RALEIGH – Nationwide, the vacancy rate for existing life science lab and research and development spaces has reached a record low, 4.9%, and average asking lease prices have jumped 7.5% between March and September 2021 in the top 12 markets for life sciences, a new report from CBRE says.
Raleigh-Durham appears on CBRE’s list of the top 12 markets for life science space, and the report notes that demand continues to be high in the region.
Demand is resulting in new construction and in updating existing properties for life science use, as well, with 1.2 million square feet of space currently under development or construction in the region, according to the report.
“Life sciences companies collectively sought nearly 23.8 million square feet of new lab space across those 12 markets in this year’s third quarter,” a statement summarizing the report reads, noting that this demand outpaces the amount of lab space under construction in those markets by nearly 2.8 million square feet.
The Triangle is experiencing high demand for life science space, the statement notes, with cell gene therapy companies active and expanding in the market.
Overall, there is more than 6 million square feet of new life sciences inventory in the Triangle market’s pipeline, according to CBRE, and currently boasts the second lowest average asking rates among the other 11 metropolitan areas, with the most recent data showing an average of $29.11 per square foot NNN.
One project is underway in a former shopping center in Raleigh that included a Kroger grocery store, for example.
“We have seen significant interest in our market over the last couple of years from life sciences companies and investors,” said First Vice President Ann-Stewart Patterson with CBRE|Raleigh in a statement.
Life Science Logistics, which is headquartered in Dallas, Texas, announced in September that it would occupy 132,000 square feet of space near the Raleigh-Durham Airport in an $15 million project that could bring 50 to 100 jobs to the area as soon as April 2022, according to John Blackington, the director of business development, told WRAL TechWire in an interview on Monday.
“Raleigh-Durham offers a variety of opportunities such as a lower cost of doing business comparative to other major markets, a strong talent pool sourced from local universities, and a strong pipeline of new product for users,” said Patterson. “The ongoing demand has created a strong hub for life sciences throughout our entire market that we expect to grow.”
Blackington told WRAL TechWire in September that the company’s decision was made without considering or pursuing any economic development grant incentives or programs, noting that it was driven by increasing client demand.
Life science and biotechnology industry jobs are growing at the fastest pace on record, according to the CBRE report, and the Triangle employed some 34,000 industry workers in 2020 with job growth occurring at 5% overall and 6.7% in research and development roles.
And more jobs in the industry are likely, CBRE forecasted in its report, as demand for life science space continues as well.
According to the report, more than 50 single-story buildings with proximity near Research Triangle Park have sold to life science investors “for intended lab conversions in the past two years.”
That includes the sale of a property now known as The Stitch, which was formerly the Morrisville Outlet Mall, becoming rezoned for life science use, which would later become leased by Invitae, WRAL TechWire reported in April 2021.
The Town of Morrisville also recently changed the zoning regulations to allow for life science use of a property owned by Trinity Capital, which spans some 109 acres and when completed will be known as Spark LS, as reported by the News & Observer.
Other investments in the life science industry include ones made by Amgen, Tempus, Grail, among others, plus the $2 billion investment from FUJIFILM Diosynth Biotechnologies, which also announced this week it would hire more workers than originally anticipated, and expand its facilities, again, adding 89,000 square feet in Morrisville. Iqvia also planned to add hundreds of workers to a new 160,000 square foot facility.
Four years after announcing the facility, bluebird bio sold its Durham facility for $110 million in July 2021 to National Resilience, Inc., with the intention of developing a strategic partnership, and some 100 employees of bluebird bio were retained following the transaction, WRAL TechWire reported in July 2021.
In November, Joel S. Marcus, the founder and executive chairman of Alexandria Real Estate Equities, told an audience at a Triangle Business Journal event that life science demand was at an all time high, forecasting a positive future for the Research Triangle and the entire Triangle region, despite the economic disruptions caused by the SARS-CoV-2 pandemic.
Alexandria Real Estate Equities, which operates some 4 million square feet of life science facility space in the Triangle, was at the time in the process of assisting two companies occupy 274,000 total square feet of space, Marcus said.
In September, the company also acquired the former RTP Foundation headquarters site along Davis Drive for $25 million.
Nationally, venture-capital funding for U.S. life sciences companies exceeded $30 billion, the most on record, in the 12 months ended in September 2021, according to the CBRE report, with about $586 million invested in Triangle companies.