In the 2010s, life sciences developments made up less than 5% of all office construction nationwide. In the last two years alone, such projects have compromised more than one-in-four new projects, according to a new report from commercial real estate software company CommercialEdge.
The report, released last week, warns of a possible oversupply on the horizon — and Boston is at a particular risk.
At the end of July, there were 12.4 million square feet of lab space under construction in the city — 89% of all new office construction in the region. Boston’s lab boom has consistently put it in the top spot for new office development nationwide.
Meanwhile, the pace of biotech investment is slowing. The first half of 2023 was the worst time for new investment in the industry since 2019, according to a July report from PitchBook. Dozens of companies have laid off employees this year, battling tough financial markets that have sent valuations crashing down.
“Life science is disproportionately buoying office starts across the country, especially in the traditional life science markets like Boston, San Diego and the Bay Area,” CommercialEdge senior manager Peter Kolaczynski said in the report.
Life sciences development remains attractive, due largely to the promise of cutting-edge technologies like mRNA and gene therapy. Boston is the top market for office construction this year so far, with 13.9 million square feet under development.
Labs can also fetch a high price. Lab sales this year have been around $323 per square foot in Boston, well above the $196-per-square-foot national average for all office buildings, per the report.
Meanwhile, other types of office developments are falling behind. National sales totaled $17.5 billion through the end of July, about one-third of the $51.9 billion in the first seven months of 2022. Boston accounted for just under $1.2 billion of that, also around one-third of last year’s sales.
When it comes to building industrial space, Boston lags behind most top cities. A separate report from CommercialEdge, also released last week, found that Boston had 5.52 million square feet of industrial construction underway, putting it squarely at No. 18 in CommercialEdge’s ranking. It has recorded $469 million in industrial sales this year, putting it at No. 14.
The city’s industrial space is also among the most expensive to rent. Boston had an average asking rate of $9.55 per square foot, a 9.5% year-over-year increase.
Sales stood at an average of $141 per square foot in the metro, with a $469 million, the second-highest year-to-date sale price in the Northeast behind only Philadelphia.