by Brianna Crandall — July 3, 2015—U.S. biopharmaceutical innovation is thriving, with areas like Boston, Raleigh-Durham and San Francisco dominating U.S. life sciences activity. However, a scarcity of laboratory space is pushing biopharmaceutical companies to seek locations in suburban markets where space is available or can be constructed, while still providing proximity to talent and resources.
These trends, along with a ranking of the top U.S. life sciences cities and the global industry landscape, are revealed in JLL’s fourth annual Life Sciences Outlook Report, released a week ago.
Boston, Raleigh-Durham and San Francisco top the list for U.S. life sciences activity.(Click on image to enlarge)
“In their U.S. operations, biopharmaceutical companies are being squeezed by rising costs for highly trained talent, more expensive real estate markets and a shrinking supply of available laboratory space,” said Roger Humphrey, executive managing director and leader of JLL’s Life Sciences group. “Many are willing to pay a premium for proximity to the leading research institutions and scientists, but the lack of space is compelling companies to look at secondary sites that are a little less conveniently located.”
Top U.S. life sciences clusters
High-volume mergers and acquisitions continue to reshape the biopharmaceutical sector as global pharmaceutical giants seek greater operating efficiencies through consolidation. Investment in start-ups and mid-sized companies developing new products is also playing a key role in industry dynamics. The report found that this burgeoning innovation has driven a space crunch for laboratories in cities such as Boston, Los Angeles and the San Francisco Bay Area.
Below is the 2015 ranking of the top 10 U.S. life sciences clusters:
- Greater Boston Area
- Raleigh-Durham
- San Francisco Bay Area
- San Diego
- New York City
- Los Angeles/Orange County
- Long Island
- Minneapolis
- Philadelphia
- Seattle
Rising labor, real estate costs spur emergence of new life sciences clusters
According to the report, biopharmaceutical operations in the USA are facing rising labor and real estate costs. While the average rent for laboratory space rose by an average of 3% nationwide in the past year, rents grew dramatically in the top clusters—by 16.9% in San Francisco and 15.5% in San Diego. The national average rent per square foot (PSF) for lab space is $24.30, but has skyrocketed to $47.40 PSF in Boston and to $37.30 PSF in San Francisco.
Rising rents are one reason small and mid-sized biotech companies are heading to Philadelphia, Denver and other more affordable locales, and saving their dollars for talent recruitment, according to the report. As rent growth increases, low interest rates make construction a reasonable option in some locations, such as Minneapolis or Indianapolis, and those locations with available land and few life sciences facilities for rent.
Emerging market opportunities
Demographic shifts continue to shape the market for life sciences products, and globalization is a key strategy for Big Pharma companies looking to compete against growing generics sales. These companies are finding opportunities in emerging markets such as China and Indonesia, according to the report.
