Boston – Life sciences companies continue to cluster around universities, particularly leading research institutions, and capital sources. As a result, it should be no surprise that JLL’s fifth annual Life Sciences Outlook Report reveals Greater Boston is the top cluster in the US. In fact, the region possesses the largest concentration of life science researchers in the country and has more than 3.75 million square feet of requirements. To top it off, the Boston area has accounted for more than 1/3 of the nation’s life science funding over the past year.
“What’s unique to our cluster from any other cluster and why we traditionally end up in this number one spot is basically the innovation that exists here,” said JLL Managing Director of the Life Science Practice Matthew Powers. “It’s all due in part to our unique ecosystem, which combines academia, healthcare, entrepreneurs, venture capital, and industry inertia in a way that no other city does.”
Top U.S. life sciences clusters
Along with Greater Boston, the other U.S. top life science clusters continue to thrive, even as high-volume mergers, business swaps and divestitures reshape the industry’s U.S. footprint. Continuing patent expirations, the high cost of R&D and the diminished availability of strategic tax inversions have increased company shareholder pressure to maximize efficiency and generate profits.
High costs and a shortage of laboratory space in infill locations are pushing life sciences developments and operations to the suburbs—but access to leading research institutions and top talent limits how far companies will go beyond the core clusters. The top U.S. life sciences clusters in 2016 include:
| Rank | 2016 Outlook Report(current) | 2015 Outlook Report | · Year-Over-Year Trends |
| 1 | Greater Boston | Greater Boston | · Life sciences real estate vacancy rates remain below 1 percent in Boston’s East Cambridge and the Bay Area’s North County. Rents have increased accordingly, reaching a high of $70.12 per square foot in East Cambridge. · Resource-rich U.S. cities are developing new life sciences facilities, such as New York’s Alexandria Center for Life Science, a $2 billion commercial campus in Houston and a 320,000-square-foot lab and office tower in downtown Philadelphia. · Office-to-lab conversions are helping meet demand for lab space in tight markets. · Fierce competition for space and labor has led to greater emphasis on site selection and amenities to attract talent and capital. |
| 2 | San Francisco Bay Area (+1) | Raleigh-Durham | |
| 3 | Raleigh-Durham (-1) | San Francisco Bay Area | |
| 4 | San Diego | San Diego | |
| 5 | Seattle-Bellevue (+6) | New York City | |
| 6 | Maryland Suburbs/DC Metro (+7) | Los Angeles/Orange County | |
| 7 | Philadelphia | Philadelphia | |
| 8 | Los Angeles/Orange County (-2) | Long Island | |
| 9 | Westchester County, NY (+5) | Minneapolis | |
| 10 | New Jersey (+2) | Seattle | |
| Source: JLL 2016 Global Life Sciences Outlook Report | |||
Business swaps, mergers and divestitures alter the life sciences landscape
U.S. M&A activity soared to an historic high in 2015, both in the quantity of deals and aggregate deal volume. Strategic business swaps—the spinning-off and tucking-in of a business line or asset for the purpose of driving value—are occurring frequently, with potentially significant impact on commercial real estate markets. Biogen, for example, is seeking a buyer for its haemophilia portfolio, but the buyer may or may not require the facilities associated with the business.
“The industry is becoming more and more competitive and it’s driving a vertical integration of the industry,” said Powers. “We used to talk about FIBCOs (fully integrated biotechnology companies) that spanned multiple therapeutic areas. What we’re seeing now is greater competition in this marketplace, which is driving companies like Biogen to really focus on their core competency.”
“Forward looking companies will start to think about disposing of their real estate as part of this vertical integration,” added Powers. “That will bring additional value to the company and also their existing remaining operations will be at the same high utilization rate as they are today.”
About the Report
JLL’s annual Life Sciences Outlook tracks geographic shifts in life sciences innovation, operations and facilities investments, including analysis of countries and cities most actively investing in their life sciences sectors. It includes a ranking of the top U.S. life sciences clusters, a look at top global cities to watch, as well as analyses of global trends. The complete findings of the Life Sciences Outlook are available in a dedicated microsite here.
