Growing demand for life sciences research space is driving an increase in office-to-lab conversion projects in the United States. According to a new report from CBRE, office-to-lab conversions in progress in the 12 largest U.S. life sciences markets at the end of 2021 amounted to 9.9 million sf, up 49 percent from the beginning of the year. In comparison, ground-up lab construction rose by 42 percent to nearly 18.8 million sf by the end of 2021. While both measures increased greatly, the jump in conversions underscores the challenges of building enough lab space to meet demand in recent years. Lab vacancy in many top markets sits at 4 percent or less.
The cost to fit out lab space with the necessary plumbing, ventilation, and electrical systems can be double to triple that of fitting out office space. Even so, the rise in conversion activity last year indicates that developers and investors are willing to cover those costs to capture the potential rent growth of lab space in comparison to office. In 2021, lease rates for laboratory space increased by an average of 11 percent in the 12 largest U.S. life sciences markets, while standard office lease rates increased by two percent. Areas currently experiencing a dynamic surge in office-to-lab conversions include Boston, San Diego, Los Angeles, and the San Francisco Bay Area.
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CBRE, Inc.
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Commercial Real Estate Services Provider
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