How Boulder Is Emerging as a Top Niche Life Sciences Market
The life sciences industry constitutes businesses and organizations engaged in researching, developing, and manufacturing food processing, pharmaceuticals, cosmeceuticals, biotechnology-based medicines and food, nutraceuticals, medical devices, biomedical technologies, and other products that improve lives.
Whether you’re a life sciences enthusiast or a real estate investor in Boulder, Colorado, you should be excited to learn how the area’s life sciences market is doing. Please keep reading for an overview of the current situation as it stands.
Life Sciences Market Insights
Based on a recently published report from the American commercial real estate services and investment firm CBRE, hefty increases in employment and funding have significantly boosted the demand for lab space and promoted new construction in Boulder.
The study revealed that the demand for life-sciences lab space has surged by a staggering 87% in the past year. Despite only a 0.5% vacancy rate for lab space in the area, demand is fast, outpacing supply. It seems that a different biotech company announces a move or expansion to the Boulder area every other week. These findings indicate that life-science lab space is emerging as a highly sought-after segment of the city’s commercial real estate sector.
In the first quarter of 2021, the life science industry of Colorado State raised $704 million in funding from federal, public, and private sources, setting up a new record. NIH funding and record-setting private investment contribute to rising demand in the life-sciences sector of Colorado. At the same time, the limited supply of shell or turnkey labs, coupled with recent high-priced acquisitions of assets with lab space or the ability to convert to lab space, is causing an increase in rent and providing opportunities to property owners in the area.
Boulder submarket will continue to see high demand for lab space in the life sciences industry, so you can expect a further increase in the associated real estate investment opportunities in the upcoming years.
How Are Investment Firms Responding?
Many forward-thinking property investment firms and out-of-market capital focused on Life Science have already begun making the most out of the opportunities in the life sciences industry. Let’s take a look at a few notable instances.
For instance, Graham Street Realty (GSR), San Francisco-based commercial property investment firm, sold the 2945 Wilderness Place in Boulder, the 2-story, Class B lab and office building containing lab improvements and traditional offices. The property formed part of the three-property portfolio, including 2945 Wilderness Place, 5665 Flatiron Parkway, and the 3005 Center Green Drive, reaching 114,862 square feet of leasable lab and office space.
Despite a challenging economic environment, the company benefited from the strong demand for life science properties. For over 20 years, the real estate unit has maintained 100% occupancy, during which it continued to function as a life-science building. The property was leased to a single biotechnology tenant that the GSR renewed for an additional term during this period.
On a similar note, in July 2021, the Boston-based Beacon Capital Partners acquired the Pearl East Business Park for $392 per square foot or $190 million and 2865-2885 Wilderness of 45,000 SF at $18.6M for conversion to Life Sci space. Even as early as December 2020, Medtronic, the Irish medical device manufacturing giant, traded its Gunbarrel campus for $36.5 million. This was when it started developing its enormous, 400,000 sq. ft., 42-acre campus in Lafayette. It has been re-traded for $125.5 million to another group out of CA as of December 2021. Flatiron Park’s portfolio at 1M SF is listed at $600M and rumored to be closing with a subsidiary of Blackstone that plans to convert several assets to life science-ready space. The Pfizer campus of 151,384 SF at 3200 Walnut was sold in Jan 2021 for $90M.
Moreover, LightDeck Diagnostics, a Boulder-based company, secured a $35.1 million contract from the US Department of Defense to boost production for its COVID-19 antibody test. In order to supplement its existing facility at 5603 Arapahoe Ave., it is looking to add around 60,000 to 70,000 sq. ft. of new lab space. It landed at 1884 Nelson R in Longmont in 65k SF.
Other recent transactions have included Umoja in 146k SF in CTC, Cogent Biosciences, and Dicernia in Pearl East Business Park at 38k and 25k, respectively, along with several other recent transactions in the Boulder marketplace and over 1M SF of active tenants.
The insights above collectively imply that life sciences are here to stay. However, with a cap on the number of life sciences lab spaces available, the chances are that the existing office space will need to be redeveloped and upgraded to life sciences lab spaces. Property owners are actively seeking creative solutions to address the supply issue. More than 540,000 square feet of office space is already planned to be converted into labs in the Boulder area.
With limited lab space, investors’ expectations of returns on historically high acquisitions, as well as the future return of tech to offices in Boulder and the large buy-in price on recent will sharply boost the rent in the next two to five years.