Amid Historic Glut Of Lab Space, Big-Name Developers Teeing Up New Projects

Between the excess of life sciences lab space on the market today and significant federal funding cuts threatening support for core research, most biotech builders aren’t in expansion mode. 

Which makes it all the more interesting that developers have moved forward on a trio of major mixed-use developments — including two featuring Houston-based giant Hines — in the past three months with a strong focus on life sciences.

“These developers seem to share the conviction that the life sciences market will eventually recover,” JLL National Life Sciences Research Director Mark Bruso said. “There is a clear indication from tenants that they want to be in core, well-amenitized markets adjacent to anchor research institutions. These projects check all the boxes of what life sciences tenants value.” 

Recovery seems far away. Recent JLL data shows a 9-to-1 supply to demand ratio in major markets, with anything less than top-shelf space facing “increased odds of distress in the next 12-24 months.” Plus, another 8.5M SF of lab space in some stage of development.

But three new projects on the boards are betting on a long-term turnaround. 

Hines and Healthpeak Properties announced a partnership April 29 to co-develop Cambridge Point, a 40-acre master plan with 5M SF of potential development. The project sits in Alewife, a neighborhood in north Cambridge, Massachusetts, that’s become a nexus of life sciences development and planning. Hines plans to start on the project’s first residential building after receiving entitlements next year.

More than half of the life sciences space in Alewife was vacant at the end of the first quarter, according to Colliers, far above Greater Boston's average vacancy rate of 29%.

But the area is poised to remain “a very attractive area for life sciences for years,” said Nancy J. Kelley, president and CEO of Nancy J. Kelley + Associates, a life sciences consulting firm.

Hines also won a bidding process in late May to serve as master developer for a mixed-use district near the North Bethesda Metrorail station in Maryland, a development on 14 acres owned by the Washington Metropolitan Area Transit Authority that will include an Institute for Health Computing from the University of Maryland.

The development firm was selected from a field of six competitors in part due to its “significant experience with and commitment to life sciences integrated with mixed-use development.”

Hines Senior Managing Director Andrew McGeorge told Maryland Matters that the project, years from breaking ground, “embodies a forward-thinking plan for life science.”

A Hines spokesperson declined to respond to questions about the developments in Alewife and Maryland.

In Hines' backyard, outside the Texas Medical Center in Houston, Winther Investment is planning a 280-unit midrise apartment building near one of the state’s central research institutions. It acquired the 2.1-acre site in the middle of 1500 OST, a walkable, mixed-use life sciences hub owned by NewQuest Crosswell Properties that is set to include hospitality, retail and lab buildings.

“Life science has gone to sleep,” NewQuest Crosswell principal Darryl Robinson said. “But with the excitement around TMC, it’s only a matter of time before life sciences uses come back.”

NewQuest bought the site roughly eight years ago as a long-term strategic hold, with life sciences as a strong consideration. Robinson said he sees multifamily as a great asset class to begin development since the current downturn in life sciences has made it more savvy to position the site for a lab rebound.

“We see this as a rare chance to deliver new residential options in one of the most innovation-driven neighborhoods in the city,” Frederic Gautier-Winther, head of Winther Investment, said in a statement. 

All these projects share an orientation around life sciences, as well as key locations in or near innovation districts that also make them valuable spots for residential development. 

But the new lab space faces a long road ahead. Life sciences real estate development ramped up significantly in 2022 and 2023 to the point that by early 2024, nearly 22M SF of product was set to deliver, including a number of multi-use projects near established biotech hubs.

During that historic run-up in biotech funding and higher demand for lab space, amenitized workspaces and high-end residential and retail could, the theory went, show how “real estate can be used to recruit and retain talent,” Trinity Capital Managing Partner Walker Collier told Bisnow. 

Projects like Levitt Green in Houston and Spark LS near the Research Triangle in North Carolina included significant efforts at placemaking in retail and residential development, concepts pushed by large-scale designers like Gensler.

Not every such project has played out as developers intended. Massive mall-to-lab district conversions in San Diego have stalled due to a decrease in demand and financing challenges. Overall lab vacancy rates have skyrocketed, hitting just under 20% nationally, per recent CBRE figures.

Despite the challenging market today, developers are lining up projects to capitalize on any positive shift in the future.

“When the market does recover and the development environment is friendlier, these groups will likely want to be shovel-ready and deliver these projects into a demand-rich environment,” Bruso said. “The first-mover advantage in market upcycles is large.”  

The early-stage projects in Alewife, Houston and Maryland are positioned around life sciences, but each site will start building more in-demand retail and residential elements. Life sciences can be a major economic driver, and housing shortages have created workforce issues in biotech. 

Kelly said these long-term projects may take five years, or even a decade, to be fully built out. And they all share a close connection to transit centers and academic centers, making them ideal innovative communities.

“Despite what’s happening in Washington and the overbuilt lab environment, people are retaining their faith,” she said. “They see the value in the industry to create new jobs and create innovations for the future.”