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CBRE Analysis Finds U.S. Life Sciences Markets Poised For Outsized Growth in San Diego

San Diego has the nation’s third largest R&D cluster and is a hotbed for life science innovation

San Diego County CA— Multiple factors are propelling the U.S. life-science industry, and by extension the real estate that supports it, to strong growth, thereby positioning research-and-development centers like San Diego, Boston and the Bay Area for outsized gains, according to a new report from CBRE. San Diego has also been recognized as the nation’s third largest R&D cluster and is a hotbed for life science innovation.

While many U.S. industries are navigating fundamental disruption, the life-sciences industry – which includes pharmaceuticals, biotechnology and medical-device manufacturing – is on a long-term expansion track. CBRE’s report examines the generators of the industry’s sustained growth, including the aging U.S. population, increases in public and private funding, hefty job gains and robust construction of lab and R&D space.

“The demand for life science space has been and continues to surge in San Diego,” said Ryan Egli, CBRE’s life science expert in San Diego. “San Diego is one of the main research and development life sciences markets in the country, the area is rich with research institutions, early-stage growth companies, and big pharma.”

CBRE’s analysis found that regions with high concentrations of research and development jobs also saw the highest growth in their overall life-sciences job bases in the past 15 years. That indicates continued strong growth for leading R&D markets such as San Diego, Boston, the San Francisco Bay Area, and Raleigh, N.C.

Almost one in four R&D jobs in the U.S. are in either San Diego, Boston-Cambridge and the Bay Area. These are the three premier life sciences clusters in the industry. Total life sciences employment in San Diego grew by 52 percent between 2001 and 2016, marginally faster than Boston-Cambridge and San Francisco. The region has one of the highest concentrations of life sciences R&D employment (60.4 percent vs. 37.2 percent nationally in 2016). The R&D sector has been a major contributor to job growth in the region and, consequently, to demand for lab space.

“Many solid trends support strong growth going forward for the life-sciences sector, especially in major R&D markets,” said Ian Anderson, CBRE Director of Research and Analysis and lead author of the report. “The market for lab space offers several secular growth drivers and constrained supply.”

“Through 2017, average asking rents had reached an all-time high ($3.57 per square foot) and vacancy of lab space remained at historical low levels between 5.7 and 6.7percent,” said Ryan Egli.

“Torrey Pines has the highest concentration of lab space totaling more than 5.7 million sq. ft. and this is a popular area because it is adjacent to UCSD in addition to numerous research institutions, large pharmaceutical and biotech firms,” said Mr. Egli. “However, the submarket of University Towne Center (UTC) has seen more growth in its laboratory inventory (1.1 million sq. ft.) than the other San Diego life science submarkets combined. UTC has led all San Diego laboratory submarkets this year in absorption with over 212,572 square feet and had 227,640 square feet in leasing activity. Sorrento Mesa also performed well and led the market with 319,194 square feet of leasing activity, which resulted in 51,317 square feet of positive absorption. With limited land sites in Torrey Pines, we expect both UTC and Sorrento Mesa to continue to add to the laboratory inventory via conversions of obsolete office/R&D product to lab space and new development.”

CBRE’s report outlines factors expanding the life-sciences market, including the nine-year gain in average life expectancy in the U.S. since the 1960s, rapid advances in life-sciences technology and increases in funding from the National Institutes of Health and venture-capital sources. For example, venture capital investment in the U.S. life-sciences industry now is 53 percent greater than 10 years ago.

“When you look at the landscape of investment opportunities within the commercial real estate sector, few asset classes offer as compelling a case for near-term optimism as the life-sciences industry,” said Scott Marshall, CBRE President of Advisory & Transaction Services | Investor Leasing. “Our team has analyzed the labor trends and found that, especially in Massachusetts and California, there are significant growth opportunities within the life-sciences industries going forward.”

To read the full report, including outtakes on seven leading life-sciences markets, click here.


About CBRE Group, Inc.

CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2016 revenue).  The company has more than 75,000 employees (excluding affiliates), and serves real estate investors and occupiers through approximately 450 offices (excluding affiliates) worldwide.  CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services.  Please visit our website at www.cbre.com.