09/17/2020

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Demand for Laboratory Space is on the Rise



A Bright Spot for the Real Estate Industry

While the real estate industry as a whole has suffered severely during the pandemic, one bright spot for landlords has been leasing space to life science labs researching COVID-19. The biotech and pharmaceutical industries were already a growing part of demand for real estate, but that trend has been accelerated by the rush to understand, treat, and prevent the virus.

Unlike work for many industries, lab work cannot be done from home. As governments and private companies pour billions of dollars into the fight against COVID-19, demand for lab space is rising.

Stocks to Watch

Large life-science real-estate companies are working to expand their supply of space to keep up with demand. Alexandria Real Estate Equities (ARE) just secured $1.1 billion with a new share offering. BioMed Realty, which was acquired by Blackstone Group (BX), is adding 2.5 million square feet to its 11-million-square-foot portfolio.

Brookfield Asset Management (BAM) recently purchased a 50% stake in a 700-acre research center near the University of Oxford for over $251 million. The owners are now in discussions about adding a hospital to the campus.

Looking Ahead

Some investors are concerned that the real estate industry is putting too much emphasis on life sciences buildings, and that eventually there will be a glut in supply.

For the time being, however, the sector is performing far better than hotels, traditional offices, and other real estate investments. Some retail landlords have said that as many as 50% of their retail tenants have missed rent payments during the pandemic. On the other hand, Alexandria, Brookfield, and Blackstone report that nearly all their life science tenants are up to date on payments.


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