JLL Life Sciences Outlook
1
2016 U.S. Cluster rankings
Rank Cluster Weighted score
1 Greater Boston 87.5
2 San Francisco Bay Area 75.2
3 Raleigh-Durham 60.7
4 San Diego 58.3
5 Seattle-Bellevue 56.3
6 Maryland Suburbs / Metro D.C. 53.2
7 Philadelphia 49.4
8 Los Angeles / Orange County 44.7
Rank Cluster Weighted score
9 Westchester County, N.Y. 41.2
10 New Jersey 40.8
11 New York City 34.7
12 Minneapolis 34.5
13 Denver 34.5
14 Chicago 30.7
15 Central & Southern Florida 30.6
16 Long Island, N.Y. 30.0
Life sciences employment concentration: Weight: 20.0%Life sciences employment growth: Weight: 10.0%Life sciences establishments concentration: Weight: 10.0%Life sciences venture capital funding: Weight: 15.0%
National Institute of Health funding: Weight: 15.0 %Market Occupancy Rate: Weight: 10.0%Average Asking Rent (NNN): Weight: 10.0%Rentable Lab Supply: Weight: 10.0%
Asking rents climbing in clusters across the U.S.
Top U.S. submarkets Asking rent ($ NNN) Vacancy
East Cambridge (Boston) $70.12 p.s.f. 0.8%
North County (Bay Area) $57.84 p.s.f. 0.5%
I-287 West (Westchester) $52.00 p.s.f. 11.0%
Torrey Pines (San Diego) $47.40 p.s.f. 3.3%
Lake Union (Seattle) $43.87 p.s.f. 2.6%
CBD (Philadelphia) $28.00 p.s.f. 1.5%
Submarket spotlight
Mid-Peninsula – Bay Area Manhattan & Brooklyn – NYC Boulder / NW – Denver MetroAs the imbalance between tenant demand and available lab space grows, the region is seeing increased tenant migration toward dense life sciences hubs in the Mid-Peninsula, driving more than 1.6 million square feet of brand new development.
A global powerhouse in the commercial real estate market, New York City’s life sciences cluster is rapidly growing. Development is highlighted by Cornell’s new 2.1 million-square-foot tech campus dedicated to the applied sciences, expected to deliver in 2017.
Following recently signed lease deals this summer, the Boulder / Northwest submarket is anticipating a notable amount of positive net absorption. With the support of NIH funding, which increased by $280 million year-over-year, the cluster is gaining attention on a national scale.
Average lab rent (NNN): $51.87 p.s.f New Class A Lab (NNN): $90-105 p.s.f. Average lab rent (NNN): $18.77 p.s.f.
Average lab vacancy: 0.7% Average lab vacancy: 14.1% Direct lab vacancy: 11.7%
YOY rent growth: 41.8% Under construction: 3.6 million s.f. Total RBA: 4.0 million s.f.
M&A
M&A activity amongst pharmaceutical and biotech companies saw a record number of transactions in 2015, totaling $520 billion.
$520B
Industry theme #1:Strategic hunt for revenue growth
Source: U.S. Food and Drug Administration
Total Healthcare M&A deals
$0
$100
$200
$300
$400
$500
$600
2010 2011 2012 2013 2014 2015
< $500M $500M to $5B $5B to $20B > $20B
Industry theme #2:Influx of new sources of capital
Source: ???
Total Biotech VC funding
700
750
800
850
900
950
1,000
$
$2
$4
$6
$8
$10
$12
2007 2008 2009 2010 2011 2012 2013 2014 2015
Billion
s
InvestmentVolume TotalDeals
Industry theme #3:Tight markets drive new real estate solutions
Source: JLL Research
Vacancy by submarket
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
NorthCounty- BayArea
EastCambridge-Boston
Philadelphia- CBD LakeUnion- Seattle LosAngeles TorreyPines- SanDiego
I-270MarylandSuburbs
Industry theme #4: Prioritizing talent critical to growth
Source: QS World University Rankings
3.40%
3.50%
3.60%
3.70%
3.80%
3.90%
4.00%
4.10%
4.20%
4.30%
$72,000
$73,000
$74,000
$75,000
$76,000
$77,000
$78,000
$79,000
$80,000
$81,000
2012 2013 2014 2015
Annual Mean Wage
Employment Growth
Implications for life sciences companies?
• As M&A and business swapping increases, it will result in an increase in vacant space in secondary markets and lead to the renovation of older space to meet the needs of life sciences companies.
• Advances in medicine and global demographic trends point to an overall expansion of the life sciences industry. With demand still outweighing supply, asking rents for lab space can be expected to continue to rise, particularly in premier clusters.
• Unlike in other industries where companies are more inclined to flee top markets for the sake of affordability, life sciences tenants continue to seek out options in top clusters. With diminishing space options, secondary submarkets in top clusters are emerging and becoming more established.
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For more information, please contact:
Roger HumphreyExecutive Managing DirectorLife Sciences+1 (908) [email protected]
Dan LoughlinInternational DirectorBrokerage, New Jersey+1 (973) [email protected]
Richard McBlaine International DirectorCorporate Client Development+1 (312) [email protected]
Lisa StropeDirector, New England ResearchAmericas Research +1 (617) [email protected]
Wes SimonAnalyst, Boston ResearchAmericas Research +1 (617) [email protected]