Investors pour $10B into life sciences real estate this year

Rising rents have not been slowed by pandemic

Asking rents for labs or research buildings have been on the rise (iStock)
Asking rents for labs or research buildings have been on the rise (iStock)

The future of the office sector remains largely uncertain at this point post-pandemic, but there’s one segment that continues to see huge gains.

Investors have spent more than $10 billion on buying life sciences buildings this year, Bloomberg News reported, citing data from Real Capital Analytics. That’s about 4 percent of all global commercial real estate transactions through May, twice what was recorded at the same time last year.

And those numbers don’t even include new life-science developments, such as Boston’s massive Fenway Center, which broke ground in 2017.

Last year, life science building sales and refinancings totaled about $25 billion, a massive jump from $9 billion in 2019. In one huge deal, Blackstone received a $6.5 billion profit from refinancing BioMed Realty Trust, the largest life science offices REIT in the U.S.

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Some of this can be attributed to the push to develop Covid-19 vaccines. But the sector was booming even before then: In some area where new projects have popped up — such as San Diego or Boston — asking rents for labs or research buildings have been on the rise. Rents in and around San Francisco have increased 90 percent in the past five years, while conventional office space has seen rents rise just 20 percent over the same period.

“The pandemic only amplified the demand growth, but it’s a trend we think will continue for years,” Nadeem Meghji, head of Blackstone’s Real Estate Americas group, told Bloomberg News.

Still, there’s some hesitancy surrounding the sector. Construction can cost 15 percent more than conventional offices and a risk of an oversupply remains possible as developers rush to break ground.

[Bloomberg News] — Sasha Jones