Opportunities Abound for Developers in the Life Sciences Market

September 1, 2021

Courtney Skunda Hall

Business Development

The recent global pandemic has touched every part of the human experience, from our personal lives to business and commerce. This past year and a half has presented challenges to businesses unlike anything we have seen in our lifetime. BE&K Building Group is fortunate to work in niche markets, many which are deemed essential businesses providing services in response to the pandemic.

Life Sciences, one of BE&K’s leading Centers of Excellence, by nature has traditionally been recession resilient, however, the pharmaceutical response required to address COVID-19 has produced exponential growth that no one was prepared for in this sector. While many Americans were forced to leave their offices under stay-at-home orders, those in this sector worked and collaborated tirelessly to develop a vaccine response to the virus. At the same time, these companies had to continue to advance their research on other critical response pipelines to develop treatments for cancer, heart disease, and many other diseases that plague humanity. This increased demand amid a pandemic climate created a perfect storm that has produced some major road bumps for the life sciences real estate market.

Before COVID-19 hit, a record $70 billion in capital was invested in life sciences; a 93% increase from 2018. Halfway through 2021, the market is looking to surpass that number with an expected $90-$100 billion in capital raised for this sector. This increased investment, driven by the global need, has created several challenges for the life sciences real estate market:

  1. Many areas of the United States are already challenged to provide ready and available life sciences real estate. This demand has naturally resulted in rising lease rates. Traditional developers have had to proceed on a speculative basis to meet this demand.
  2. The above is in direct contrast to the national office/retail sector where the pandemic has negatively impacted rates and vacancy rates remain at about 15% as of the first quarter of 2021.
  3. Lab space rental rates now have a national average of about $43.80 (Triple Net), which is significantly more than the $34.45 average for office space.

These challenges lead many traditional office and industrial developers to contemplate how to enter the life sciences space, either temporarily or permanently, to reposition their assets. Developers who have yet to dip their toes into this market should know that although life sciences spaces are highly regulated, entering the market remains entirely achievable. For interested developers, some initial questions and topics to consider include:

General:

For Biomanufacturing Space:

The above are just a few of the questions that interested developers must consider in repurposing assets for the life sciences market that is currently experiencing exponential growth.

BE&K is here to help guide you through this process. Are you interested in converting or repositioning select real estate assets to meet the growing life sciences demand? If so, we are uniquely positioned to assist by offering consulting services to help you determine if your property is a possible candidate. We have put in place more than $2 billion of life sciences projects throughout the United States, including new construction, expansions, retrofits, and renovations. In addition, BE&K has constructed more than 2 million sf of laboratory and associated support space over the past 20 years. We have the experts on hand to help you determine if your space is viable for life sciences repurposing or to assist in developing new life sciences core/shell space.

For more information, please contact Courtney Skunda Hall at Courtney.Hall@bekbg.com.