VC funding is turbocharging a building boom of new lab space, with 31M SF under development in emerging and established markets.
A flood of venture capital is turbocharging a building boom for new life-sciences lab space as biotech and pharma players race to develop new life-saving treatments using the genomics breakthrough that produced the leading Covid-19 vaccines.
A record 31 million SF of life-science space was under development during the fourth quarter of 2021, nearly doubling the 19 million SF reported during the first quarter of last year, according to CBRE. The Q4 total includes new construction and conversions of offices into lab space.
During the first two months of the new year there has been a steady drumbeat of new mega-projects to develop lab space, including this week’s announcement that Ensemble/Mosaic and Oxford Properties Group are joining forces in a $1.5-billion deal to develop up to 3 million SF of life science properties at the Navy Yard in Philadelphia.
On Feb. 22, Eli Lilly announced plans to develop a $700-million Lilly Institute for Genetic Medicine in Boston’s Seaport District. Eli Lilly will lease 334,000 SF of a new 12-story building to be co-developed and operated by Alexandria Real Estate Equities, which primarily owns and develops life-sciences properties.
A tidal wave of venture capital has been flowing into Boston, which has long been the leading global hub for life sciences.
Colliers International estimates that life-sciences projects under development or in planning will expand the sector in greater Boston to more than 60 million SF by the end of this decade.
Boston has attracted nearly $20 billion in VC investments for life sciences projects in the past two years, according to Crunchbase.
Overall, VC funding of life sciences R&D has tripled over the past five years, with more than $8 billion in new VC funding for life sciences in Q4 2021, according to CBRE. Boston-based RA Capital Management heads the national list of VC investors in life sciences, pouring $6.1B into the sector in 2021.
While Boston’s traditional hegemony in life sciences is shared with San Francisco and San Diego—California is known as “the birthplace of biotech”—these biotech powerhouses are facing strong competition from established life sciences sectors in Philadelphia, Raleigh-Durham, Northern NJ and Bethesda, MD as well as rising life-sciences hubs in Los Angeles, Houston, Denver-Boulder, Seattle-Bellevue, Chicago and Minneapolis-St. Paul.
Houston-based developer Hines recently announced that it would invest “billions of dollars” in life sciences projects in the next 24 months, focusing on non-traditional markets including Houston, Washington, DC and Nashville.
A spate of adaptive reuse projects involving the conversion of office buildings into lab space is an indicator of the burgeoning demand for life sciences facilities. Converting an office building into a life sciences lab is more expensive than other reuse projects due to the special systems needed for ventilation, cooling and moving equipment.
Longfellow Real Estate Partners, the largest privately owned commercial developer of life sciences projects in the US, last month announced the purchase of a seven-story office building in Long Island City, NY that Longfellow will convert into a 208,000 SF life sciences lab.
The $155-million transaction was Longfellow’s first acquisition in the New York City market.
Genomics research was driving life-sciences growth before the pandemic struck, but the successful development of mRNA vaccines is generating huge investments in R&D for new genetically engineered treatments for cancer, diabetes and other life-threatening ailments.
The Pfizer/BioNTech and Moderna vaccines were created using “messenger” RNA (mRNA), nucleic acid containing genetically engineered nanoparticles of the virus that “instruct” human cells to manufacture antibodies that fight off COVID-19.
This technology has created a platform for the rapid development of new molecular-level treatments that are expected to revolutionize the development of drugs.