Office Demand from Life Science Sectors Withstands Economic Winds
In the latest CommercialEdge monthly office report, analysts highlighted how demand from life sciences sectors had driven investment across the national office market. Specifically, the report noted that the popularity of this real estate segment was so strong that recent concerns regarding rising interest rates and the general economic environment had not affected sales or construction activity. In fact, existing lab space — as well as office properties prime for a quick conversion — continue to command top-dollar acquisitions, and developers are still hard at work bringing more R&D office space to market.
Regarding life sciences transaction activity, CommercialEdge research showed that sale prices for life sciences properties averaged roughly $645 per square foot in 2022. Notably, this was about 150% more than the average price for general office assets, which rested at around $258 per square foot, year-to-date.
In terms of development, the report noted that nearly 22 million square feet of new lab space was underway at the start of September 2022 in markets surveyed by CommercialEdge. However, growth in this sector was not limited to established life sciences cluster markets, such as Boston (where 27 projects totaling 8.4 million square feet were under construction).
The demand has also benefitted tertiary life science markets. For example, Boulder, Colo., will welcome its first speculative life sciences property, which is being developed by PMB in partnership with Montgomery Street Partners. Dubbed Coal Creek Innovation Park, the project is located in downtown Superior, Colo. Initial plans include three office and lab space buildings that range between 85,000 and 150,000 square feet in size. A fourth building will include ground-floor retail, amenities and structured parking.
Located within 10 minutes of Boulder and 25 minutes of Denver, Coal Creek Innovation Park is part of a notable wave of development that is occurring along this portion of the US-36 corridor. As such, developers of the purpose-built speculative R&D property are confident in the appeal of the region’s potential in terms of life sciences talent.
To that end, a recent CommercialCafe study found that the greater Denver area ranked among the top 20 metros for life sciences companies in 2022. Of course, the area is already home to major biopharma companies and rich in academic programs and institutions. Denver office space also ranked among the most accessible of all the markets analyzed, and the life sciences real estate scene here is already growing: Denver was the 11th-largest life sciences real estate market among the 45 metropolitan statistical areas (MSAs) reviewed in the CommercialCafe study, with life sciences inventory accounting for nearly 1.2% of office space in Denver.
Meanwhile, development plans have also been unveiled for a multipurpose campus in Maricopa, Ariz., south of Phoenix. S3 Biotech announced a five-year project that will be built in three phases on a 52-acre site adjacent to Copper Sky Regional Park. The first phase of the 2.5-million-square-foot infill and redevelopment project will include: a specialty emergency hospital; a three-story, 108,000-square-foot medical office building; a 150-key, select-service hotel; a seven-story condominium/extended-stay building with 100 units; an extended care and physical therapy center; and a “smart” parking facility.
In addition to some residential property, the second phase will also add: a behavioral health and sports psychology center; a five-story innovation center totaling 100,000 square feet of Phoenix office space dedicated to life sciences; and a 270,000-square-foot Sports and Science Academy.
Tap into extensive and current research on performance of office assets across key U.S. markets by visiting the CommercialEdge blog for the full September 2022 national office report.
