2021 Year End

Driven in part by the COVID-19 pandemic, demand continues to outpace supply. In the third quarter of 2021 alone, US life science companies were looking for 24 million square feet of new real estate according to research by CBRE. Furthermore, the same research states that only 21 million square feet of spec lab space is scheduled for delivery in 2022. National vacancy is at 4.9% with major markets in the space such as Boston and NYC at a stark vacancy of 1.1% across the board. CBRE’s top 12 markets in 2021 shows an average rent growth rate of 7.5%.

However, it’s inflated designation in the market has much more to do than with the COVID-19 pandemic crisis. LSRE has strong demand drivers such as the continued commercialization and development of pharmaceuticals and devices. World drug sales compound growth rate (3.5%) has outpaced the national GDP growth rate (1.5%) over equal time periods. Other drivers include advances in technology such as genome sequencing used in mRNA vaccines, as well as America’s aging population continuing to grow. This keeps pace with venture capital which, according to Newmark’s 2021 Mid-Year Life Sciences Report, raised a record amount of 26.1 billion for life sciences companies in 6 months, just shy of the 33.1 billion raised in 2020.

What we expect for 2022 is for demand to remain strong by biotech companies for space, and cap rates to remain low. However, there is still a lot of upside in rent growth. LSRE has a strong and growing investor base creating more competition which has led – and will continue to lead – to record prices.