Life Science Reigns Amidst Slowing Development in Office Market
Venture Capital funding in 2023 has exhibited a more cautious approach than in recent years, primarily due to the high costs of capital. But while the demand for office space has taken a hit, the Life Science sector still shines as a prominent player in commercial real estate. Yardi’s Commercial Edge platform highlights that Life Science comprises almost a third of the current office development pipeline, with cities like Boston, San Diego, and the Bay Area demonstrating remarkable resilience and optimism in that sector, unlike traditional office spaces.
Notably, the Life Science market has exhibited significant growth, with over 23 million square feet of lab space going under construction since 2022, and accounting for more than a quarter of new projects nationally. Despite a 58% decrease in Life Science leasing during Q3 as reported by GlobeSt, the sector remains robust. This resilience can be primarily attributed to the fact that while remote and hybrid work impact traditional offices, the nature of research work done in lab space makes it virtually impossible to replicate from home. The average life science property costs are $770 PSF today, , nearly four times the national average for all office buildings at $196 PSFt, The value of these buildings remain essential for their users and their value reflects that.
Original Publication Credit: Globe St.
Image Credit: Genesis San Diego