In this Q&A, Colliers’ Joseph Fetterman, Executive Vice President, and Anjee Solanki, National Director of Retail and Practice Groups | U.S., explore the life sciences real estate market. They discuss how investor and occupier demand is shifting, the unique challenges life sciences companies face when scaling, and what’s driving long-term opportunity across the sector. 

Anjee Solanki (AS): What sets life sciences real estate apart from other sectors?

Joe Fetterman (JF): Life sciences real estate is quite distinct from other sectors, particularly compared to traditional office real estate. Life sciences buildings are expensive to construct and convert from other uses because of the infrastructure requirements for lab and manufacturing operations. For instance, HVAC systems in these facilities are considerably more robust in supporting the exhaust and fresh air requirements.  In addition, greater structural floor and roof load capacity, electrical infrastructure, specialty gases, deionized water, and backup power can be required for these facilities. These systems are critical because the research conducted in these buildings often runs continuously for months, and an interruption to these services could result in a costly compromise of a study.

AS: What are the top life sciences real estate markets and biotech hubs in the U.S.?

JF: The leading life sciences markets in the U.S. are Boston, the Bay Area, and San Diego. These markets have established markets with a large inventory of life sciences space, a strong talent base, institutional research, and strong venture capital presence, all of which support the creation and growth of life sciences companies. Following closely are Philadelphia, New Jersey, New York, and Raleigh-Durham. Other developing markets include Chicago, Maryland, Seattle, Orange County, Minneapolis, St. Louis, Denver, Houston, and Salt Lake City. These clusters typically grow around large academic medical research institutions, which are the engines for scientific discovery and the springboard for the funding, development, and commercialization of future lifesaving drugs and applications.

AS: What types of life sciences facilities exist, and how do they differ?

JF: Life sciences facilities can be categorized into several types. It all begins with R&D labs, which are the primary focus. As research progresses, the need for manufacturing facilities arises, especially GMP (Good Manufacturing Practice) facilities, which are heavily regulated and require specific infrastructure. These buildings often feature high ceilings, robust HVAC systems, and significant power and plumbing requirements. Other facilities include testing labs and vivariums, which are used for pre-human testing.

AS: How can real estate support a vibrant life sciences ecosystem, and what new amenities are developers deploying?

JF: Real estate plays a critical role in developing life sciences clusters. The challenge is that these are expensive buildings to construct, and in the current market, there is a shift from speculative development to securing anchor tenants before launching a project. This is particularly important because companies need space immediately, but bringing new buildings online can take 2-3 years. In established markets like Boston and San Francisco, we see an oversupply of space, but in growing markets like Philadelphia, New Jersey, and Raleigh-Durham, having surplus square footage can be beneficial when demand for space accelerates.

AS: What makes an area attractive for life sciences development?

JF: The key factors that make an area attractive for life sciences development include a strong university presence, robust healthcare infrastructure, and the ability to commercialize research. Cities like Boston, San Francisco, and Philadelphia have these fundamentals in abundance. Proximity to where research is happening is also crucial, as it allows for a seamless transition from academic discovery to commercial application. Additionally, having a pool of talented professionals, from Ph.D. scientists to skilled manufacturing workers, is essential to sustaining and growing a life sciences cluster.

AS: If you were to develop a life sciences campus, what unique amenity or vision would you prioritize?

JF: The ideal life sciences campus of the future would integrate all phases of the drug development process, from R&D through clinical trials and FDA approval. It would also include a central facility that serves as a hub for interaction among researchers, legal experts in IP, and venture capitalists, including conferencing capacity where all scientific and capital community members can interact to advance discovery, collaboration, and commercialization. This environment would foster the exchange of ideas, leading to new insights and discovery, and support the growth and creation of companies. While amenities like great food and a social atmosphere are important to bringing scientists together, greater value will come from creating spaces that bring together all the critical elements needed for success in life sciences.

Learn more about our Life Sciences capabilities: https://www.colliers.com/en/services/life-sciences