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| Maddie Holmes |
CHICAGO, Sept. 19, 2023 – The life sciences commercial real estate market has undergone a reset this year but is well positioned to be the comeback kid as capital sources grow more confident and green shoots emerge, according to JLL’s 2023 Life Sciences Industry and Real Estate Perspective.
The report explores the state of the industry and identifies trends – and opportunities – for current and future lab space demand, along with the annual ranking of the top innovation communities.
Additionally, JLL Research has added two new cluster rankings that reveal the five top markets for both medical technology (medtech) and biomanufacturing.
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| Travis McCready |
Though current industry fundaments have slowed, demand is well positioned to rebound. The top 20 venture capital (VC) firms focused on life sciences are waiting to deploy record amounts of capital.
They’ve raised over $22 billion collectively since 2021 that will soon find its way into growing startups. With ample funds to close deals, the rest of 2023 will likely see mega M&A deals for companies with top-notch science deep into their clinical trials.
“The relationship between funding rounds and startup expansion are symbiotic, driving growth throughout the biotech sector, and, while the public markets have slightly cooled off, private capital remains hopeful with record dry powder from top VCs focused on life sciences,” said Travis McCready, Head of Life Sciences, Americas Markets, JLL.
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| Kevin Wayer |
The supply landscape shifted dramatically over the past 18 months, proving how sensitive the biotech sector is to microeconomic forces. At the end of 2021, demand across the top eight markets in the U.S. was more than 25 million square feet. By mid-2023, that had fallen to just over 10 million square feet.
Still, opportunities exist for tenants and landlords. A bright spot is small biotech occupiers that have a critical need for bench space. Throughout 2023, they have been the largest seeker of new space, as opposed to mid- to late-stage companies that can pause expansion plans and operate within their current space. Sub-30,000 square foot tenants accounted for 82% of deals signed in the first half of 2023, up from the previous average of 65%.
“Established pharmaceutical companies and biotechs have the chance to strategically select long-term markets for R&D growth,” said Kevin Wayer, President, Life Sciences, Work Dynamics Division, JLL. “It’s the perfect opportunity for larger companies to analyze their real estate portfolios and facilities and make informed location choices, as well as for growing companies and startups seeking to scale. It marks a new era of strategic decision-making in the life sciences industry.”
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| Mark Bruso |
The top life sciences innovation communities
JLL Research looked at the three main components of what comprises a successful life sciences ecosystem, which are access to talent, funding that leads to commercialization and real estate infrastructure that supports current activities and further growth.
Once again, Greater Boston (1), the San Francisco Bay Area (2) and San Diego (3) reign supreme as the top three markets for life sciences commercial real estate in the U.S. It’s taken decades for these clusters to mature and evolve. Greater DC and Baltimore, Raleigh-Durham, New Jersey, New York City, Boulder and the Northwest Corridor, Philadelphia and Seattle round out the top 10, respectively.
“The elements that are mission critical for young startups to grow are numerous, and, while the top 10 markets provide what is necessary for the discovery and clinical stages and house the highest concentration of VCs with deep industry knowledge, new markets like Los Angeles, Chicago and Houston are showing signs of significant growth and potential,” added Maddie Holmes, Senior Research Analyst, Life Sciences Industry Insight and Advisory, JLL.
“These emerging clusters are attracting investments from universities, institutions, governments and industry players who recognize the importance of fostering breakthrough scientific developments.”
Orange County, CA beach line
New rankings: Medtech and biomanufacturing markets
The life sciences industry is more than the development of new therapeutics; it involves other life-impacting scientific endeavors such as medical devices and technologies and biomanufacturing, which are key drivers of the overall industry’s evolution.
The long-term growth prospects for both medtech and biomanufacturing are exceptional, and, given the significant capital investments and the pivotal role of manufacturing operations in a company's success, choosing locations and sites with long-term value and optimal deployment is imperative.
Through complex analysis focused on variables specific to medtech and biomanufacturing, JLL Research uncovered the top five markets that show strength in these specific subsectors. Skilled talent and its growing demand, innovation measured by clinical trials and venture capital funding, and industry performance and concentration were among the evaluated factors.
For MedTech, Orange County, Calif., is the top-ranked market due to its presence of renowned academic and research institutions, support of the local government and industry associations and strong VC presence. Minneapolis-Saint Paul (2), the San Francisco Bay Area (3), Greater Boston (4) and Salt Lake City (5) comprise the remaining top clusters.
Raleigh-Durham, NC
When it comes to the top biomanufacturing market, look no further than established juggernaut Raleigh-Durham. The area is uniquely positioned due to the history of large-scale biomanufacturing in and around Research Triangle Park and the outlying counties, large talent pool and three tier-one universities. Philadelphia (2), New Jersey (3), Greater Boston (4) and the San Francisco Bay Area (5) make up the top five.
“Medical device and testing companies represent a huge swath of the life sciences landscape in the U.S., and biomanufacturing is a critical piece of a therapeutic company’s lifecycle” said Mark Bruso, Research Director, New England and U.S. Life Sciences, JLL.
“Markets that specialize in these fields and have high concentrations of talent are not necessarily the same as traditional R&D hubs, so it was important for us to shine a light on the strongest medtech and biomanufacturing hubs in the country for the first time.”
JLL's vision is to reimagine the world of real estate, creating, finding, locating and operating safe and amazing spaces. JLL’s Life Sciences team of 3,000+ experienced professionals are a safe pair of hands to help biotechnology, pharmaceutical, medical devices organizations, investors and developers achieve their ambitions.
JLL brings deep understanding of location analytics, project management, research advisory, financial incentives, transaction management, capital markets, real estate strategy and technology, facilities management, regulatory compliance and quality, and more.
Our solutions help fuel innovation, enhance efficiency, improve financial performance and attract and retain top talent. Our team is trained and certified to operate within office and critical, regulated environments of lab and manufacturing space. To learn more, visit us.jll.com/lifesciences.
For more news, videos and research resources on JLL, please visit JLL’s newsroom.
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