Economy Watch: Life Sciences Industy Churns
- Sep 29, 2016
The life sciences industry is going through a wave of consolidation and acquisitions, as well as rapid growth, and that’s having a strong impact–with both positive and negative elements–on the real estate markets where life science businesses tend to cluster. That’s according to JLL’st latest annual life sciences outlook report, which was released this week.
The report explains that the hunt is on for acquisition targets in the industry. As multiple revenue growth-inhibiting obstacles arise, corporations look for more strategic ways to streamline business, and that can mean expanding, relocating or leaving space. Across the board, v
acancy is low and landlords are adapting, either by building specialized space fit for these firms, or by converting office-to-lab space.
JLL cites New Jersey as a prime example of this kind of activity, with its many suburban life science campuses. GSK Consumer Healthcare, formed by the merger of GlaxoSmithKline’s and Novartis’ consumer health care businesses, recently grabbed 150,000 square feet in central NJ. At the same time, M&A activity in the market has resulted in a surplus of vacant lab space. At the former Bell Labs complex in Holmdel, for instance, there’s 2 million square feet of such vacant space, which is now being rebranded for other uses.
In the top subrmarkets nationwide for life science space, vacancy is quite low and rents are climbing. In the North County submarket in the Bay Area, and in East Cambridge in metro Boston, there’s practically no space available, with vacancies of 0.5 percent and 0.8 percent, respectively. Other tight life science markets include I-287 West (Westchester County), Torrey Pines (San Diego) and Lake Union (Seattle). Developers want to build more lab space in all these markets, but they have high barriers to entry and the cost of construction is rising.
Meanwhile, secondary bioscience markets such as Denver are seeing an uptick in leasing activity. Eventually, the report posited, these markets will also become supply-constrained as the industry expands and continues its M&A activity.