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<\/p>\nThe life sciences and healthcare sectors are two of the small handful of sectors that have come out stronger on the other side of the COVID-19 pandemic. This article offers an overview of relevant U.S. market data, as well as the way in which specialist office providers are serving the demands of businesses looking to house themselves in mixed-use office spaces that include both traditional desks and lab space.<\/p>\n
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Contents<\/p>
While offices occupied by countless other industries emptied virtually overnight in response to the pandemic, life sciences companies stayed put \u2014 with some even opting to move to larger premises to accommodate additional employees. In 2021, the sector was still attracting millions of dollars in investments\u00a0\u2014 particularly in the fields of Biotech and Medtech\u00a0\u2014 due to their status as safe, recession-proof assets. In fact, 2021 saw a record $78 billion<\/a> of capital investments to life sciences-related companies in the United States, up from the $70 billion seen in 2020.<\/p>\n Rapid expansion also put pressure on these companies to source top talent. In the United States, life sciences is a leader for employment growth. Illustrating this\u00a0\u2014 in Q1 2021 the life science sector had surpassed the tech sector<\/a> in job creation numbers.\u00a0<\/p>\n Inevitably, the growth of the life sciences industry is reflected in real estate market conditions. Mixed-use offices that can accommodate lab equipment, R&D, and life sciences facilities have experienced a continued surge in demand since 2020. Across the United States, demand rose by more than 30% in just one year. The mid-term comparison 2014-2021 revealed an even sharper increase in demand of nearly 80%.<\/p>\n According to a research report by CBRE, investment in U.S. life sciences office space increased by 62%<\/a> in 2021, and further growth is expected to reach 10% by the end of 2022.<\/p>\n Investment remains strong across the board, especially from private equity entities. Overall investment in Biotech is up 12.7% YOY<\/a> based on figures from Q1, 2022. Talent within the sector has also been on the rise, with 2021 seeing life sciences job growth of 11.4%, the second-largest growth rate in 30 years. Further, growth trends over the decade between 2011 and 2021 showed employment in life sciences grew by an average of 6.6% annually, compared to just 1.0% growth in the overall U.S. employment market.<\/p>\n The most renowned life sciences hubs in the United States can be found in Boston, San Diego, and the Bay Area. These areas continue to capture the greatest investment figures in 2022, with the top 10 markets accounting for roughly half of all sector funding. In these cities, the combination of growing requirements from life sciences occupiers and a tight supply of quality offices is tipping the market to suit landlords \u2013 a different story from much of the rest of the United States office market.<\/p>\n The lowest vacancy rates for this type of office space can currently be found in LA, Boston and Seattle, sitting at 5% or below. This is quite a shift from Q1 2021, when the lowest vacancy rates sat below 2.5% and were seen in New York City, Boston, Cambridge, and the Bay Area. Low availability in high-demand areas, especially the hubs in close proximity to major educational and industrial institutions, has been prompting life science tenants to consider alternative locations.<\/p>\n The biggest increases in demand have taken place in Suburban Maryland, which currently holds the lowest vacancy rate of 1.7%, while holding the third-highest lab share amongst notable U.S. markets (as a percentage of total office inventory) at 16%. Raleigh\/Durham County and New Jersey are also seeing noticeable surges in inquiries.<\/p>\n Asking rents are increasing in areas where supply is scarce, not only in the cities mentioned above, but also in emerging life science clusters like Baltimore, Philadelphia, and Washington. Outside of the top three markets (NYC, Boston, and the Bay Area), the highest average rents are in Los Angeles and San Diego, with Seattle and Chicago following closely behind.<\/p>\n When compared to life sciences, the healthcare sector has not been as robust. As of late 2021, the YOY employment change in hospitals was only up 0.18%<\/a>, and social assistance employment dropped by 5.67%. However, there were some increases seen in nursing and residential care, with a yearly gain of 5.52%. The industry as a whole struggled with declining employment levels for part of 2020, and is currently (as at June 2022<\/a>) down on February 2020 figures by 1.1%.<\/p>\n Activity volumes dropped by more than 40% in mid 2020, but have rebounded somewhat, with new demand for high-spec office space continuing from Q1 2021<\/a>.<\/p>\n Medical offices have been attracting the interest of investors, due to their potential for above-average yields. Moreover, their prices have already proven to be less volatile<\/a> than other asset classes.<\/p>\n General doctor and dental offices have good short-term growth forecasts, contributed via a number of influences \u2013 for instance, demographic reasons. With an overall aging population in the U.S. \u2013 the proportion of citizens 65 years and older currently sits at 16.6% of the total population. This figure is expected to increase to almost 19% by 2025. Growth will also be due partly to<\/a> changes in medical insurance coverage, and to the gradual easing of the pent-up, and ongoing, demand\u00a0\u2014 which has been backlogged since 2020.<\/p>\n Family medical accounts for 38% of the entire industry\u2019s revenue, and its profit margins are forecasted to grow to 15% of the total average revenue.<\/p>\n Fundamentals for this sub-market remain strong, ending 2021 with a vacancy rate of 8.3% for healthcare real estate<\/a>, lower than the national average of 14.8% for traditional offices. The current supply is still struggling to catch up to demand<\/a> in the nation\u2019s top 50 medical office markets, despite the fact that new medical office developments are going up in the most supply-stripped markets\u00a0\u2014 such as Atlanta, New York City, and Chicago.<\/p>\n As of 2022\u2019s commencement, there were 1,092 healthcare CRE projects and 703 medical office buildings (MOBs) under construction. MOB projects remain primarily off-campus, further highlighting geographic diversification in investment\u00a0\u2014 away from saturated and supply deficient markets. These account for near 70% of all MOB construction.<\/p>\n Upon completion, these facilities will hopefully serve to ease demand pressure on the top medical hubs, as well as overcome bottlenecks experienced in the industry as a result of COVID-19. As remote work continues to gain ground, and top health and life sciences talent decentralize from major hubs, this will combine with the opening of top-spec regional facilities to ease pressure and effectively serve more markets.<\/p>\n Increased demand for life science facilities and the continuation of muted growth in the general office market is causing numerous office providers to pivot their offerings by converting their existing spaces into lab space. A major conversion like this is desirable for a number of reasons. Firstly, it speeds up construction substantially when compared to ground-up development, allowing tenants to move in and get to work much faster. Additionally, it allows major companies to gain a foothold in dense city centers, something that is extremely difficult to achieve with new builds in cities like New York and San Francisco.<\/p>\n However, these conversions can come with a number of significant hurdles\u00a0\u2014 including general space considerations, safety requirements, cost, and mechanical, electrical, and plumbing systems (MEP systems). General demand and the allure of profits has led to the growth of a broad range of companies offering office-to-lab conversions. Providing additional services when compared to those offering more traditional office fit-outs<\/a>, these companies are realizing strong returns, largely fueled by their expertise developing altered floor plans and managing other important factors of the conversion.<\/p>\n To sum up, the pandemic only further served to cement the roles of the life sciences and healthcare sectors. Their performance is likely to stay strong in already established clusters, and gain ground in office markets of the emerging regional hubs we\u2019ve identified. As this boom of new developments open onto the market, they will alleviate some pent-up demand for mixed-use and medical office space, whilst simultaneously reducing the strain on established markets to meet demand.<\/p>\n This will be a win for established centers, since their current resources will be better able to service local populations, providing better and more timely medical care and clearing backlogs. Moreover, the benefits will be compounded as regional centers become emergent hubs, which will gradually develop into class-leading delocalized centers of their own\u00a0\u2014 easing pressure on the metropolitan industries, inviting more investment regionally, and spurring greater innovation in regional areas.<\/p>\n Further Insights<\/em><\/strong><\/p>\n Mid-2022 Atlanta Commercial Real Estate Market Overview<\/a> The life sciences and healthcare sectors are two of the small handful of sectors that have come out stronger on the other side of the COVID-19 pandemic. This article offers an overview of relevant U.S. market data, as well as the way in which specialist office providers are serving the demands of businesses looking to […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[495,480,371,9],"tags":[492,498,496,500,497,499,490],"class_list":["post-1837","post","type-post","status-publish","format-standard","hentry","category-mixed-use-office-space","category-office-renovation","category-office-space-forecasts-and-trends","category-office-talk","tag-492","tag-biotech","tag-life-sciences","tag-medical-office-space","tag-mixed-use-office-space","tag-office-conversions","tag-office-market-report"],"_links":{"self":[{"href":"https:\/\/offices.net\/news\/wp-json\/wp\/v2\/posts\/1837","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/offices.net\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/offices.net\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/offices.net\/news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/offices.net\/news\/wp-json\/wp\/v2\/comments?post=1837"}],"version-history":[{"count":10,"href":"https:\/\/offices.net\/news\/wp-json\/wp\/v2\/posts\/1837\/revisions"}],"predecessor-version":[{"id":2149,"href":"https:\/\/offices.net\/news\/wp-json\/wp\/v2\/posts\/1837\/revisions\/2149"}],"wp:attachment":[{"href":"https:\/\/offices.net\/news\/wp-json\/wp\/v2\/media?parent=1837"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/offices.net\/news\/wp-json\/wp\/v2\/categories?post=1837"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/offices.net\/news\/wp-json\/wp\/v2\/tags?post=1837"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"man](\"https:\/\/offices.net\/news\/wp-content\/uploads\/2022\/08\/mixeduselifescience-Offices.net_.jpg\")
<\/p>\nOther Life Science Growth Factors<\/span><\/h2>\n
![\"waterside](\"https:\/\/offices.net\/news\/wp-content\/uploads\/2022\/08\/bostonlifescience-Offices.net_.jpg\")
<\/p>\nTop Life Science Cities & Market Conditions<\/span><\/h2>\n
![\"woman](\"https:\/\/offices.net\/news\/wp-content\/uploads\/2022\/08\/medicalofficetrends-Offices.net_.jpg\")
<\/p>\nMedical Office Trends<\/span><\/h2>\n
Office-to-Lab Conversions<\/span><\/h2>\n
![\"woman](\"https:\/\/offices.net\/news\/wp-content\/uploads\/2022\/08\/lifesciencefooter-Offices.net_.jpg\")
<\/p>\nWhat Does This All Mean?<\/span><\/h2>\n
\nUS Office Market Trends 2022 \u2013 Statistics, Challenges and Outlook<\/a>
\nJanuary 2022 \u2013 U.S. National Office Market Report<\/a>
\nThe Great Resignation or the Great Retention? How Employers Yield the Power Heading into 2022<\/a>
\n5 Ways to Create a Great Office Culture<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"