Dive brief:
- Life Sciences Construction Deliveries will hit a record in 2024, but sluggish capital markets, high interest rates and slowing economic growth will dampen momentum in 2025, according to a new report from Dallas-based commercial real estate services firm CBRE .
- With a boom of 38 million square feet of new lab space currently under construction likely to outpace demand, the life sciences sector faces a potential oversupply problem by 2025, particularly in major Industry markets: Boston, San Francisco Bay Area and San Diego.
- All three major life sciences construction markets experienced a faster inflow of venture capital financing between 2019 and 2021, leading to this recent increase in new construction. According to the report, CBRE expects life sciences completions in 2024 to surpass record levels in 2023.
Diving knowledge:
According to CBRE, life sciences construction is beginning to grapple with a delicate balance between supply and demand in the lab space as concerns about oversupply begin to hang over the industry.
scientific discovery, fueled by significant public and private capital, has led to a substantial 48% increase in laboratory, research and development space over the past five years. By 2024, CBRE anticipates more than 18 million square feet of lab space completion. This represents a 40% increase over 2023 levels.
Some notable industry wins include:
But the faster flow of venture capital funding into key markets has led to overly ambitious construction plans, contributing to the current construction boom, the report said.
This means that a possible correction could affect the life sciences construction pipeline in 2025. CBRE economists expect the construction pipeline to “fall sharply in 2025,” largely due to economic challenges such as slow capital markets and high interest rates. CBRE noted that potential interest rate cuts in 2024 may trigger additional transactions that have been delayed in recent years due to these factors.
However, the other nine primary markets tracked by CBRE should maintain a more balanced supply and demand balance, the report said, as these regions did not receive as much venture capital funding as the top three markets. These other markets include:
- Philadelphia.
- New Jersey
- Washington, DC- Baltimore.
- Seattle.
- Chicago.
- Raleigh-Durham.
- New York.
- Denver-Boulder.
- Los Angeles.
