Demand for new life sciences lab space is far outpacing speculative construction in the Garden State, with biomanufacturing tenants looking for space in the market to meet rapid growth amid a global race for new drug development, according to a new report from CBRE.
“New Jersey is a hotbed for the life sciences sector, with strong (venture capital) funding, record job growth and demand for lab space outpacing supply by a large margin,” said Thomas Sullivan, senior vice president, CBRE. “Given New Jersey’s position as one of the country’s top markets for (research & development) employment growth over the past year, demand for space will remain extremely high and owners will have to adapt and create the type of properties needed to support this need.”
The life sciences industry was the leading source of employment growth in New Jersey, with biotech and R&D demand growing at the fastest rate on record. There are currently 17 tenants in the market looking for approximately 1.3 million square feet of space, while there is only 222,500 square feet of lab and R&D space under construction, 34% of which is preleased.
Demand has risen by 8.3% over the past six months. In Q3 2021, the vacancy rate in New Jersey was 9.1%, well below the 10% equilibrium point. As a result of low supply, New Jersey’s net lease rate pricing for lab space is up by 10-15% since mid-2020.
The largest New Jersey lease commitment during Q3 2021 was Hikma Pharmaceuticals’ 49,539-square-foot deal at the Interstate 278/78 interchange. In addition, Beyond Spring Pharma inked a 27,813-square-foot lease in Morristown and Sensient committed to 21,000 square feet in Somerset.