Unprecedented demand for life sciences real estate has prices soaring in markets across the country.
Pricing for life science and R&D properties averaged $585 per square foot in the first half of this year, up 50 percent over last year’s average, according to a new report from Newmark.
That increase was partially driven by a handful of major deals. In March, prices peaked at $750 per square foot after Blackstone paid $3.45 billion, or more than $1,800 per square foot, for a lab portfolio located in and around Cambridge, Massachusetts.
Unlike other sectors, life sciences generally did not cater to remote work during the pandemic, strengthening demand for lab space. Additionally, increased research efforts, pandemic-related or otherwise, caused companies to expand at a time when many office tenants were consolidating.
There’s additional interest in life sciences moving forward. After a record $33.1 billion of venture capital funding was invested in the sector last year, funding is poised to blow past that figure this year, having already reached $26.7 billion in the first six months of 2021 alone.
In New York City, which already has more than 2 million square feet of life science space, another 3 million square feet has been proposed. In the San Francisco Bay Area, where there is 31 million square feet, another nearly 18 million square feet has been proposed. And in Los Angeles, where there is 11 million square feet, an additional 453,000 has been proposed.
Still, renovations can be difficult given zoning prerequisites and other fitting issues.