Life sciences office space is a growing industry while retail malls are reeling, and a new acquisition by a real estate investment trust (REIT) is a daily double for retail investors following and reacting to those trends.
The Boston Globe says Alexandria Real Estate Equities (NYSE: ARE) is working on a deal to buy an aging mall in an area that’s a hotspot for Beantown’s exploding life sciences market for commercial real estate.
Watertown Mall is across the street from another former mall, the Arsenal Mall, that’s being converted into a seven-building complex covering 1 million square feet of mixed-use space in the Boston suburb that gave it its name, the Globe article says. Alexandria Real Estate Equities itself spent $525 million in 2019 to buy a nearby healthcare technology campus and plans to significantly expand space there.
Alexandria Real Estate Equities and others are leveraging a pandemic-fueled natural advantage life sciences has over other consumers of office space: This is an industry that just doesn’t lend itself well to working at home.
Not the only way to redo a mall, but it’s particularly promising
In her piece titled "A New Use for Old Department Stores: Laboratories," Millionacres’ Maurie Backman lays out the background for malls to repurpose into such use, noting some such conversions have begun in the United Kingdom and how an Iowa mall has been hosting vaccination clinics.
There also are plans underway to convert vacant mall space into apartments, including a New Jersey project by PREIT (NYSE: PEI), a mall operator that recently went through a Chapter 11 bankruptcy organization.
The creator of the "Fortnite" video game also is buying a North Carolina mall to convert into its new headquarters.
But the life sciences surge is particularly appealing, given the money it attracts and the prospects it presents. That whole vertical is in a growth trajectory that, along with IT specialties, stand out among employment sectors expected to surge in the next 10 years, according to a recently revised report the Bureau of Labor Statistics issued because of the pandemic. (Check out this New York Times piece [subscription required] for the highlights of that report.)
The Millionacres bottom line
Investors looking for likely spots to take advantage of the appetite for office space in the life sciences industry might take cues from big operators like REITs and the Blackstone Group (NYSE: BX), which is committing billions to expanding its portfolio of life sciences properties.
Some of their most obvious strategies are buying space near centers of such activity already underway, including malls and office space. Individual real estate investors without those kinds of deep pockets can look for opportunities in spaces too small for the big shots to bother with, such as small office buildings and strip mall centers.