RALEIGH – The Triangle – already one of the largest biotech and life science hubs in the nation – is also one of the hottest destinations in the U.S. for companies seeking lab space. Rents are going up, just like growing demand is sending up housing costs.
According to a new report from commercial real estate firm CBRE Raleigh, demand for lab space totaled 839,000 square feet across the Triangle as the first quarter ended.
However, only 380,000 square feet is currently under construction.
As a result, rents are up to $28.43 per square foot, CBRE reported. And the pressure for space isn’t likely to be aleviated any time soon.
“Over the past few years, we have seen an increase in demand from life science companies. Several of the contributing factors include the area’s more affordable cost of real estate, our overall growing market, and our strong academic institutions and deep talent pool. We’re seeing an influx from manufacturing companies where historically most activity was coming from research and development,” said CBRE Raleigh’s Ann-Stewart Patterson. “North Carolina provides strong incentives for these companies to locate here, but with that growth, we are seeing supply constraints.”
Class A office space, meanwhile, ranges from around $26 to more than $33 per square foot, according to CBRE Raleigh data.
Adding to the pressure, several recent facility expansions and new projects is upping future demand along with bringing thousands of jobs to the region.
So far this year, N.C. has landed 15 announcements, reflecting $2.9+ billion in investment and the creation of 2,686 life sciences jobs, excluding jobs created in the construction and other related workforces.
“We’ve had a significant amount of investments in our market over the last few years, and we’ve had a significant amount of jobs announced — I see that as continuing without pause,” Patterson, who is CBRE’s first vice president, said. “There’s so much more demand, and it all comes down to finding a place to land in our market.”
CBRE ranked the Triabgle as the fifth largest life science hub in a 2020 report.
The Triangle is not the only area where lab space is in demand with nearly 19 million square feet under construction across the nation’s top 12 life science markets, CBRE Raleigh noted. Average vacancy rate is less than 6%, the result being higher costs.
And more growth can be expected due to a flood of investment capital going to life science firms.
“The $10 billion in venture capital awarded to U.S. life sciences companies in the first quarter marked a record, exceeding the previous high in last year’s fourth quarter by roughly 60 percent,” CBRE Raleigh said, noting data from the PwC Moneytree Explorer survey. “U.S. life-sciences employment has risen by 15.6 percent since April 2017, outpacing the growth of the larger tech industry.”