Life science real estate demand has, unsurprisingly, accelerated over the past several months. Accordingly, the construction pipeline is full, with more than 36 million square feet on tap for delivery across the 14 largest life science markets, says Newmark senior analyst Daniel Littman in a new report on the sector. The concentration of life science investment volume as a percentage of total office volume reached a record high of 16.4% in 2020, more than double the 2019 figure.
But that development pipeline is unlikely to satisfy the need for new space. For example, tenants in Boston’s Cambridge submarket are facing a two-year wait for available space, according to the Newmark report.
This has led to burgeoning development activity in submarkets outside the densest clusters. It has also meant, Newmark reports, that “institutional investors and landlords across the largest life science clusters are actively reevaluating ‘highest and best use’ for their portfolios and are considering converting their properties to meet immediate life science demand.”
How much of their portfolios can actually make the transition is an open question, though. Littman cites a number of characteristics of successful office-to-life science conversions, and not all properties tick off these boxes.
Among them are neighborhood characteristics. A good neighborhood for a conversion boasts a high concentration of nearby life science, biotechnology and/or pharmaceutical firms.
It should also be anchored by a research university, medical system or research institution, and have access to a large pipeline of STEM graduate degree holders, Littman writes.
Then there are the requirements of the properties themselves. “Low and wide” is better suited to life science conversion than a “tall and skinny” CBD office tower, for instance.
“While HVAC requirements vary depending on the type of laboratory, typically recirculated air is not permitted,” the report states. “Additionally, if a fume hood is present, the lab will require additional replacement air.”
Life science use also calls for redundancy, particularly for electric and critical systems in the case of power outages or natural disasters. This may include features such as emergency generators and an uninterruptible power system.
Other prominent features include: self-closing doors, hand washing sinks, laboratory benches, autoclaves, powered air purifying respirators, exhaust HEPA filters, and effluent decontamination systems.
Given all of these requirements, specialty life science developers and operators have several advantages in the sector, including experience with the highly technical components of life science development. However, Littman observes, “it is expected more institutional players will enter the life science space.
“In addition to outright acquisitions, institutional groups will likely expand their life science exposure by creating life science platforms, like Tishman Speyer and Bellco Capital’s Breakthrough Properties, or by strategic joint ventures, minority interest transactions and/or recapitalizations of existing life science product.”
Paul Bubny serves as Senior Content Director for Connect Commercial Real Estate, a role to which he brings 13-plus years’ experience covering the commercial real estate industry and 30-plus years in business-to-business journalism.
Email the Author
Connect CRE reaches the top commercial real estate players nationwide and across all property types, offering you a variety of ways to showcase your team, your expertise and your brand to CRE decision makers.
The home for CRE news and everything you need to stay informed on deals, trends, and transactions, providing a platform to get your brand in front of your target audience.
Reaching over 150,000 inboxes across the nation every day, Connect’s Daily News emails provide advertising opportunities specific to your market.
Focus your advertising on emails dedicated to your property sector and stay visible to current and potential clients.
Position your team as experts in your field with content created by Connect’s editorial team and published on Connect’s news emails. Showcase your intelligence and broaden your reach.