Office occupancy rates remain deflated across industries, but one type of workplace is in high demand: labs.
The big picture: A number of trends — in public health, American demographics and venture capital funding — are colliding to supercharge the life sciences industry.
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Driving the news: U.S. office vacancy rates are at 17%, but lab vacancy rates are at 5%, according to a new report from the commercial real estate firm CBRE.
Money is pouring into life sciences companies. Venture capitalists are throwing money at gene editing and other promising therapies, at the same time that an aging American population is driving up health care spending.
The annual amount of venture capital flowing to life sciences companies has roughly doubled since 2019 to a whopping $32 billion, per CBRE and CB Insights data in the report.
Federal health care spending made up around 4% of GDP in 2006, but that's expected to swell to over 8% by 2040, according to the Congressional Budget Office.
What's happening: "This was a sector that was white-hot prior to the pandemic," says Jon Varholak, a vice chairman at CBRE who specializes in life sciences real estate. "The pandemic poured more gasoline on the fire."
"People now more than ever are realizing we may need to be at the ready for something like this," he says.
That's goading established life sciences companies to come up with innovative therapies and vaccines, and giving rise to startups that bring a fresh perspective to public health issues.
Biotech job openings are growing at their fastest pace on record, outpacing the notoriously hot tech sector, per a CBRE analysis of Bureau of Labor Statistics data.
Certain metro areas are benefiting from this boom more than others, according to the CBRE report.
In Boston, lab vacancies are at 1.7%. Demand for lab space is so high that the city's "office market has become the envy of landlords across the country," the Wall Street Journal's Peter Grant writes.
New York's lab vacancy rate is 1.1%, and San Francisco's is 2.6%.
And here's another new trend: Even though life sciences jobs have traditionally been located outside of cities — where there's ample inexpensive space for big labs and campuses — the strongest demand for lab space is actually in urban areas, says Ian Anderson, CBRE’s head of office research in the Americas.
Employment growth between 2017 and 2020 was 25% in Middlesex County, Massachusetts — which is composed of the Greater Boston suburbs — but 35% in Boston proper.
Growth was around 18% in San Mateo County, California, but nearly 92% in San Francisco.
There's nearly 0% growth in Suffolk County, New York — which encompasses the Long Island suburbs — but over 25% in Manhattan.
The bottom line: "The whole industry is moving closer to where the intellectual capital is," Anderson says.
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