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Insights

Demand for Lab and R&D Space Rises Across the Garden State

Increased investment and employment in the life sciences sector has driven life sciences related real estate to new heights, according to Cushman & Wakefield’s new 2022 Q1 Life Sciences Update.

Growth in the life sciences sector has directly translated into increased demand for lab space across major markets including New Jersey. As a cheaper alternative to some high-priced lab markets, the Garden State has recorded a rise in lab and R&D demand over recent years. 

Coupled with strong capital flows, life sciences companies have increased their footprint in most markets, driving up rents and increasing occupancies. With the New Jersey market tightening amid healthy activity, asking rents for life sciences space has risen markedly over the last two years. Compared to 2020, the average net asking rental rate has swelled by 12.2% to an all-time high of $33.61 per square foot.

Nationally, life sciences employment has continued to fare better than the U.S. job market with year-over-year growth up 7.9% and 11.4% in 2020 and 2021, respectively. Since 2011, total U.S. employment growth has averaged 1.0% per year while life sciences employment has increased by 6.6% per year, on average. The top 10 life sciences MSAs account for 45% of the U.S. life sciences talent pool led by Boston, NYC-NJ, San Francisco, Philadelphia and San Diego.

Since 2001, New Jersey has experienced a 141% increase in life sciences employment, with the employment and talent pool reaching 43,700 current and potential employees. The highly educated talent pool, along with an innovative ecosystem with top-rated research universities and a persistent pipeline of biotech start-ups, continues to motivate companies to expand.

Investors remain extremely interested in purchasing life sciences facilities throughout the Garden State, especially fully leased assets. Institutional buyers such as Thor Equities, Harrison Street, and Lincoln Equities Group have all entered the life sciences marketplace in recent years. Investment transactions in 2021 included the $47 million sale of 170 Park Ave., the $39.7 million sale of 86-90 Morris Ave., and the $36.8 million sale of 111 Ideation Way.

 

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