High-Profile Focus: Forecast 2022
20
January 2022
Continued Growth in Life Sciences Fuels Development
by Suzanne Duca and Taylor Stucky The life sciences market has never been stronger. With 2021 wrapping up, how will the market fare moving into 2022? While many ponder whether or not we are in a bubble brought on by COVID-19, our data points to this not being the case. With revolutionary technology, advances in discovery and innovation, and an aging population in need of better medical care, the life sciences are more pertinent and accessible than ever. In the third quarter, demand for lab space in Boston-Cambridge surged to a record of 23.8 million sq. ft. of tenant requirements, outstripping unleased, speculative construction. Thirty-three percent of the 21.4 million sq. ft. of speculative lab/R&D space under construction is already pre-leased with the majority in Boston-Cambridge. Over 50% of the projects expected to deliver by
the end of 2022 in Boston-Cambridge are pre-leased. In the last three years, BostonCambridge’s lab inventory has more than doubled, reaching 42 million sq. ft. Across the U.S., many office and industrial facilitates are being converted to life science to keep up with demand. There are 3.2 million sq. ft. of lab conversions underway in Boston-Cambridge alone. In 2021, investment in life sciences lab/R&D properties skyrocketed. As the need for lab/R&D space appears to have no near-term end in sight, developers and investors have been paying a premium for office properties slated for life sciences conversion compared to conventional office properties. With average U.S. lab/R&D vacancy below 5%, space available cannot keep up with the demand from eager tenants. In Boston-Cambridge, lab/R&D vacancy fell from 2.5% in the first quarter to 1.1% in the third quarter of 2021. Conventional office vacancy in the market was markedly higher at 12.7%. In addition to decreasing vacancy rates, eight of the 12 top U.S. markets saw increased rents from March 2021 to September 2021 as companies expanded and young companies moved out of incubators and into their own spaces. Asking rates in the top markets reached nearly $95 NNN per sq. ft. per year.
Boston skyline / photo by Kareya Saleh
As space is being consumed, U.S. biotechnology R&D jobs are growing at their fastest recorded rate. Life sciences is now a leading source of U.S. employment growth, with biotech R&D employment growing faster than even the technology sector. This growth is fueled by historic levels of funding. Venture capital funding posted a new high of over $32 billion for the fiscal year. Seventy life sciences IPOs generated $10.8 billion as of October 2021 – more than double the funding of three years ago – with more than $13 billion projected by the end of 2021. Seventy percent of U.S. venture capital
Electrical Construction
CREATIVE SPACES FOR LEARNING, GROWING AND SUSTAINING
◆
Fire Alarm
◆
funding went to Boston-Cambridge ($10.7 billion), San Francisco Bay Area ($6.7 billion), and San Diego ($5.1 billion). Funding is expected to continue this upward trajectory into 2022. Robust fundamentals moving into 2022 and continued interest from developers, landlords, venture capital companies, and tenants suggest another strong year ahead for the life sciences sector. Suzanne Duca is director of research, and Taylor Stucky is senior field research analyst at CBRE.
Special Projects
◆
Tel-Data/Security Systems
BEST WISHES TO NEW ENGLAND’S REAL ESTATE & CONSTRUCTION COMMUNITIES FOR A BRIGHT 2022! One Congress
Mass + Main
g:
rin
de
n Re
One Seaport Square u Elk c ite rch iA
d fre
an
sM
Ren
deri
ng:
CBT
ts
345 Harrison Avenue
The BEAT
Arch itec ts
ts itec Arch CBT ng: deri Ren Pell i Cla rke Pell i Arc hite cts
; Ow
ner:
and
HYM
UDR
Gro
up
c)
ng:
deri
Ren
Ren
deri
ng:
Perk in
s&
Will
Cambridge Crossing, Parcel G
Pho
Ren
deri
ng:
Elku sM
anfr edi
Arch itec ts
our
ym
Se to:
y Lev
ADD
Inc.
nTe (Sta
100 Pier 4 Boston
15 Necco Street
Member of
ARCHITECTURE | PLANNING | DESIGN INNOVATION 50 Speen Street, Ste 300, Framingham, MA 01701 617-467-3119 MATZCollaborative.com
www.high-profile.com
Photo: © Keitaro Yoshioka
Building on 100 Years of Electrical Construction Excellence 20 Carematrix Drive, Dedham, MA • 617-522-6800 • www.jmbco.com