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<\/a>Robert Albro, CIO & Partner, King Street Properties<\/p><\/div>\n
Private equity capital, as well as public funding from such organizations as the National Institutes of Health, is pumping billions of dollars into life science research, development and manufacturing. After a record $26 billion in venture capital in 2020, life science investment soared to $39 billion last year, according to J.P. Morgan Chase\u2019s 2022 Annual Outlook<\/a> on the industry.<\/p>\n Even before this recent surge, <\/strong>life sciences had been steadily expanding for years. \u201cLong before the pandemic, this was an industry that had been growing,\u201d said Robert Albro, a partner at King Street Properties, one of the biggest owners and developers of life science properties in the U.S.<\/p>\n Over the past decade, the development of CRISPR\u2014the acronym for a revolutionary gene-editing technology\u2014kicked off a boom that is still going strong. In just a decade, the number of products related to gene and cell therapy soared from zero to 450, while Series A companies are still forming constantly, an important market indicator. Developing therapies has a long timeline; it can take 20 years to go from idea to finished product.<\/p>\n Philadelphia continues to expand its life science footprint with such projects as the $365 million research and manufacturing facility planned by Longfellow Real Estate Partners and the University of Pennsylvania. Image courtesy of Longfellow Real Estate Partners<\/p><\/div>\n In response to these trends, large-scale, state-of-the-art projects are sprouting up across the country. According to a recent Cushman & Wakefield report, 17 million square feet are under construction in the top 10 life sciences markets.<\/p>\n Matt Gardner, Americas Life Sciences Leader, CBRE<\/p><\/div>\n Boston, San Diego, and the Bay Area still rank as the most powerful hubs, but they have no shortage of competitors. \u201cThere are at least a dozen emerging markets to consider, probably more,\u201d said Matt Gardner, who leads CBRE\u2019s life science division in the U.S. Philadelphia and New Jersey have strong life science industries with long histories, while the Raleigh-Durham research triangle, Seattle, Boulder, Colo., Chicago, Atlanta and Houston are all showing growth. The connecting thread among these geographically diverse markets: a strong university presence, major medical facilities and a vibrant urban culture.<\/p>\n In New York City, which has long aspired to status as a biotech hub, a growing cluster is generating buzz. Long Island City, the Queens neighborhood where Amazon first announced and then cancelled plans for a second headquarters, is emerging as a favorite.<\/p>\n The enclave is an attractive location in no small part because Midtown Manhattan is a five-minute, one-stop subway ride away. And in contrast to its neighbor, Long Island City offers plenty of space to build. \u201cLife science got to Long Island City before Amazon but has real staying power. A lot of the projects came about after Amazon pulled out,\u201d said Bill Harvey, a Manhattan-based managing director at Newmark.<\/p>\n Harvey serves as the leasing broker for the 275,000-square-foot Innolabs, which is owned by King Street Properties and GFP and welcomed its first tenants last fall. Nearby, Boston-based Longfellow Real Estate Partners and Sculptor Real Estate are developing a 210,000-square-foot facility dubbed 43TEN. The $120 million conversion project is slated to open in the second quarter of 2023.<\/p>\n Still other projects are in the works, including a pair by Alexandria Real Estate Equities, the largest life sciences owner in the country. While these facilities are all adaptive reuse projects, the opportunity exists for ground-up life science development, Harvey said.<\/p>\n Kate McNamara, Senior Vice President, PIDC<\/p><\/div>\n Elsewhere in the Northeast, Philadelphia is a rising life science leader. The city\u2019s life science talent pool is ranked fourth in the country by Cushman & Wakefield, behind only Boston, the San Francisco Bay Area and the New York City-New Jersey region.<\/p>\n \u201cThere are so many companies looking for space, and we really had to scramble in Philly,\u201d said Kate McNamara, head of real estate planning and development at Philadelphia\u2019s Navy Yard for PIDC Philadelphia, the city\u2019s economic development agency. Much of the 1,200-acre Navy Yard is being redeveloped to add new industries, and life sciences accounts for 11 million square feet of under-construction lab and manufacturing space on the campus.<\/p>\n McNamara credited Philadelphia\u2019s rise as a life sciences hub to the cluster of top-tier research hospitals in the city, including the Children\u2019s Hospital of Philadelphia (CHOP) and the foundational center for gene and cell therapy at the University of Pennsylvania.<\/p>\n \u201cA lot of companies are spinning out of the University of Pennsylvania and CHOP and couldn\u2019t put together enough space,\u201d she said. In June, the university and Longfellow announced a $365 million, 455,000-square-foot development at Pennovation Works, a 23-acre campus adjacent to Penn\u2019s campus.<\/p>\n A joint development of King Street Properties and GFP, Innolabs has more than 250,000 square feet of lab space for biotech tenants in Long Island City, part of Queens, N.Y. Image courtesy of King Street Properties and GFP<\/p><\/div>\n With so much demand, product and investment capital flooding real estate\u2019s life sciences sector, that begs a crucial question: Is a bubble forming?<\/p>\n The combination of factors suggests the possibility. All real estate sectors, no matter how well-performing, are subject to business cycles and financial market shocks, and industry leaders don\u2019t rule out periods of instability for the sector. And as is often the case with fast-growing economic sectors, a shortage of professionals<\/a> with specialized skills is a real concern.<\/p>\n As a result, industry insiders don\u2019t rule out the possibility of instability or disruption. Yet they also advise that such unexpected events should be seen in context. \u201cWill there be short-term turbulence? Possibly, but the fundamentals and demand are still there,\u201d Albro said.<\/p>\n CBRE\u2019s Gardner, a 30-year life science veteran, sees no bubble forming but suggests that a round of consolidation is possible: \u201cWe go through cycles in biotech like any other sector,\u201d he said.<\/p>\n Interest rate hikes may cause the market to realign, and developers will need to use caution to make sure their projects and investments are sound, McNamara noted. That said, she added, signs point to continued growth for life science companies and the demand for more supply.<\/p>\n By all indications, pent-up demand for new research, innovation and cures will require life science facilities for years to come.<\/p>\n \u201cEven if we still cure things at a rapid pace, given human nature, we will not get 1,000 of 10,000 diseases cured and say, \u2018That\u2019s enough,\u2019\u201d Albro said. \u201cWe\u2019re going to keep evolving, and we think life science real estate will play an important role in that. Even in the current vibrant market, life sciences still represent only a fraction of the nation\u2019s office inventory\u2014and that leaves plenty of room for growth.”<\/p>\n![\"\"](\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2022\/06\/longfellow_rendering_collage-full.jpg\")
<\/a>Growing markets<\/h2>\n
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<\/a>The diagnosis<\/h2>\n
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