The life sciences market remains one of the hottest for engineering, architecture, and construction firms. The reasons for this are the demand for facilities due to employment growth and solid streams of increased funding from venture capital and other sources—thereby boosting research, development, and facility spending.
Even before the global COVID-19 pandemic began in early 2020, for the past two decades the life sciences industry has been considered by many analysts to be “recession-proof” due to demand and the necessity of services connected to this market. That trend has only accelerated in the last few years. Having modern facilities for those who work in the health care and life sciences industries is key, as many employees cannot work remotely and competition for talent is fierce.
Venture capital (VC) continues to pour into the life sciences sector, reaching $36.1 billion in 2020, a 482 percent increase in 15 years (see table). According to Colliers, nearly 60 percent of all VC deals benefit companies in the Boston and San Francisco Bay areas—the two largest life science clusters nationwide. This wave of capital drives real estate markets, and developers are building to suit this market (or even transforming existing office buildings when feasible). A recent report by commercial real estate firm CBRE showed that in the Boston-Cambridge market for life sciences space vacancy was 1.1 percent, with office space at 12.7 percent; in the San Francisco Bay area the story was the same, with 2.6 percent life sciences vacancy, compared to 14.8 percent for office space (Q3 2021).
The growth of life sciences is supported in large part by a growing need to find innovative solutions connected to supporting an aging population. By 2030, all baby boomers will be age 65 or older. At an estimated 73 million, this generation is the second largest age group after millennials, according to the U.S. Census Bureau. With people 65 and older visiting the doctor 2.5 times more than those aged 25-44, as reported by Marcus & Millichap Research Services, the need for facilities will continue to grow in large part due to demographics and a drive toward innovation.
At the end of April, ACEC hosted its first “private market symposium” focused on the health care and life sciences sector, convening experts on the booming industry in the Boston suburb of Cambridge.
The symposium reflects both how the life sciences sector has become a major growth area for A/E companies along with the emergence of the Boston area as the hottest geographic market for this sector. Other U.S. markets with demand for new lab and biotech research space include Philadelphia, Washington, D.C., Chicago, Seattle, Raleigh/Durham, and San Francisco.
Increased migration to the Sunbelt, with Texas the leading state in 2021, has been confirmed by U-Haul’s annual migration trends report. Data such as this is interesting for our industry to track, as engineering firms look to target growing markets that will be investing in more housing, retail, and infrastructure. Texas regained its number one spot on the list, which it previously held from 2016-2018, according to U-Haul. Florida ranked first in 2019, with Tennessee taking the lead in 2020. While waiting for U.S. Census Bureau data to confirm population shifts, U-Haul provides us with a list of how states are faring by calculating the net gain of one-way U-Haul trucks entering a state versus leaving that state within a calendar year; this is what economists refer to as “alternative data.” U-Haul says this migration trend data is compiled from more than 2 million one-way U-Haul trips annually.
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The Private Side is a regular department of Engineering Inc., focusing on the private-sector markets listed above, and information and insights on economic data relevant to the industry. For more on these topics, subscribe to ACEC’s bi-monthly Private Industry Briefs: https://programs.acec.org/industrybrief.