Doors of opportunity emerge outside the traditional life sciences hubs

CHICAGO, Sept. 15, 2021 - The life sciences sector is attracting real estate capital from around the globe, with investors targeting legacy markets where industry clusters are strongest and where a density of lab properties already exist. But, strong buyer competition in key clusters, coupled with emerging growth in secondary markets, is driving investment and development activity beyond the traditional geographies.

JLL Life Sciences just released its 2021 Life Sciences Real Estate Outlook, which aims to identify the fundamental industry trends driving demand for lab space now and into the future. As core cluster markets generate outsized demand, industry growth and productivity are also being driven by the adoption of new technologies and rapid advancements in innovation.

'The life sciences industry has been investing in lab space and lab R&D for years, and new capital players continue to enter the space. Not only is venture capital fueling new company formation faster than ever before, new real estate capital players are battling for the best-located assets or development sites in hopes of tapping into this new wave of demand,' said Travis McCready, Executive Managing Director and National Markets Practice Leader, JLL Life Sciences. 'Historically, however, infrastructure and innovation investment in advanced biomanufacturing has lagged, and that will be the next hurdle as more companies grow to scale and enter into clinical trials at an accelerated rate.'

For years, the major clusters of Boston, the San Francisco Bay Area and San Diego have led the way for the industry, and for the associated lab real estate market.

'Only a handful of markets can compete with Boston, the indisputable center of the life sciences world, so this year we've benchmarked market opportunity relative to talent, industry depth, innovation, and lab real estate dynamics to provide a more robust market comparison,' said Amber Schiada, Senior Director, Insight & Advisory, JLL.

Communities that have great research capabilities, access to capital, workforce training, PhDs, respect for science in the workforce, and lower costs are now more competitive:

• Raleigh-Durham moved up one position in 2021. Raleigh-Durham's legacy of strong research institutions, competitive talent pipeline, existing industry depth, and a viable commercial lab market can support greater industry expansion.
• The Greater New York-New Jersey cluster is another top market, but the talent pool is not quite as deep, although it's quite broad given its scale. Innovation is the driver here, capturing the third-largest volume of venture capital dollars among all markets in the U.S.
• While the Greater DC-Mid-Atlantic cluster attracts less start-up capital relative to peers, its depth of talent, semi-mature lab real estate market, breadth of institutional research, and presence of key federal agencies like the NIH in the region all have propelled further development of its life sciences ecosystem.
• Los Angeles has the advantage of proximity to San Diego and easy access to the San Francisco Bay Area, the second and third-ranked clusters. What Los Angeles lacks in a centralized cluster, it makes up for with talent (particularly in engineering and the computer sciences), innovation, and institutional presence. Los Angeles has an opportunity to capture some of the overflow demand from its northern and southern neighbors.
• Denver-Boulder, Philadelphia, and Seattle-Bellevue round out the top 10; all score relatively well across the components, with room to grow. Denver-Boulder is a new entrant to the top life sciences cluster list, driven by an extraordinary rise of lab development, venture investment, and start-up activity emerging out of Boulder.

Across the leading and emerging clusters innovation is robust, with no slowdown in sight. Currently, there are several thousand known diseases in the world but therapies are only available for approximately 500.

'Technology and productivity gains in R&D efforts and, at the most basic level, our human desire to live long lives, will drive the industry forward,' said Roger Humphrey, Division President, JLL Life Sciences. 'We're only at the beginning of what's possible in drug discovery and delivery through greater adoption of technology.'

Also driving life sciences real estate demand is worldwide pharmaceutical sales, which are predicted to escalate at a compound annual rate of 7.4 percent through 2026, to nearly $1.4 trillion in sales. This is a significant increase in the next six years compared with the previous six when sales grew at a compound annual rate of just 2.9 percent. Growth is largely expected from accelerated sales of biotechnology-driven therapeutics, growing at a compound annual rate of 10.1 percent through 2026, reflecting the growing share of biologics that have been made possible through advances in the industry.

To view JLL's new 2021 cluster rankings, read the full report.