Unlike other types of office product with conventional office tenants, most life science tenants continue to operate as “essential” businesses and continue to occupy their spaces, albeit in staggered shifts and with increased use of personal protective equipment in all areas of their space. Lab work such as drug trials and development or gene sequencing cannot be replicated from home, and therefore are minimally impacted by work-from-home related disruption affecting traditional office-using tenants. However, firms that operate in the life sciences space will not necessarily be immune to economic damages posed by the current crisis—smaller, startup firms that require VC and grant funding to survive could face sizable headwinds if that funding is no longer as readily available.
Even before Covid-19, life sciences real estate was one of the top performing segments in the major urban clusters in Boston, San Francisco and San Diego, with markets such as Cambridge achieving some of the lowest vacancy rates in the country, coupled with record high office rents. In recent years demand in these top tier clusters has prompted growth into areas further outside of the core submarkets and has placed renewed emphasis on several emerging clusters throughout the country. On the East Coast, emerging markets such as the Research Triangle in Raleigh, University City in Philadelphia and New York City all have a powerful mix of research and hospital institutions, large number of advanced degree holders and healthy startup environments to support a robust life sciences industry. They are also in close proximity to each other by air, therefore, creating a larger, regional cluster. Similarly, on the West Coast, emerging markets like Seattle and Los Angeles have high levels of technology employment as well top ranked university systems that produce STEM graduates. Nearly all of the university systems cater to entrepreneurship and incubators, and many have specific carve-outs for life sciences startups needing lab space.