Houston's Life Sciences Sector Still Challenged By Lack Of Lab Space — For Now
Houston's reputation for the life sciences is growing, but the city still lacks enough lab space to seriously compete with other well-established clusters in the U.S.
Despite plenty of investment, Texas' strongest healthcare-oriented city failed to crack the top 10 cities ranking in JLL’s newly released 2021 Life Sciences Real Estate Outlook report. The report showed Boston remains the dominant life sciences cluster in the U.S., with only a handful of other coastal cities qualifying as realistic competitors.
Familiar entrants appeared in the firm’s top 10 list of U.S. life sciences clusters, with the San Francisco Bay Area, San Diego and Raleigh-Durham coming in second, third and fourth, respectively.
Overall, Houston ranked 15th out of 46 markets, JLL confirmed. Using an updated methodology this year, the brokerage’s researchers accounted for factors such as talent, industry depth, innovation and lab real estate dynamics.
Houston’s rank might come as a surprise, as billions of dollars worth of life sciences projects are planned or under construction, including the Texas Medical Center’s TMC3 campus; Rice University’s The Ion project; Hines and 2ML Real Estate Interests’ Levit Green; and Medistar Corp.’s Innovation Tower; as well as the forthcoming Texas A&M Innovation Plaza development, which will include medical and lab space within its Horizon Tower.
That growing pipeline of projects is excellent news for the city’s life sciences prospects, but it doesn’t solve the more immediate problem of catering to startups and companies that need space right now.
JLL Senior Vice President and Director of Research Amber Schiada told Bisnow its model is focused on highlighting the opportunity for occupiers and real estate investors and is specific to lab space. It doesn’t consider traditional healthcare assets; if it did, Houston’s ranking would be much higher.
“What’s interesting about Houston is that it has the legacy of research talent and institutional depth that define a life sciences ecosystem. It’s challenged by lack of lab space for companies to grow into and scale,” Schiada said.
When it came to talent, Houston ranked ninth overall. The city has a much higher concentration of life sciences talent than the U.S. average, ranking eighth among the markets in the JLL model for that specific kind of talent, Schiada said.
Houston also generates great talent, based on the number of Ph.D.s earned locally in life sciences programs. Schiada noted that National Institutes of Health funding is also in the top 10, but venture capital dollars aren’t flowing quite as freely as in other markets yet. That availability of funding is the key driver of leasing and demand for commercial lab space.
“Houston has the right ingredients to support growth in the life sciences, but the lack of lab product could be a challenge for companies looking to scale [there]. But, there’s a ton of potential,” Schiada added.