What is Life Sciences in Real Estate?

What is Life Sciences in Real Estate?

Life Sciences refers to the specialized sector of the property market that supports industries focused on scientific research, biotechnology, pharmaceuticals, medical devices, and related fields. Life sciences facilities typically include laboratories, research and development spaces, clean rooms, manufacturing plants, and office spaces that meet specific requirements for scientific and technical work.

Here are some key aspects of life sciences real estate:

1. Location: Life sciences clusters are often located near universities, medical centers, and research institutions to leverage access to talent, research, and funding. Major clusters include Boston, San Francisco, and San Diego.
2. Facility Requirements: Life sciences buildings require specialized infrastructure, such as reinforced floors for heavy equipment, advanced HVAC systems for ventilation and air quality control, and lab-specific setups like fume hoods, deionized water systems, and backup power sources.
3. Tenant Stability: Life sciences tenants tend to have longer lease terms and higher capital investments in spaces due to the specialized nature of the facilities, making them relatively stable compared to traditional office tenants.
4. Growth Drivers: The demand for life sciences real estate is driven by the expanding needs for medical research, biotechnology advances, pharmaceutical development, and aging population health demands. With a strong focus on innovation and R&D, these industries require specific real estate to facilitate growth and development.
5. Investment Appeal: Given the demand stability and specialized nature of these spaces, life sciences real estate has become an attractive asset class for investors, often resulting in high occupancy rates and rent premiums compared to standard commercial office space.

Real estate that supports life sciences helps facilitate the research and development for medical and technological advancements.

What Are Some Ways to Invest in Life Sciences Real Estate?

Investing in life sciences real estate can be done through direct property acquisitions, investing in Real Estate Investment Trusts (REITs) focused on life sciences, partnering with developers or operators specializing in lab and research spaces, investing in funds targeting life sciences real estate, or purchasing shares in publicly traded companies with substantial life sciences portfolios. Each of these methods provides exposure to the sector's growth potential, driven by rising demand for specialized facilities in biotech and medical research.

Since REITs are one of the easiest/most liquid ways to invest in real estate, here's a list of the top five life sciences REITs to get you started:

1. Alexandria Real Estate Equities (NYSE: ARE): As the largest pure-play life sciences REIT, Alexandria owns and operates high-quality lab and office spaces in key markets such as Boston, San Francisco, and San Diego. The company boasts an asset base of approximately 74 million square feet, focusing exclusively on life science properties.
2. Healthpeak Properties (NYSE: PEAK): While Healthpeak has a diversified portfolio, it has a significant focus on life sciences real estate. The company owns and develops properties in major biotech hubs, including South San Francisco, Boston, and San Diego. In April 2024, Healthpeak raised its annual funds from operations forecast, citing increased demand for its life science properties.
3. Ventas, Inc. (NYSE: VTR): Ventas is a diversified healthcare REIT with a growing portfolio in the life sciences sector. The company invests in research and innovation centers, partnering with leading universities and research institutions to develop state-of-the-art facilities.
4. BioMed Realty (Private): Acquired by Blackstone in 2016, BioMed Realty is a leading provider of real estate solutions to the life sciences community. The company owns and operates properties in major life science markets, including Boston/Cambridge, San Francisco, and San Diego.
5. Harrison Street Real Estate Capital (Private): Harrison Street is a real estate investment management firm with a significant focus on life sciences properties. The firm invests in research facilities and lab spaces, primarily in collaboration with academic and healthcare institutions.

These REITs help support the infrastructure needs of the rapidly growing life sciences industry, providing specialized facilities that cater to the unique requirements of biotech and pharmaceutical companies.