Research Associate Sachi Johnson works at Sorrento Therapeutics, where efforts are currently underway to develop an antibody, STI-1499, for the prevention of coronavirus disease (COVID-19) in San Diego, California on May 22, 2020.
Bing Guan | Reuters
All the basics are in line with the life science industry as Covid-19 is accelerating the already growing demand for real estate in this sector.
Laboratory rents are rising, vacancies are falling and research and development is falling, and employment and new development continue to grow thanks to strong venture capital investments.
There is currently around 13.9 million square feet under construction in the top life science markets, but active tenant demand exceeds that at around 14.7 million square feet, according to a new report from CBRE. Laboratory vacancy rates are historically low at less than 8% in most top life science markets, which is driving rents high.
"The biotech sector may be the most attractive sub-sector for commercial real estate today," said Spencer Levy, chairman of Americas Research and senior economic advisor at CBRE. "Not just because of the pandemic that accelerated many trends, but because of these megatrends that pre-existed, including an aging population, the importance of personalized medicine, and the importance of venture capital in this sector that is only growing." "
Venture capital investments in this sector grew to rolling annual revenues of $ 17.8 billion in the second quarter. According to a PwC / CB Insights MoneyTree survey, this is the largest amount registered. U.S. biotechnology research and development employment is also growing rapidly, topping 220,000 in July.
Large institutional investors who have worked in the four major asset classes – residential, retail, office and industrial – are now looking for alternatives such as biotechnology, data centers, student and senior housing, although these have been slumped.
Biotech is a bright spot because of the pandemic, but it also has a bright future because of all the venture capital in space and funding from the National Institutes of Health. There doesn't seem to be much downside risk to the sector unless construction really overheats and exceeds demand.
Key REITs in this space include Alexandria Real Estate Equities, Healthpeak Properties and Ventas.
"Stocks in this sector are doing very well. And why is that? Because of the demand for biotechnology," Levy said. "I would make the same argument about data centers. I would make the same argument about the industry as a whole, but these subsectors, where there is massive demand and longevity through phenomena like work-from-home, give them a bright present and a long-term Future. "
Largest US life sciences real estate markets
2.) San Francisco Bay Area
3.) San Diego
5.) Raleigh-Durham, N.C.
6.) New Jersey
8.) New York City
Important to watch out for are some of the sector's largest emerging markets including Pittsburgh, Houston, Austin, Detroit, Phoenix, Dallas-Fort Worth, St. Louis, Atlanta, Minneapolis, and Portland, Oregon.