Denver’s Lab Vacancy Is Among The Lowest In The Country

Denver’s life sciences market is poised for growth because of its low asking rents and high product delivery pipeline relative to other markets, but experts remain concerned about economic headwinds preventing future deals, according to CBRE’s latest market report. 

Overall, Denver’s 8.3% life sciences vacancy rate in the second quarter was the fourth-lowest among 13 leading life sciences markets, such as San Diego and Cambridge, Massachusetts, CBRE found. However, that rate is more than double the 4% vacancy rate that was recorded at this time a year ago, due in part to the delivery of new product over the last 12 months. 

Outside of low vacancy, CBRE Senior Vice President of Life Sciences Erik Abrahamson said in a press release that the Denver market’s robust talent pipeline shows the market is in the midst of a “major shift” and has caught the attention of the “most sophisticated life sciences developers.” However, economic headwinds stemming from the capital markets slowdown still pose a threat to the market’s future, Abrahamson added. 

Life sciences investment has declined steadily after peaking in Q4 2021 with more than $33B invested across the country. Denver was able to buck that trend in Q2 when it attracted more than $119M of life sciences investments, the highest total recorded since Q4 2020 when more than $150M was invested in the market. 

“While the national pullback in venture capital funding is causing some companies to delay leasing decisions, the Denver-Aurora-Boulder area continues to see strong funding, research talent growth and steady preleasing,” Abrahamson said in a press release. 

The U.S. life sciences market surged after the onset of the pandemic as medical supply and research companies sought more efficient spaces. However, investors have pulled back from funding new developments because of turbulence in the capital markets, CBRE found. 

CBRE Americas Life Sciences Leader Matt Gardner said in the report that this activity is emblematic of the “choppy waters” the life sciences market is navigating. The U.S. recorded more than 1M SF of negative net absorption in Q2, which is illustrative of the market coming back to earth after a pandemic-driven boom. 

“Many metrics have receded from their 2020 and 2021 highs, but they’re still above pre-pandemic levels,” Gardner said. “There is a lot of promising science in the works to propel this industry forward once the lending environment settles.”

There are reasons to be bullish about the Denver market’s future, CBRE Executive Vice President David Saad said in a release. Saad pointed to the market’s growth in life sciences talent, which has grown by 15.1% over the last decade, as one reason. The Denver life sciences market was also ranked in the top 10 nationally by CBRE and is the second-fastest-growing market of the top 25 markets the firm analyzed. 

The market is also seeing solid leasing and sales activity, Saad said. Mosaic Life Sciences signed a new lease for more than 18K SF at 5710 Flatiron Parkway in Boulder in Q4. Think Bioscience inked a lease for more than 11K SF in Boulder in Q1. 

“Barriers to entry in the nation’s largest life sciences markets are compelling companies to expand to places like greater Denver, which is known for its highly-educated talent pipeline,” Saad said in the release. “The region’s universities, medical research facilities, and biotech destinations are creating an ideal ecosystem for the industry to grow in Colorado.”