Covid drives historic demand for life sciences real estate and these REITs, report says

Research affiliate Sachi Johnson works at Sorrento Therapeutics the place efforts are underway to develop an antibody, STI-1499, to assist in prevention of the coronavirus illness (COVID-19) in San Diego, California, May 22, 2020.

Bing Guan | Reuters

All the basics are aligning for the life sciences business, as Covid-19 accelerates already rising demand for real estate within the sector.

Rents are rising for lab house, vacancies are plunging and analysis and growth, and employment and new growth are increasing additional, due to sturdy enterprise capital funding. 

In the highest life sciences markets there’s at the moment about 13.9 million sq. toes of house below development, however energetic tenant demand is outpacing that, operating at about 14.7 million sq. toes, in accordance with a brand new report from CBRE. Lab-space emptiness is traditionally low at lower than 8% p.c in most high life sciences markets, pushing rents increased.

“The biotech sector may be the single most attractive subsector within commercial real estate today,” stated Spencer Levy, chairman of Americas analysis and senior financial advisor for CBRE. “Not only because of the pandemic, which accelerated many trends, but because of these mega trends which existed prior to it, including an aging demographic, the importance of personalized medicine, and the importance of venture capital in this sector which is only increasing.”

Venture-capital funding within the sector grew to a rolling annual complete of $17.Eight billion within the second quarter. That is the biggest quantity on report, in accordance with a survey by PwC/CB Insights MoneyTree. Employment in U.S. biotechnology analysis and growth professions can be rising at a quick clip and exceeded 220,000 in July.

Large institutional buyers that had been within the 4 main asset courses — house, retail, workplace and industrial — at the moment are trying for alternate options like biotech, information facilities, pupil and senior housing, though these have gotten overwhelmed up.

Biotech is a shiny spot due to the pandemic, however it additionally has a promising future due to all of the enterprise capital within the house, in addition to funding from the National Institutes of Health. There doesn’t look like a lot draw back threat to the sector, until development have been to actually overheat and outpace demand.

Major REITs on this house embody Alexandria Real Estate Equities, Healthpeak Properties, and Ventas.

“Stocks that are in this sector are doing very well. And why is that? Because of the demand for biotech,” stated Levy. “I would make the similar argument about data centers. I would make the same argument about industrial overall, but these subsectors where there’s massive demand and durability through phenomena like work-from-home, gives them a bright present and a long-term future.”

Largest U.S. life sciences real estate markets

1.)    Boston-Cambridge

2.)    San Francisco Bay Area

3.)    San Diego

4.)    Washington-Baltimore

5.)    Raleigh-Durham, N.C.

6.)    New Jersey

7.)    Philadelphia

8.)    New York City

Important to look at are among the largest rising markets within the sector, which embody Pittsburgh, Houston, Austin, Detroit, Phoenix, Dallas-Fort Worth, St. Louis, Atlanta, Minneapolis and Portland, Oregon.


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