Denver Life Sciences Market Facing ‘Unique And Perfect’ Storm For Growth

Life sciences experts say the Denver market is on the precipice of rapid growth, as development and leasing activity continue to soar. But there are still significant roadblocks along that path, like high interest rates keeping investors at bay and Denver housing prices making it difficult for businesses to retain labor.  

As of the first quarter, more than 475K SF of life sciences space was either under development or renovation in the metro Denver area, according to CBRE’s latest market report.

While this figure pales in comparison to top-tier life sciences hubs like San Diego or Cambridge, Massachusetts, the city is in the midst of a “unique and perfect” storm for growth as vacancy rates increase in the top hubs and technological advances continue to drive new lab design trends, according to Mortenson Director of Real Estate Development for Healthcare Chantily Malibago. Malibago was part of a panel at Bisnow’s Healthcare and Life Sciences Summit on June 27 at the Hilton Denver City Center.

Malibago described Denver’s perfect storm as a three-legged stool that includes technological advancements from artificial intelligence, financial constraints from macroeconomic pressures, and the social inequities brought to light during the pandemic.

Malibago said AI could help solve a lot of the issues in healthcare today, especially the socioeconomic fissures that were exposed during the pandemic in the way certain communities receive healthcare. At the same time, financial constraints are causing life sciences and healthcare businesses to more strategically deploy their capital. 

“All of the growth fundamentals are there, but developers still need to do their homework first,” Malibago said.

Colorado Bioscience Association Executive Board Member Byron Hewett said medicine is becoming much more personalized, which means life sciences and healthcare companies need spaces that are more efficient and agile as they look to expand horizontally instead of vertically. 

CRB Group Project Manager Ben Orozco said the need for more efficient lab space is also driving some new design trends. For example, Orozco said, a lot of amenities that are being put into lab spaces are similar to those found in the tech industry. Meanwhile, some life sciences hubs in places like Chicago are experiencing a period of urbanization where high-rise and multitenant spaces are king. 

“These scientists are rockstars. They are changing the world, and they know it,” Orozco said. “So you have to find a way of attracting them here.” 

Denver still has some challenges to overcome if it wants to be a top-tier life sciences and healthcare hub like San Diego or Cambridge, according to Conscience Bay Co. Director of Development Daniel Aizenman.

Aizenman said the metro lacks available lab space in Boulder, which is the area’s most popular market for life sciences properties and had a direct vacancy rate of about 4% in Q1, according to CBRE. That rate is well below the 10% average rate that was measured across the metro. 

Boulder also had only 65K SF of vacant lab space in Q1, CBRE found, which is one reason why the market’s asking rents are about $5 to $14 per SF more than the metro area’s average. For comparison, the northwest and northeast submarkets had vacancy rates of 33.5% and 19.3%, respectively, despite the markets having a combined 350K SF of vacant space, according to CBRE. 

CBRE data also shows that San Diego had more than 2.4M SF of available lab space in Q1, and Cambridge had about 2.7M SF of available space. However, the CBRE reports on both markets said vacancy rates are increasing and landlords are having a tougher time finding tenants.

Outside of available lab space, Aizenman said Denver still needs to address its lengthy life sciences entitlement process, which he said can take about five years to get all of the necessary approvals. Meanwhile, the industry is also facing a period of high construction costs and supply chain disruptions. Aizenman said certain materials like switchgears for a building’s electrical system have a lead time of at least 52 weeks. 

Despite the challenges Denver’s life sciences market faces, Hewett said there are still a lot of strong fundamentals. The metro area is home to large hospitals like Denver Health and Swedish Hospital. Established life sciences companies like Crestone and SomaLogic also have offices in the metro area.

There is also a large biosciences and healthcare talent pool due to the presence of the University of Colorado Boulder and the Anschutz Medical Campus, which U.S. News and World Report ranked as one of the top schools for primary care and geriatric medicine. 

The metro area also has a natural competitive advantage from the Colorado lifestyle, Hewett said, but keeping people may prove to be a challenge given Denver’s high home prices. Data from Redfin shows that the median home price in the Denver metro area increased by 29% from around $466K in June 2020 to $600K as of June 2023. 

“We have a lot of work to do, but I think we’re poised for success,” Hewett said.