The Once Red-Hot Life Sciences Sector Returns to “Normalcy”
November 10, 2022 | Patricia Kirk | WealthManagement.com
As the U.S. commercial real estate market adapts to rising interest rates and a less certain outlook for the economy, the life sciences sector remains a strong performer. But some signs of a slowdown are appearing even here.
In the third quarter, occupancy dipped to 94 percent across the top 12 U.S. life sciences markets—from a peak of 95 percent in the first quarter of 2022, according to a November report from commercial real estate services firm CBRE. CBRE also registered a 30-basis-point increase in quarter-over-quarter vacancy, to 5.3 percent. That was largely due to a significant amount of new supply (2.1 million sq. ft.) hitting the market, leading the addition of available new space to outpace absorption of 363,047 sq. ft., the firm’s researchers estimate.
“Life sciences occupancy has remained strong relative to a year ago, but we have begun to see evidence of excess space and sublease activity in some of the more active markets, like San Diego and Boston,” says Philadelphia-based Joseph Fetterman, executive vice president and leader in the national life sciences practice group with real estate services firm Colliers.
