CBRE | Raleigh, a commercial real estate services company, released a research report in October 2020 that named the Raleigh-Durham area as number five in the nation for the life sciences.
The life science industry is defined as companies, businesses, and research institutions dedicated to improving organism life and includes the fields of biotechnology, pharmaceuticals, food processing, environmental studies, biomedical manufacturing and much more.
The Triangle has long established itself as a leader in life sciences with its Research Triangle Park campus, the largest research park in the United States. RTP is home to 450-plus life science companies, 10 million square feet of laboratory inventory, and 50,000 employees in a variety of research and development organizations.
Even Triangle sister towns like Clayton, Holly Springs and Sanford are home to pharmaceutical giants Novo Nordisk, Grifols, Seqirus and Pfizer. As Lee Clyburn, an executive vice president at CBRE | Raleigh, pointed out, sometimes life science companies want to locate in perimeter areas where there is available space at a more affordable cost.
“We’ve always had big manufacturers establish a presence here, but in recent years, there’s been an explosion of biomanufacturing in the Triangle,” Clyburn said.
The question is, why are so many big-name companies and manufacturers deciding to locate to the Triangle?
For starters, the Triangle is consistently rated as one of the best places in America to live due to its quality of life, weather, health care systems and affordability. Clyburn noted the Triangle’s real estate costs are also lower compared to other areas such as New England, which ranked high on the life science cluster list, making it an attractive place to set up research labs and biopharma manufacturing sites.
“In the Triangle, lab rents are around $28 to $35 per square foot; while in New England, rents could be up to $125 per square foot,” he said. “If a company wants to build out a new site and hire people for their life science company, it’s very appealing to do that here.”
Ann-Stewart Patterson, first vice-president with CBRE | Raleigh’s Advisory & Transaction group added, “One of the most unique attributes about our market is the strong balance between academia, research/lab and GMP (good manufacturing practices) manufacturing coupled with the balance between owner/users on the manufacturing side and the institutional ownership on the lab side.”
According to the CBRE | Raleigh Life Science Cluster 2020 report, the Triangle area has experienced above-average growth in its local life sciences employment base, with total life sciences employment in this market jumping 5.2 percent versus 4.2 percent in the U.S. between 2018 and 2019.
Biomanufacturing in particular has undergone a significant expansion here, with tenants currently seeking nearly 2 million square feet of biomanufacturing space and approximately 840,000 square feet of wet lab space. Existing employers, such as Grifols, Novartis, Fujifilm, LabCorp and Merck, are growing and are just a few well-known companies in the Triangle that have contributed to the biotech growth.
There have also been announcements this year from Eli Lilly, Beam and Grail. These three companies have committed to more than 1 million square feet of new real estate in the Raleigh-Durham market.
“Many developers are converting existing real estate to support life sciences,” said Clyburn. “Buying second-generation buildings for conversion adds speed to the lab inventory our market can offer, plus we have a deep bench of developers with laboratory experience who are very active in our market. Raleigh-Durham also offers large land parcels that are ‘pad ready’ for life science users.”
There is also a strong need for new speculative construction as well.
“For decades, our area has been home to many large pharmaceutical manufacturing companies, but with new science and technology, the demand for space by biomanufacturing therapy companies is very strong. It is important for them to be near R&D, and the real estate is specialized. Unlike the lab conversions we are seeing in the Triangle, these groups will demand new speculative construction,” said Patterson.
Even during the COVID-19 pandemic, when many industries are struggling, the life sciences industry is thriving.
“The life sciences industry has been thrust into the spotlight as the United States faces its greatest public health crisis in a century. As the industry works feverishly to develop a vaccine and effective treatments for COVID-19, investors, policymakers and the public have a renewed interest in the vast opportunities and potential presented by the life sciences sector,” states the report. “This heightened interest is already influencing commercial real estate. The industry has displayed remarkable resilience to the economic downturn, with new sources of demand and a flood of venture capital to support various initiatives. Across the various U.S. life sciences lab clusters, our data shows a market undeterred by disruption and, if anything, recharged for an intensified expansion.”
“Raleigh-Durham has been experiencing a steady organic growth of the life sciences industry in recent years. As we watch it evolve and continue to expand, developers are leveraging the opportunity to be a part of the growth with new market options,” said Tom Fritsch, CBRE | Raleigh’s senior managing director. “The world is facing the opportunity of finding a vaccine for COVID-19 head-on and as the race continues, the life sciences industry is needed now more than ever. However, it’s clear that these companies need space and investment to make this happen and our market is poised to support the continued growth.”
This is all good news for the Triangle in a time where many other regions are struggling with the current national economic downturn. Having a stable commercial real estate market, as well as an industry and venture capital to support it, reveals the life science industry is displaying resilience to the economic downturn and is recharging the market for intensified expansion.
“Raleigh-Durham’s life sciences market is experiencing considerable growth and transformation. Few markets can match its recent employment growth, and developers are responding with various transformative redevelopments and conversions to fuel future growth,” stated the report.
“This thriving industry is a good thing for our market,” added Clyburn. “It means more jobs and more investment opportunities in our community.”