Life Science Leasing Activity Tops Record in NYC

Life science leasing activity in New York City reached new heights in 2022, despite a noticeable drop-off in venture capital in the second half of the year.

Leasing activity totaled 455K SF, a 5% increase over the total in 2021, with average rents reaching a record high of $108.47 triple-net per SF, according to a new market report from CBRE.

Lab exclusive inventory grew in NYC from 1.9M to 2.7M, but demand was robust enough to keep the available rate for occupancy-ready pre-built lab space at a tight 3.8% as of the end of the year.

A tidal wave of venture capital funding that began flooding into the life science sector in 2017 crested in 2021, when it was augmented by additional funding from the federal government as the National Institutes of Health prioritized life sciences during the pandemic.

NYC’s life sciences VC funding fell to $615M across 31 deals in 2022, moving in tandem with the broader pull-back in VC funding across the U. S. While NYC’s NIH funding declined to $2.52 billion in 2022, it remained 11% ahead of 2020’s level.

The total leasing activity in NYC’s life science sector exceeded 400K SF for the second consecutive year in 2022. CBRE’s report noted that lab demand notched a slight decline.

“Last year finished with lab demand falling slightly, reaching 1.36M SF at year-end, due to some tenants shifting to a wait-and-see approach, CBRE’s report said. “However, NYC boasts a strong roster of small-to-mid sized requirements, along with some larger, institutional-grade tenants currently in the mix for new lab space, and life sciences employment growth continues to outpace gains in total private employment.”

The steady lease-up of several recently redeveloped lab projects across Manhattan and Long Island City, including Cure, Hudson Research Center, ACLS LIC, and Innolabs, drove leasing activity to an all-time high in 2022, the report said.

The launch of West End Labs in Manhattan and Hatch in Long Island City during 2022, both full-building repositioned lab developments, also provided a boost to NYC’s lab supply with a blend of build-to-suit and spec lab offerings.

“Lab space is a unique asset in the NYC office market, and buildings that can accommodate labs must meet special conditions that include zoning restrictions and special infrastructure requirements such as heavy power loads, ventilation systems, ceiling heights, floor loads, building loading capacity, riser space, and roof space for industry specific equipment,” said David Stockel, a senior VP in CBRE’s Midtown Manhattan office.

“Most buildings in the NYC inventory are not compatible with lab use. However, in the last several years, major strides have been made to increase lab use in the city, which is reflected in the growing inventory of lab exclusive and lab capable space,” Stockel said.