JLL Data: Net Absorption Strong for New Life Sciences CRE Assets

Kevin Wayner

Credit: JLL

With an increase in absorption across lab spaces since 2015, there has been a rise of new developments influencing a surge in flight-to quality- trends. Lab Design spoke to Kevin Wayer, president of government, education, infrastructure, and life sciences industries at JLL about the competition and boom for new developments with well amenitized spaces. Kate Malagiere, director of lab services operations at JLL, also spoke to Lab Design about the amenity features that tenants are willing to pay top dollar for.

Q: What sort of development spaces are in high competition?   

A: High-quality purpose-built, well-amenitized space in the best possible locations, such as established life sciences markets with ample access to talent, are highly sought after. For example, 37% of underway purpose-built space is spoken for in Boston, compared to 21% of conversions.

Q: Why are there so many new developments?        

A: Though it’s taken a recent hit due to a slowdown in funding, tenant demand for lab space has been consistently very strong over the past few years, especially in established markets. In the fourth quarter of 2021, there was 24 m.s.f. of demand across the top life sciences markets and only 5.9% vacancy. The quality that comes with new developments is important for efficient processes within the life sciences industry.  

Q: What is the flight-to-high-quality trend? How have new developments contributed to this? 

A: Fueled by the influx of new development, tenants have been prioritizing the best possible space available, leading to record levels of positive net absorption in new builds. In fact, 34.9 million square feet of space has been spoken for in buildings that came online 2020-2022.  

Q: Since 2015 absorption in lab spaces has been a strong asset, why is that? 

A: The increase of new developments coming online congruent with the nature of the industry running more efficiently in well-constructed purpose-built lab space is why lab space has been an incredibly strong asset class for the better part of the last decade.

Q: How do high-quality lab spaces impact the efficiency of the life science industry? 

A: Function is important for the highly complex work done within labs, so they require high-quality space.  

Q: What sort of amenity features are tenants willing to pay a premium for?

A: Tenants are willing to pay a premium for high-quality spaces that have modern amenities that support today’s workforce, which includes having ample common space, an easy-to-access location, and dining options.   At the end of the day, employees are more attracted towards workplaces that are focused on wellness – somewhere that makes them happy to go to every day and provides the conveniences that enable them to focus on their work while in the office/lab. (Answered by Kate Malagiere)