CBRE Ranks Houston Second Among Emerging Life-Sciences Sector

HOUSTON – (By Dale King, Realty News Report) – The global struggle to eradicate coronavirus and end its worldwide stranglehold has accelerated the growth of, and interest in, the U.S. life-sciences industry.

This boost is largely powered by the race to produce a COVID-19 cure and develop medicines to remedy other human ailments.

The industry’s growth has boosted several emerging life-sciences centers, including Houston, Austin and Dallas-Fort Worth, says a new report from CBRE, a commercial real estate services firm. This, in turn, is creating new opportunities for commercial real estate in those Lone Star medical centers.

“Interest in Houston’s life sciences sector from developers, investors and financial backers has grown significantly in recent years,” said Nelson Udstuen,  senior vice president at CBRE.

“Several factors have contributed to this,” he noted, “including an increase in both federal funding from the National Institutes of Health (NIH) and private venture capital, a growth in R&D employment and commitments from Texas Medical Center member institutions and other private developers to establish new life-sciences buildings and campuses.”

“Houston is also a draw for the life-sciences industry due to its large cluster of life-science employees,” continued Udstuen. “Our market is home to a large population with the technical ability to perform Research & Development, meaning employers do not have to focus as heavily on recruiting from other markets.”

Among the largest life-sciences clusters ranked by employment are Houston, ranked 14thoverall with nearly 60,000 as its share of the R&D workforce and Dallas/Fort Worth, 17th, with a nudge over 20,000.

Clearly, Houston’s life-sciences industry is well within the 20 largest cores in the U.S. by employment. It is also the fourth-fastest growing for life-sciences jobs, expanding at a 6.5% pace from 2018 to 2019. The NIH contributed roughly $600 million to Houston institutions last year, which amounted to the 12th-largest sum by market.

The CBRE report says the life-sciences 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 show a market undeterred by disruption and, if anything, recharged for an intensified expansion.”

While life-sciences employment was down by just 1.3% in July from its peak in March, it was 1% higher than a year ago compared with the 7.6% decline in total nonfarm employment, the report says. Biotech R&D employment has been particularly strong, up by 4.9% from a year ago, it points out.

CBRE determined its ranking of emerging life-sciences markets by assessing their size and growth of employment in that field, concentration of R&D employment in life sciences and the venture capital and NIH funding they received.

Current ranking of long-established life-sciences centers include, in numerical order: Boston-Cambridge; San Francisco Bay area; San Diego; Washington, D.C.-Baltimore; Raleigh-Durham; New Jersey; Philadelphia; New York City; Seattle; Los Angeles; Chicago; Orange County, Calif. and Denver-Boulder.

Top emerging life sciences markets

Top emerging life sciences markets in the U.S., ranked from the top down, are Pittsburgh, Houston, Austin, Detroit, Phoenix, Dallas/Fort Worth, St. Louis, Atlanta, Portland, Ore., and Minneapolis.

Nationally, the life-sciences sector has reached new highs this year in R&D employment and venture-capital funding. Those factors and others have helped to fuel a surge in demand for life sciences real estate in markets from longstanding centers like Boston to emerging hubs such as Pittsburgh, Houston and Austin.

The life-sciences industry continues to build on its momentum. Venture-capital investment grew to a rolling annual total of $17.8 billion in the second quarter. Employment in U.S. biotechnology research and development professions exceeded 220,000 in July, extending a decade-long growth trajectory.

Construction at the Texas Medical Center in Houston. CBRE Ranks Houston Second in Emerging Life-Sciences Sector. Photo by Ralph Bivins. Copyright 2020.

Investors continue to consider lab and R&D space to be slightly more valuable on average than conventional office space, a trend that began in 2015. Lab-space vacancy is less than 8 percent in many top life-sciences markets and rents are rising in most.

In Houston, the TMC3 and the Hines Levit Green are two new projects under development that will add to the life sciences momentum in the city. And the existing Texas Medical Center employs over 100,000 people and has a number of institutions training thousands of students.

Other conclusions in the CBRE report include:

  • NIH funding to major universities and institutions for health care research is up 6% to $42 billion.
  • Total commercial laboratory space has grown by 12% this year to 95 million SF. Another 11 million SF is currently under construction. Despite the increased supply, lab rents are rising as tenant demand remains very strong.
  • A continued positive outlook is underscored by new growth drivers, such as government emphasis on the life-science industry’s pivotal role in combating COVID-19.

Oct. 26, 2020 Realty News Report Copyright 2020

File: CBRE Ranks Houston Second

Caption: Levit Green. Rendering courtesy of Hines

File: (2)  TMC3,  Hines Levit Green. Covid-19.  CBRE Ranks Houston Second in Emerging Life Science markets.

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