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Report Says Life Science Industry Faces Challenge

A report reveals that owners and occupiers of life-science properties face unprecedented leasing and investing challenges.

By John McCloud | Updated on September 03, 2008

LOS ANGELES-A while paper from CB Richard Ellis analyzing the life sciences industry in the top nine US markets reveals that owners and occupiers of life-science properties face unprecedented leasing and investing challenges due to patent expirations over the next five years. The report, A Primer on Life Sciences Properties, based its findings on studies of the Boston, Los Angeles, New York/Northern New Jersey, Philadelphia/Southern New Jersey, Raleigh-Durham, NC, San Diego, San Francisco Bay Area, Seattle and Washington-Baltimore biotech and pharma-tech markets.

According to the report, which was prepared by members of CBRE’s Life Sciences Group, the major real estate challenge facing the industry is the fact the properties are among the most complex and expensive in the world, requiring extraordinarily high amount of capital to finance both construction and operation. Thomas Sullivan, senior vice president in CBRE’s Central New Jersey office and a senior member of the Life Sciences Group, says budgets for life-science buildings often run more than $1,000 a sf (see separate article).

The report points to several key concepts it calls critical for understanding the life-science industry, including the fact the two primary industry drivers are the increasing needs of an agingpopulation and overall consumer demand for improved healthcare. But despite the growing demand, CBRE says the industry’s high-risk character limits the number of investors willing to provide capital for early-stage development, with the largest share of investment going to acquisitions of mid- to late-stage products. Because the cost of developing new products is high, with prices for raw materials and labor increasing at a steep rate, life-science companies are looking for ways to contain costs and improve efficiencies without sacrificing safety and environmental concerns.

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