While the office market grapples with the Delta variant, life science labs are enjoying a boom. In fact, many new labs are actually conversions from offices.
The life science industry saw record investments in North America last year, bringing in $70 billion of capital investments. In six large industry markets, 20 percent of laboratory spaces being constructed are office conversions, the New York Times reported. Investors have put more than $10 billion into life science real estate this year alone.
Asking rents for laboratory spaces are also soaring, easily outpacing the increase in asking rents for office space. Asking rents for lab space in Chicago and San Francisco have shot up more than 60 percent since 2016.
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CBRE reports there were a record 1.9 million life science workers in the United States as of April, and many of scientists’ activities are experiments and projects that need lab space, sparing those landlords from the work-from-home phenomenon.
According to Newmark, the need for laboratory space has grown 34 percent in just a year.
Converting offices to labs comes with its own set of challenges. Tenants generally need more electricity and water, loading zones and specific interior spaces. Some spaces also need special ventilation and upgraded electrical facilities, which make office conversions trickier than constructing new buildings.
The cities seeing the most office-to-lab conversions are Boston, San Francisco and San Diego.
[NYT] — Holden Walter-Warner