Life Sciences Construction Waits Nearly Two Years for Some Components

Amid widespread critical materials shortages and increases in the costs of construction and skilled labor, the life sciences industry stands out for how severely it has been impacted.

“Right now, life science projects, including new builds and refits, are dealing with material lead times that stretch from four weeks to nearly two years for critical components,” said Jason D’Orlando, senior managing director and life and technology science lead, Americas, with Cushman & Wakefield.

This is happening even as the life sciences industry has proved to be one of the bright spots in the office sector, with demand for lab space remaining solid.  In the past two years, the industry has accounted for more than one out of four new projects, according to CommercialEdge’s August 2023 National Office Report. 

Cushman & Wakefield reports over 35 million SF of life sciences projects are under construction – a 34% increase year-over-year. “Competition for materials and labor has increased significantly over the last year, causing some projects to be put on hold, delayed or scrapped altogether,” it noted.

Indeed, while a contractor might wait four to 20 weeks for roofing materials, the wait for a generator could last from 72 to 95 weeks. There’s a 17 to 30 week delay in delivery of orders for steel, and up to a year or 18 months for air handling units and chillers.

Even though a 2023 Cushman & Wakefield survey of more than 70 general contractors uncovered more positive outlooks on costs and timelines since 2022, a tight labor market is also contributing to delays. Rapidly rising labor costs present an ongoing challenge. 

Wages for skilled labor increased 4.5% year-over-year – almost twice the 10-year average of 2.4%. Pay for common labor rose 2.1% year-over-year, a rate consistent with its 10-year average. In 2Q 2023, job openings diminished somewhat but remained higher than historical averages. “To attract talent to open positions, the sector has raised wages consistently and significantly over the last six quarters,” Cushman & Wakefield noted.

The impact of low supply and high cost has been detailed in a new Cushman & Wakefield Life Sciences Fit Out Cost Guide. It examined nine types of life-sciences facilities in six major biotech markets: Boston, Philadelphia, Raleigh-Durham, San Diego, San Francisco and Seattle. 

“National fit out costs across all types and markets average $837 psf, with costs totaling $690 psf on the low end and $980 psf at the high end,” the guide calculated. They soared to an average of $1,930 psf for Biosafety Level 3 structures. The most expensive market was San Francisco, averaging $1,152 psf and the least expensive was Raleigh-Durham, which averaged $533 psf.

Despite these challenges, the underlying fundamentals of the life sciences sector in the U.S. remain strong, said research manager Sandy Romero. She expects ongoing clinical trials, R&D and existing manufacturing to be augmented by reshoring efforts, including federal efforts to return manufacturing of active pharmaceutical ingredients to the U.S. Nevertheless, D’Orlando warned, rising costs and delays are inhibiting opportunities for companies to move or expand – and they are having a negative impact on efforts to onshore production in the U.S.