Life Science Incubators In High Demand

Life sciences are seen as one of the key drivers not only of future advances in medicine and health but also of economic development in many regions. And incubators that provide space and resources for innovation serve in many cases as the vital infrastructure for advances in the life sciences.

Not surprising, then, that CBRE Research’s 2024 survey of life sciences incubators finds them in high demand – and most with high occupancy. “Startups that grow from innovative research at educational institutions often cannot afford to lease full office and lab space, making incubators essential resources,” the survey found. Some 95% offer accessible space of this type, as well as mentorship.

“All incubators we surveyed were at least 50% occupied, including 59% that were at least 75% occupied and 19% fully occupied. Over the next decade, 63% expect to open more locations and 52% also project the average size of their locations to increase,” the report stated.

Specific services and facilities such as specialized equipment may vary, with some incubators offering access to private markets or funding. While 62% provide wet labs, 24% focus on dry labs, with some mixed use and 5% with no lab space.

Life sciences incubators overwhelmingly favor locations near educational institutions, with almost nine out of 10 naming this as their main priority. Only 30% rated being near major medical facilities at the top, slightly fewer than housing or retail amenities.

About half (48%) of incubators lease real estate, 32% own it, and 19% have a mix of both. There is also considerable variety in the fees tenants pay for their use. The largest number (48%) pay by the month, 19% pay a flat fee, 14% pay by the bench or suite and the remainder pay according to headcount or on a mixed basis. The lucky few (5%) pay no fee at all.

Government agencies (43%) and academic institutions (14%) account for the bulk of incubators’ funding. Another 14% are self-funded. Venture capital puts in 9%, clients 5%, and inflows from multiple sources 10%. Some 5% derive their income from rent. And most (62%) project an increase in funding over the next five to 10 years.

Medical device companies are life science incubators’ most frequent tenants, found in 90%. Biotech, therapeutics, medtech and other technology startups are also common, as well as some pharma. Some 40% of incubators also house fintech and AI firms.

Potential tenants are usually carefully screened. “Selecting which companies to grant a spot in the incubator is challenging,” the report noted. Most stay for more than two years. While the vast majority of incubators consider many factors in the selection process, the key for most is the company’s business idea. Its focus on innovation and the potential for the incubator to assist are also vital. “This highlights the importance of a synergistic relationship between the companies and the incubators, rather than a traditional tenant-landlord dynamic,” the report stated.

Incubators have also expanded their definition of a startup’s success beyond simply capital raised – though the ability to raise funds is still a consideration, along with revenue, job growth, coachability, adaptability and networking. Intellectual property, product quality, service and scalability are also important.

The relationship between a startup and its incubator can be enduring. Three-quarters of incubators follow up with their graduate companies at least once a year and many monitor their funding. “Maintaining these relationships and tracking graduates’ progress is crucial for incubators to gauge their own value,” the report stated.