HOUSTON – (By Dale King, Realty News Report) – The global effort to overcome the coronavirus pandemic has accelerated growth and interest in the U.S. life-sciences industry.
This momentum has been driven largely by the urgent race to develop COVID-19 treatments and vaccines, alongside continued work to address other health conditions.
That expansion has strengthened several emerging life-sciences hubs in Texas, including Houston, Austin and the Dallas–Fort Worth region, according to a new report from CBRE, a commercial real estate services firm. The growth is creating fresh opportunities for commercial real estate in these Lone Star medical centers.
“Interest in Houston’s life-sciences sector from developers, investors and financial backers has grown significantly in recent years,” said Nelson Udstuen, senior vice president at CBRE.
“Several factors have contributed to this,” Udstuen noted, “including increases in federal funding from the National Institutes of Health (NIH) and private venture capital, growth in R&D employment, and commitments from Texas Medical Center institutions and private developers to establish new life-sciences buildings and campuses.”
“Houston is also attractive to the life-sciences industry because it already has a large cluster of skilled life-science employees,” Udstuen added. “Employers benefit from a local talent pool with the technical expertise required for research and development, reducing the need to recruit heavily from other markets.”
By employment, Houston ranks among the nation’s largest life-sciences clusters—14th overall—with nearly 60,000 workers in R&D. Dallas–Fort Worth ranks 17th with just over 20,000 R&D employees.
Houston sits within the top 20 U.S. core markets for life-sciences employment and was the fourth-fastest-growing market for life-sciences jobs, expanding at a 6.5% rate from 2018 to 2019. Local institutions received roughly $600 million in NIH funding last year, the 12th-largest amount among U.S. markets.
The CBRE report highlights the industry’s resilience through the economic downturn, noting new demand sources and a surge of venture-capital funding supporting diverse initiatives.
“Across the various U.S. life-sciences lab clusters, our data show a market undeterred by disruption and, if anything, recharged for intensified expansion,” the report states.
Life-sciences employment dipped only 1.3% in July compared with its March peak and remained about 1% higher than a year earlier—outperforming total nonfarm employment, which dropped 7.6% over the same period. Biotech R&D employment was particularly strong, rising 4.9% year-over-year.
CBRE’s rankings of emerging life-sciences markets consider the size and growth of employment in the sector, the concentration of R&D jobs, and levels of venture capital and NIH funding.
Established life-sciences centers, listed by CBRE, include Boston–Cambridge; San Francisco Bay Area; San Diego; Washington, D.C.–Baltimore; Raleigh–Durham; New Jersey; Philadelphia; New York City; Seattle; Los Angeles; Chicago; Orange County, Calif.; and Denver–Boulder.
Top emerging life sciences markets
CBRE’s top emerging life-sciences markets are ranked as follows: Pittsburgh, Houston, Austin, Detroit, Phoenix, Dallas–Fort Worth, St. Louis, Atlanta, Portland (Ore.), and Minneapolis.
Nationally, the life-sciences sector has reached new highs in R&D employment and venture-capital funding this year. Those trends have driven demand for lab and research space across established hubs like Boston and in growing centers such as Pittsburgh, Houston and Austin.
Venture-capital investment climbed to a rolling annual total of $17.8 billion in the second quarter. Employment in U.S. biotechnology research and development professions surpassed 220,000 in July, extending a decade-long growth trajectory.
Investors increasingly value lab and R&D space slightly more than conventional office space—a trend since 2015. In many top life-sciences markets, lab-space vacancy rates are below 8 percent and rents are rising as tenant demand remains strong.
In Houston, projects such as TMC3 and the Hines Levit Green are under development and will contribute to the city’s life-sciences momentum. The broader Texas Medical Center employs more than 100,000 people and hosts institutions training thousands of students.
Other key findings from the CBRE report include:
- NIH funding to major universities and health care research institutions rose about 6%, reaching $42 billion.
- Total commercial laboratory space increased roughly 12% this year to about 95 million square feet, with an additional 11 million square feet under construction. Despite growing supply, lab rents are increasing due to sustained tenant demand.
- Outlook remains positive, supported by new growth drivers such as government focus on the life-sciences industry’s central role in addressing the COVID-19 pandemic.
Oct. 26, 2020 Realty News Report Copyright 2020
File: CBRE Ranks Houston Second
Caption: Levit Green. Rendering courtesy of Hines
File: (2) TMC3, Hines Levit Green. COVID-19. CBRE ranks Houston second in emerging life-sciences markets.