While Boston has long been known as the life sciences capital of the nation, Philadelphia is slowly but surely making a name for itself in that sector as well. If you’re wondering whether it's time to add some life science properties to your portfolio, read on to learn more about the life sciences real estate boom currently happening in the City of Brotherly Love.
What’s happening in Philly’s life science scene?
Over the past few months, the Greater Philadelphia real estate market has been experiencing massive growth in its life sciences sector. In May, CBRE (NYSE: CBRE) extended its Life Sciences Group into the region by announcing its intent to arrange renovation funding for a 1.6 million-square-foot Discovery Labs building in King of Prussia.
Then, in June, Scheer Partners opened a new office in Philadelphia's University City neighborhood. Three months later, in September, Ensemble Real Estate Investments purchased three life sciences facilities in Philadelphia’s Navy Yard, which adds up to 366,803 square feet of space.
Most recently, in December, Silverstein Properties and Cantor Fitzgerald announced they're partnering with Philadelphia’s University Place Association to develop a state-of-the-art life sciences building that will encompass 250,000 square feet of laboratory and office space. Notably, their project falls within both a qualified opportunity zone and a Keystone Opportunity Zone.
What’s behind the growth in this sector?
This deluge of new development and investment comes not a moment too soon. According to a recent lab space study by CBRE (NYSE: CBRE) and RES Group (NYSE: RES), the city's total lab space had just a 2% vacancy rate going into 2020 in the city’s popular University City hub, alongside limited vacancies elsewhere in the city and surrounding areas.
As far as what’s driving this need for more space, according to a June 2020 report by Newmark Knight Frank (NKF) (NASDAQ: NMRK), a commercial real estate services firm, the City of Brotherly Love is now the eighth largest player in the life sciences industry, comprising about 1.5% of the market share. The report also found that more than 800 life sciences companies have chosen Philadelphia as the ideal location to develop their products.
Though there’s no singular reason behind this Philadelphia boom, one can easily draw connections to the wealth of well-known educational institutions and research sites the city has to offer. According to the NKF report, the state of Pennsylvania is currently the fourth-largest state recipient of National Institutes of Health (NIH) funding, 41% of which was allocated to the University of Pennsylvania, the Children’s Hospital of Philadelphia, and Temple University -- all located within Philadelphia’s city limits.
Should you invest?
If you’re wondering whether you should invest in Philadelphia’s life sciences sector, consider the fact that, as a whole, the life sciences industry has been growing for years and is showing no signs of slowing down. Per a 2020 industry overview from Cushman & Wakefield (NYSE: CWK), the total investment in 2019 was $17.4 billion, up from just $3.7 billion in 2008, making this sector a stable addition to any portfolio.
In addition, it’s impossible not to mention the effect the pandemic is having on the industry as a whole, and in Philadelphia in particular. Of the countless companies that have been working tirelessly to create a coronavirus vaccine and related technologies, several are located in Philadelphia, including Inovio Pharmaceuticals (NASDAQ: INO), Chimeron Bio, GlaxoSmithKline (GSK) (NYSE: GSK), and Integral Molecular.
As promising as all this is, as with any investment, always be sure to do your research into a particular company before making any financial commitments. If needed, you can also choose to consult a financial advisor for assistance.