After a record-setting year in 2021, the life sciences sector is showing signs of slowing. According to CBRE’s Q3 U.S. Life Sciences Report, available space surpassed demand by 13.5 million square feet. That’s in contrast to a record-setting 2021 for the industry, when space was in high demand from life sciences companies. Vacancy rates nationwide rose over the quarter to 5.3 percent, while venture capital to the industry dropped 29 percent since the last quarter, and 42 percent since the same time period last year.
While certain industry metrics are starting to plateau, others showed notable gains. Job growth in life sciences ticked up 5.4 percent year-over-year in the third quarter, while average asking rents in the country’s top 12 markets rose nearly 7 percent since the last quarter. Under-construction lab space increased by 4.9 million square feet quarter-over-quarter to 37.4 million square feet. Of the space, 88 percent was being built on spec and more than 26 percent had been pre-leased. Lab space under construction is primarily concentrated in the largest life sciences markets: Boston/Cambridge, the San Francisco Bay Area, San Diego, and Philadelphia. Venture capital funding for life sciences companies likely peaked in 2021, according to CBRE, and with fundraising weakening this year, the firm expects average funding to continue to fall.
The life sciences boom of the last few years was bolstered by the COVID-19 pandemic, but as CBRE’s latest market report and others have shown, that streak has ended and numbers are returning to pre-pandemic levels. The sector is still experiencing a lot of momentum, especially with gene editing therapies expected to continue to spur the creation of new companies and drive demand for space for years to come. While demand and venture capital funding has slowed, the figures are still well above pre-pandemic numbers, and that’s a good reason for life sciences investors and developers to be optimistic going forward.