Life Sciences Had Another Impressive Quarter Despite Decline in VC Funding

The life sciences sector logged another impressive quarter as employment ticked up by 5.5% and Big Pharma continued to gobble up space across the country, according to a new report from CBRE.

The overall lab vacancy rate in the top 12 US life sciences markets fell by 10 basis points to 5.2% in the second quarter of 2022, while the average lab asking rent in those cities ticked up 5.8% year over year.

The gains were notched even as funding from venture capital sources for life science companies in the US fell by 13.3% quarter over quarter and by 27% year over year.  However, the rolling four quarter average funding was up 54.2% since the onset of the COVID-19 pandemic two years ago.

“Few, if any, sectors are completely immune to economic cycles. Even so, the life sciences sector is buttressed by more fundamental, long-term shifts than most industries, such as advances in science and technology, expanding uses for biotechnology, and the long-term trend toward more individualized treatment,” said Matt Gardner, CBRE’s Americas Life Sciences Leader. “Indicators and market forces will shift on a quarterly or annual basis, but the underlying science continues to develop and expand.”

The total amount of lab space under construction increased by a whopping 65.6% year over year to 31.3 million square feet, while tenant requirements fell to 20.6 million square feet from 27.4 million square feet in Q1. The majority of space under construction was in white-hot Boston/Cambridge, followed by the San Francisco Bay Area, San Diego, Philadelphia, and Seattle.

Vacancy in the Boston/Cambridge metro stands at 1.2% with 14.9 million square feet under construction and 4.2 million square feet of current tenant demand. But life sciences growth is also pushing past the typical coastal markets, according to Gardner: “There is a conventional view of life sciences that emphasizes large lab markets such as Boston, the Bay Area and San Diego…we take a broader view, analyzing life sciences workforces across the U.S. as well as the connection that talent has to how – and where – companies grow,” he says. “It’s also important to keep in mind that the life sciences industry encompasses more than drug development in the lab. Major growth drivers for life sciences – even amid market headwinds – include personalized treatment, advanced materials and future foods.”