

$14,000

700

$12,000

600

Number of Deals

$10,000

500

Improved Workflows: Some companies are deploying AI agents as digital worker companions, with the goal of automating everyday tasks and freeing up staff to focus on higher competency work.

•

$8,000 VC Funding ($millions)

400

$6,000

300

• Global funding for AI in life sciences increased 31% YOY in 2024. As this sector matures, further investor interest is expected. Recently, the UK government announced an £82.6 million investment (£37.9 million from the government and £44.7 million from co-investors) in AI for cancer care and drug discovery1. 1. https://www.openaccessgovernment.org/uk invests-82-6-million-to-support-ai-in-cancer-care and-drug-discovery/188475/

$4,000

200

$2,000

100

2019

2020

2021

2022

2023

2024

Source: PitchBook Data, Inc.; *Data has not been reviewed by PitchBook analysts; YTD as of June 2024; RHS=Right Hand Side

35 35

Cushman & Wakefield

Will Potential Tariffs Impact Drug Costs?

CONTENTS

API Sources for U.S. Medicines in 2021, In $Billions

Top 10 Countries for U.S. API

• The Biden administration’s use of the Inflation Reduction Act (IRA) to control Medicare drug costs created uncertainty for an industry already navigating patent expirations and the loss of exclusivity of some medications. • Further uncertainty arose with the passage of the Biosecure Act, aimed at securing the pharmaceutical supply chain. • The new U.S. administration has yet to clarify its stance on the IRA but is expected to support the Biosecure Act, which leaves a lot of policy direction on uncertain ground. More recently, the focus has turned to how potential tariffs will impact drug pricing. • Active pharmaceutical ingredients (APIs) are used in all drugs consumed in the U.S., with 53% (by dollar value) manufactured domestically and 47% produced abroad. Depending on the scope of potential tariffs, nearly half of the U.S. drug supply could be affected. • Increased drug costs will impact consumers and health systems alike, including hospitals that provide in-patient medicines.

Percentage of Total API

100%

Rank Country

USA

53%

Imported Medicines*, $16.3

90%

Ireland

19%

80%

China

70%

Germany

Singapore

60%

Switzerland

Domestic API, $45.4

50%

India

Belgium

40%

Italy

30%

France

20%

• Tariffs may also disrupt supply chains and aggravate ongoing drug shortages.

Imported API, $24.0

10%

Source: Avelere; Cushman & Wakefield Research; * Imported medicines use foreign API

36 36

Cushman & Wakefield

Are Manufacturing Changes on the Horizon?

CONTENTS

Top 10 Contract Development and Manufacturing Organizations (CDMOs)

• M&A activity in the CDMO sector has driven consolidation among major players, and the trend may be far from over, as recent deals indicate: • Novo Holdings purchased Catalent for $16.5 billion in late 2024, aiming to increase its manufacturing capacity for diabetes and obesity drugs.

Lonza Group (Switzerland)

$7.7

Thermo Fisher Scientific (U.S.)

$7.0

• BioCina and NovaCina announced a $1.2 billion merger in January 2025, with the combined global CDMO retaining the BioCina name.

Catalent (U.S.)*

$4.1

Samsung Biologics (S. Korea)

$2.7

• Despite the industry’s efforts to scale up CDMO capacity, gaps remain due to growing global demand. To fill these gaps, further M&A activity is expected. Additionally, the sector is expected to significantly leverage AI to increase efficiencies in clinical and manufacturing processes. • Global geopolitical pressures will likely shape the CDMO sector in the next few years. The U.S. government’s efforts to onshore more pharma manufacturing will likely shape the industry in the near and long term.

WiXi Biologics (China)

$2.4

Siegfried (Switzerland)

$1.5

Recipharm (Sweden)

$1.4

Fujifilm Diosynth Biotech (Japan)

$1.4

Boehringer Ingelheim (Germany)

$1.2

MilliporeSigma (Germany)

$0.9

2023 Revenue in Billions (USD)

Source: Statista, Cushman & Wakefield Research; *Catalent was purchased by Novo Holdings in December 2024

37 37

Cushman & Wakefield

Will M&A Activity Rebound in 2025?

CONTENTS

Global Biotech Pharmaceutical M&A Activity by Year

• Many pharma companies saw a significant increase in revenue from 2021 to 2022, positioning them to pursue strategic M&A activity to bolster their drug pipelines as key patents near expiration. • After over $140 billion in M&A activity in 2023, deal volume dropped 67.4% YOY in 2024 to $46.5 billion. While deal count in • So far in 2025, M&A activity has been robust, totaling $16.8 billion, largely driven by Johnson & Johnson’s $14.6 billion acquisition of Intra-Cellular Therapies — the largest deal since March 2023. • Part of the decline in 2024 deal volume was the surge in 2023 activity. It takes time for mergers to be fully integrated into operations. Now that most of those M&A deals have been fully integrated, expectations are that M&A activity will increase in 2025. • Early- to late-stage biotech companies can be prime targets for M&A activity. This process is a major driver of equity recycling and real estate activity for life sciences. 2024 was flat compared to 2023, the average deal size fell to $1.2 billion — the smallest in seven years.

Deal Volume

Annual Average (2017-2024)

Deal Count (RHS)

$250

$200

$150

$100

M&A Deal Volume ($billions)

$50

2018

2019

2020

2021

2022

2023

2024

2025 YTD

Source: BioPharma Dive

38 38

Cushman & Wakefield

CONTENTS

EMERGING MARKETS

Cushman & Wakefield

What Makes an Emerging Market?

CONTENTS

Growing Inventory

• Expanding inventory can facilitate growth for life sciences companies in emerging markets. As firms gain more access to advanced laboratories and research facilities, they can use this enhanced infrastructure to accelerate their development processes. growing momentum behind the life sciences sector in emerging markets. Greater access to space also helps these markets maintain cost advantages over rental rates in hub metros. • The inventory pipeline reflects the growing enthusiasm of the life sciences sector within a market. • Increasing supply levels highlight the

Existing

Under Construction

Proposed

% of Existing Inventory U/C & Proposed (RHS)

100%

93%

90%

80%

84%

70%

MSF

60%

54%

50%

40%

33%

32%

30%

26%

25%

20%

10%

Costa Rica*

Indianapolis Dallas/Ft. Worth Houston

Austin

Atlanta

Salt Lake City

Source: Cushman & Wakefield Research

*Inventory is manufacturing

40 40

Cushman & Wakefield

What Makes an Emerging Market?

CONTENTS

Access to a Healthcare Ecosystem

• Healthcare providers, research institutions and universities help formulate an attractive life sciences market by providing several benefits such as:

Non-Top Tier Hospital

Top Tier Hospital SF

# of Existing Hospitals (RHS)

Collaboration and innovation.

•

180

A steady stream of talent.

•

160

Improved access to patient populations critical for clinical trials

•

140

• Medical professionals have direct access to patients and possess a high level of trust and credibility, which significantly boosts patient enrollment in clinical trials. This helps mitigate low patient participation, which often hinders clinical trials and delays drug development. • According to a report by the SAS Institute, enrollment strategies that leverage healthcare providers and pharmacies were the most effective in recruiting patients. • A strong research and healthcare network in a market enhances innovation and reduces risks of delays in clinical trials.

32%

30%

14%

120

14%

100

MSF

18%

26%

11%

# of Existing Hospitals

48%

Dallas/Ft. Worth

Houston Hub Avg.

Secondary Avg.

Phoenix

Atlanta Indianapolis Austin Salt Lake City

Source: Cushman & Wakefield Research, Costar

*Hospitals considered top tier are those designated as 4- or 5-star buildings by Costar

41 41

Cushman & Wakefield

Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13 Page 14 Page 15 Page 16 Page 17 Page 18 Page 19 Page 20 Page 21 Page 22 Page 23 Page 24 Page 25 Page 26 Page 27 Page 28 Page 29 Page 30 Page 31 Page 32 Page 33 Page 34 Page 35 Page 36 Page 37 Page 38 Page 39 Page 40 Page 41 Page 42 Page 43 Page 44 Page 45 Page 46 Page 47 Page 48 Page 49 Page 50 Page 51 Page 52 Page 53 Page 54 Page 55 Page 56 Page 57 Page 58 Page 59 Page 60 Page 61 Page 62 Page 63 Page 64 Page 65 Page 66 Page 67 Page 68 Page 69 Page 70 Page 71 Page 72 Page 73 Page 74 Page 75 Page 76 Page 77 Page 78 Page 79 Page 80 Page 81 Page 82 Page 83 Page 84 Page 85 Page 86 Page 87 Page 88 Page 89 Page 90 Page 91 Page 92 Page 93

Made with FlippingBook - Online magazine maker