With the rapid expansion of the U.S. life science industry, investor interest in life science properties has expanded dramatically, despite the fact that such properties are more expensive than ever.

Prices in the sector are up. During the recession, life science cap rates averaged about 9% nationwide. Since then, compression has been steady, with cap rates at about 6.5% as of Q3 2018 — a little lower than standard office space, which has also seen cap rate compression in recent years.

That isn't keeping investors from betting on the sector, including major players. Since 2013, sales of life science properties have roughly doubled to about $9B in 2018, according to CBRE data.

In 2016, for instance, Blackstone Group acquired life sciences specialist BioMed Realty Trust for nearly $5B, and Related Cos. and Canada's Public Sector Pension Investment Board are also active buyers in life sciences real estate, The Wall Street Journal reports.

Investors are strongly motivated to be in the sector, having taken note of the growing number of jobs created by the life science sector, whose workers typically need specialized space.

During Q3 2018, life science job growth was up 3.2% year over year, according to the Bureau of Labor Statistics, considerably higher than the 1.7% overall increase in employment for the same period a year earlier.

Also, venture capitalists are pouring money into the industry. As of the end of Q3 2018, VC firms had put $15.8B into life science companies over the previous four quarters. That is an 86% increase compared with the same period a year earlier, according to CBRE.

Most of the industry's growth has been in a handful of markets, especially Boston and the Bay Area, though other metros are up-and-coming in the sector, such as Houston, San Diego, Chicago and New York.

Characteristic of the top life science markets is a lack of space as development hasn't kept pace. In Boston, life science vacancy was 4.1% at the end of 2018, and some markets are much tighter, such as Cambridge's 1.7%, CBRE reports.

A lot of space is underway, meaning that growth in the industry will need to continue for property investors to win the bets they are making. Nearly 1.5M SF of spec life science space is under development in Boston for delivery between 2019 and 2021.

In the Bay Area, life science vacancy is 2%, with about 2.4M SF under construction at the end of 2018.