Life Science Investment Has Cooled but Demand for Lab Space Is Strong

By Holly Dutton

The life science sector has been one of the best-performing real estate segments over the past several years, driven by scientific advances that have led to a strong pipeline of startup formation and venture capital funding. But it’s now an industry that has slowed over the last year, as investment capital has dried up considerably. Despite a drawback in investment in the life sciences space, demand for lab space has remained solid. In major cities around the country, developers are looking to build new life science properties in order to meet the strong demand. As of May, more than 120 developments with at least some life science components are under construction nationwide, according to a report from CommercialEdge. Most of that new space in the works is happening in the country’s largest life science markets, including Boston, the San Francisco Bay Area, and San Diego. But other markets are gaining momentum as well—major life science developments are currently being built in areas like suburban New Jersey and metro Atlanta. 

The continued demand and development of lab space is good news for the life sciences and biotech industries, which have been through a lot this year. The collapse of Silicon Valley Bank in March sent shockwaves through the industry. Close to half of all venture-backed tech and life science companies banked with SVB, with 12 percent of the bank’s $173 billion in deposits coming from the industry, according to Axios. Many in the space worried about what the bank’s closure could mean in the long-term, something that is still unclear. For now, city officials in the country’s major biotech hubs are launching initiatives to help boost the industry. Earlier this month, Boston Mayor Michelle Wu announced a $4 million grant application program to add 1,000 new biotech and life sciences workers in the city by 2025. And in San Francisco, Mayor London Breed wants to make it easier for developers to convert empty offices into life sciences space. There will likely be some bumps ahead for the industry, but as we have seen, it’s a sector that has proven to be resilient through tough times.

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