New Life Sciences Funding Drives Lab Demand, Development

Money has been flowing into life sciences, ignited by breakthroughs in immuno-oncology, neonatology and other technological advances.

That investment translates into commercial real estate leasing, according to JLL.

“Every time there is a funding round, it’s only a matter of months before these companies are looking for new space,” says Travis McCready, executive director, US Life Sciences Markets, JLL in a new report. “When companies get VC money, they need lab space in order to deliver as soon as humanly possible.” 

Life sciences funding comes from governments, risk and venture capital and institutional capital, according to JLL. In recent years, these allocations have been rising, especially during the pandemic. 

For instance, Project Warp Speed sent billions from the government toward COVID-19 research and biomanufacturing. In 2007, health care represented 9 percent of deal activity in private equity. Last year it rose to 14%, according to JLL. For CRE, this capital flow has elevated the status of life science real estate.

“At this point in the US, life sciences is an asset class that you can’t ignore anymore,” Nicole Riley, a counsel in Goodwin’s Business Law Department and a member of its Real Estate Industry group, told GlobeSt.com in an interview last year. “We have folks who are asking us how to look at this asset class from an underwriting perspective.” 

Not surprisingly, vacancies have been falling. They decreased from 9.8% to 7.3% from 2015 to 2020, according to JLL.

JLL says developers are building lab space speculatively to keep up with the pace of venture capital.

This influx of capital is pushing life science firms into new markets. “It is exploding beyond even the three major markets here in the US,” Riley told GlobeSt.com. “We’re seeing more than a half a dozen clusters pop up in the secondary markets.”

Retail, Housing Also Impacted

But life science expansion doesn’t just impact local office space. Retail and housing are developed to support it. Citing data from TEConomy and BIO, JLL says that for each life sciences job, there are almost four support jobs.

With that type of job generation, there is an opportunity to develop diverse property types surrounding lab space, according to JLL.

“As the life sciences industry develops and matures, the need for more housing in these areas is becoming clearer,” Mark Stern, managing director at JLL Capital Markets, said in the report.