Gov. Shapiro Bets $30M On Pennsylvania Life Sciences Vying With Boston And The Bay Area
Philadelphia's real estate community made some big bets on the life sciences sector when demand for new medical technologies and the labs that produced them boomed during the pandemic.
That trend slumped as the country eased its way out of lockdowns and masking mandates, leaving Philly and other markets with too much space and too few takers.
Now, Pennsylvania Gov. Josh Shapiro hopes to change that and take on the sector's top dogs with $30M allocated for life sciences in his proposed 2025-26 budget.
“If you look at the landscape on life sciences, two regions have dominated for years: The Bay Area and Boston,” Shapiro said in his budget address earlier this week. “After them, there’s a huge drop off — and a huge life sciences void that should be filled by us.”
According to Shapiro, the new funding would help industry leaders share data, commercialize discoveries and “unleash Pennsylvania’s full potential.”
The governor said that despite Pennsylvania companies receiving 10,783 new life sciences patents over the past five years, the fourth-highest number in the country, it received just 3% of the venture capital allotted to life sciences.
‘That means we’re effectively doing the research but losing out on commercial opportunities to other states,” he said. “Let's change that.”
Several reports indicate Philadelphia could be well placed to challenge the Boston/Bay Area stranglehold on the sector thanks to its relative affordability and stability versus the Big Two and an uptick in venture capital funding.
The region is definitely a bargain. Asking rents in greater Philly were $52 per SF on average as of mid-2024, much lower than $88.37 in greater Boston and $77.17 in the Bay Area, according to a report from Newmark.
“Our occupancy cost is approximately two-thirds of that in Boston,” Colliers Executive Vice President Joe Fetterman, a broker focused on the Philly life sciences sector, told Bisnow last month.
But vacancy rates in Boston and the Bay Area were much higher. They sat at 27.6% and 27.8%, respectively, in the Newmark report, while Philadelphia's was 10.7%.
Rent decreases followed in those other markets. Boston and Cambridge, Massachusetts, saw asking rents drop by 10.9% and 12.3% in 2024, according to Newmark’s fourth-quarter life sciences report for the region. The Bay Area saw the metric fall by 1.5% in its corresponding local report from the brokerage.
Average asking rents in Philly actually grew 8.2% year-over-year to $47.21, according to a Q4 report from JLL. That was the second-highest growth rate nationwide behind only Washington, D.C.
Philadelphia has the capacity for lots of future life sciences expansion.
JLL counted nearly 1.7M SF of life sciences space under construction across the region in Q4, although its market is experiencing the same leasing slump that has hit life sciences markets nationwide. Even so, it finished out 2024 with roughly 688K SF of leasing activity, double the city's 2023 volume.
Savills highlighted some of the biggest life sciences projects slated to come online this year in its Q4 report.
Spark Therapeutics’ 500K SF Roche Global Center under construction on Drexel University’s West Philly campus is due in Q4. A few blocks away, Brandywine Realty Trust’s 3151 Market St. project and Breakthrough Properties’ 2300 Market St. development are expected to wrap up in the first half of this year.
Savills also tracked a modest potential turnaround for venture capital funding in the local life sciences market.
While the number of total deals continued to fall last year, venture capital funding for Philadelphia area companies in the sector totaled $859M. That was down from the peak of $2B in 2021 but up from the trough of $684.9M in 2023.
CORRECTION, FEB. 17, 1 P.M. ET: A previous version of this story named the wrong developer for 2300 Market St. The story has been updated.
