JLL Report Details Canada’s Growing Life Science Market

A new JLL report, the Canadian Life Sciences Outlook, examines the development opportunities for the life science real estate market. It uncovers macro-trends shaping the industry, and how the life science market is changing in Montreal, Vancouver, and Toronto.  

The full report can be found here.

Lab Design News spoke to Scott Figler, director of research at JLL Canada about the report’s findings.

Q: Could please introduce yourself?

A: My name is Scott Figler, I lead JLL’s research group in Canada.

Q: If you could summarize the report in a few sentences what would you say?

A: Canada’s lack of biomanufacturing capacity was exposed during the pandemic as vaccines and PPE had to be mostly imported from abroad.  This lack of capacity is fundamentally a real estate question – there is simply not enough physical space for life science companies in Canada to grow, and many end up having to move abroad to meet their space needs. In the years since, there has been a great deal of collaboration between public, private, and academic sectors to grow Canada’s life sciences industry and be more prepared for future public health emergencies.  Much of this collaboration is related to the question of physical space, whether it’s incubator space, scale-up space, and biomanufacturing space.  To understand and quantify this growth in physical space, JLL identified all existing and future life science buildings in Toronto/Golden Horseshoe, Montreal, and Vancouver. This gives us insights into what cities are moving faster and where Canada’s most dynamic future life science clusters will be.

Q: How were able to find these identifiable trends?

A: We used our in-house data as well as third-party data to identify all the companies working in each city.  Then we looked at the buildings they were working out of to determine if they met our criteria for “lab” or “GMP” buildings. Considerable research went into finding lease rates, vacancy rates, and specs for buildings that we deem to be within the sample size for this project. 

Q: Which of these trends do you find is most pressing, and why?

A: The biggest bottleneck we are facing is the lack of new purpose-built development in and around Toronto.  It’s Canada’s largest market with about a third of all life science employment. However much of the growth in the industry is moving to Montreal and Vancouver because there is more readily available space in these cities. Over time this will create more opportunities in other cities.

Another trend that I find disconcerting is the elevated job vacancy rate in the healthcare profession.  This suggests that hospitals are not able to hire the staff that they need. This is leading to longer wait times for patients, rising costs, and more strain on current employees.

Q: In which Canadian city do you think these macro-trends have the most impact?

A: Vancouver is benefitting most from the growth in the industry.  Over 8,000 new life science jobs have been added in the last decade just in Vancouver.  Companies like AbCellera, Precision Nanosystems, Zymeworks, and Stemcell Technologies have grown substantially over this period. Not surprisingly, Vancouver accounts for about 45% of all new life science real estate development in Canada.

Q: Why do you think investors are now turning their focus toward tenant attraction and retention?

A: This point is more related to more established markets like Boston, Bay Area, and San Diego.  They don’t face the supply gap that we face in Canada, and actually, they are seeing rising lab vacancies.  So, landlords, there are more focused on attracting and retaining tenants.  In Canada, the focus is still very much on building the space.   

Q: What sort of areas are tenants most interested in?

A: This depends. Smaller tenants that are more R&D focused are looking for lab space that is well-located, well-amenitized, and connected to public transit. So Discovery District in Toronto, Mount Pleasant/False Creek Flats in Vancouver, etc. But companies that manufacture and need a larger footprint are more amenable to suburban locations. The most important is proximity to other life science tenants and talent clusters. However, given the current lack of space, many tenants would be willing to compromise on some of these considerations in order to just have the space they need to grow.

Q: What ESG strategy should life science companies consider?

A: There are many environmental concerns: energy use (round-the-clock heating and cooling), non-biodegradable waste, single-use plastics, and embodied carbon are the most top-of-mind. Some strategies that tenants are implementing include alternative sources of energy and executing green leases. The best thing tenants can do is a partner with a landlord who is ESG-savvy….these landlords are very eager to work with tenants and develop customized solutions to these problems.