Greater Boston is once again the #1 life sciences cluster in the US according to JLL’s annual Life Sciences Outlook. In fact, since JLL began producing the report in 2011, no other city has held the top spot. It should come as no surprise that the region possesses the largest concentration of life sciences researchers in the US, has more than 3.75 million square feet of requirements, and accounts for more than 1/3 of the industry’s VC funding.
That all said, the life sciences industry is constantly evolving both here in Greater Boston and across the US. To that end, we’ve identified the top 4 trends impacting the industry today:
1. Strategic hunt for revenue growth
The US saw M&A activity soar to record heights last year. Within that umbrella was an increase in what we call business swaps, or the spinning-off and tucking-in of a business line or asset for the purpose of driving value. This trend can be traced back to last July when Allergen sold off its generics division for $40.5 billion to Teva Pharmaceuticals so it could focus on being the leader in Branded Growth Pharma. As my colleague Matthew Powers describes in the below video, the impact of this vertical integration of the industry cannot be overstated.
2. Influx of new sources of capital
While institutional investors have traditionally looked past life sciences properties, investors are now recognizing the value in this unique asset class. In the past nine months, Morgan Stanley Real Estate Investing acquired two lab buildings in West Cambridge as part of their Prime Property Fund, which primarily targets core US real estate. Perhaps the most notable indication that this is becoming a reality however is Blackstone’s purchase of BioMed Realty Trust. This represents the largest private equity real estate firm in the world buying the leading provider of life science real estate solutions.
3. Tight markets drive new real estate solutions
Driven by fierce competition for space and labor, tenants are putting more emphasis on the importance of site selection and amenities. With open, flexible floor plans becoming standard, the focus has turned toward amenities as companies desire more interactive spaces. Locally, shovels are on the ground at the Alexandria Center at Kendall Square where Bristol Myers Squibb will be the anchor tenant in the 500,000-square-foot office and lab building. In addition to being in the heart of East Cambridge, ACKS includes restaurants, shops, state-of-the-art fitness centers, a bus shuttle service and an ice-skating rink.
4. Prioritizing talent critical to growth
In today’s constantly evolving workforce, the ability to attract, develop and retain top talent is fundamentally important to company growth. Proximity to higher education institutions is crucial for life sciences firms and weighs heavily into real estate decisions. In fact, seven of the top 10 biological science programs are at graduate universities located in the top clusters of Boston, the Bay Area, and San Diego. The increasingly competitive landscape and demand for highly skilled labor has led to sustained wage growth for life sciences employees. This trend is likely here to stay due to a confined labor pool and need for candidates with advanced educational degrees.
For more on these trends and a closer look at the Greater Boston life sciences market, download the complete JLL Life Sciences Outlook.
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