A Record 21M-SF of Life Science Space Will Deliver This Year
79% of that space is slotted for Boston, San Francisco and San Diego.
The life sciences real estate market faces many challenges this year but is expected to remain durable due to a healthy and growing pipeline of approved drugs and increased corporate spending in the areas of research and development, according to CBRE.
From 2020 to 2022, the life sciences real estate sector experienced growth, followed by a cooldown in 2023. It is expected this market will continue to stabilize in 2024.
CBRE expects completion of 21.3 million square feet this year across the largest U.S. markets. This is a record in the life sciences real estate sector, up from 13.9 million square feet in 2023 and 5.6 million square feet in 2022.
Most of the construction anticipated for completion this year, 79%, is in the three largest biotech areas: Boston, the San Francisco Bay Area, and San Diego.
The market’s slowdown can be attributed to a few factors. Namely, the softer economy, a dip in venture capital initial public offerings, and slowing of job growth within the industry.
Yet, despite these difficulties, there appears to be an upside for this sector. According to the CBRE report, the U.S. Food & Drug Administration approved more novel drugs last year than in all but one of the previous 25 years. This suggests a need for additional space as companies refine, market, and manufacture those drugs. In addition, spending on research and development by public companies continued to increase over the last decade, reaching $180 billion last year. Finally, a few sources of funding continue to grow.
According to Matt Gardner, CBRE’s Americas Life Science Leader, 2024 will likely see mergers, acquisitions, and partnerships in this sector.
“The underlying science still is strong following a decade of rising investment, as shown by recent robust levels of drug approvals and early-stage clinical trials,” said Gardner.
Gardner expects construction completions to peak in 2024, then drop off substantially. Overall, the activity in life sciences is expected to benefit this sector’s real estate market.