LifeSciences Outlook

Rents rising, options shrinkingUnited States | 2016

JLL Life Sciences Outlook

1

2016 U.S. Cluster rankings

Rank Cluster Weighted score

1 Greater Boston 87.5

2 San Francisco Bay Area 75.2

3 Raleigh-Durham 60.7

4 San Diego 58.3

5 Seattle-Bellevue 56.3

6 Maryland Suburbs / Metro D.C. 53.2

7 Philadelphia 49.4

8 Los Angeles / Orange County 44.7

Rank Cluster Weighted score

9 Westchester County, N.Y. 41.2

10 New Jersey 40.8

11 New York City 34.7

12 Minneapolis 34.5

13 Denver 34.5

14 Chicago 30.7

15 Central & Southern Florida 30.6

16 Long Island, N.Y. 30.0

Life sciences employment concentration: Weight: 20.0%Life sciences employment growth: Weight: 10.0%Life sciences establishments concentration: Weight: 10.0%Life sciences venture capital funding: Weight: 15.0%

National Institute of Health funding: Weight: 15.0 %Market Occupancy Rate: Weight: 10.0%Average Asking Rent (NNN): Weight: 10.0%Rentable Lab Supply: Weight: 10.0%

Asking rents climbing in clusters across the U.S.

Top U.S. submarkets Asking rent ($ NNN) Vacancy

East Cambridge (Boston) $70.12 p.s.f. 0.8%

North County (Bay Area) $57.84 p.s.f. 0.5%

I-287 West (Westchester) $52.00 p.s.f. 11.0%

Torrey Pines (San Diego) $47.40 p.s.f. 3.3%

Lake Union (Seattle) $43.87 p.s.f. 2.6%

CBD (Philadelphia) $28.00 p.s.f. 1.5%

Submarket spotlight

Mid-Peninsula – Bay Area Manhattan & Brooklyn – NYC Boulder / NW – Denver MetroAs the imbalance between tenant demand and available lab space grows, the region is seeing increased tenant migration toward dense life sciences hubs in the Mid-Peninsula, driving more than 1.6 million square feet of brand new development.

A global powerhouse in the commercial real estate market, New York City’s life sciences cluster is rapidly growing. Development is highlighted by Cornell’s new 2.1 million-square-foot tech campus dedicated to the applied sciences, expected to deliver in 2017.

Following recently signed lease deals this summer, the Boulder / Northwest submarket is anticipating a notable amount of positive net absorption. With the support of NIH funding, which increased by $280 million year-over-year, the cluster is gaining attention on a national scale.

Average lab rent (NNN): $51.87 p.s.f New Class A Lab (NNN): $90-105 p.s.f. Average lab rent (NNN): $18.77 p.s.f.

Average lab vacancy: 0.7% Average lab vacancy: 14.1% Direct lab vacancy: 11.7%

YOY rent growth: 41.8% Under construction: 3.6 million s.f. Total RBA: 4.0 million s.f.

M&A

M&A activity amongst pharmaceutical and biotech companies saw a record number of transactions in 2015, totaling $520 billion.

$520B

Industry theme #1:Strategic hunt for revenue growth

Source: U.S. Food and Drug Administration

Total Healthcare M&A deals

$0

$100

$200

$300

$400

$500

$600

2010 2011 2012 2013 2014 2015

< $500M $500M to $5B $5B to $20B > $20B

Industry theme #2:Influx of new sources of capital

Source: ???

Total Biotech VC funding

700

750

800

850

900

950

1,000

$

$2

$4

$6

$8

$10

$12

2007 2008 2009 2010 2011 2012 2013 2014 2015

Billion

s

InvestmentVolume TotalDeals

Industry theme #3:Tight markets drive new real estate solutions

Source: JLL Research

Vacancy by submarket

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

NorthCounty- BayArea

EastCambridge-Boston

Philadelphia- CBD LakeUnion- Seattle LosAngeles TorreyPines- SanDiego

I-270MarylandSuburbs

Industry theme #4: Prioritizing talent critical to growth

Source: QS World University Rankings

3.40%

3.50%

3.60%

3.70%

3.80%

3.90%

4.00%

4.10%

4.20%

4.30%

$72,000

$73,000

$74,000

$75,000

$76,000

$77,000

$78,000

$79,000

$80,000

$81,000

2012 2013 2014 2015

Annual Mean Wage

Employment Growth

Implications for life sciences companies?

• As M&A and business swapping increases, it will result in an increase in vacant space in secondary markets and lead to the renovation of older space to meet the needs of life sciences companies.

• Advances in medicine and global demographic trends point to an overall expansion of the life sciences industry. With demand still outweighing supply, asking rents for lab space can be expected to continue to rise, particularly in premier clusters.

• Unlike in other industries where companies are more inclined to flee top markets for the sake of affordability, life sciences tenants continue to seek out options in top clusters. With diminishing space options, secondary submarkets in top clusters are emerging and becoming more established.

© Copyright 2016 Jones Lang LaSalle

For more information, please contact:

Roger HumphreyExecutive Managing DirectorLife Sciences+1 (908) 698-2867Roger.Humphrey@am.jll.com

Dan LoughlinInternational DirectorBrokerage, New Jersey+1 (973) 939-3869Dan.Loughlin@am.jll.com

Richard McBlaine International DirectorCorporate Client Development+1 (312) 228-2793Richard.Mcblaine@am.jll.com

Lisa StropeDirector, New England ResearchAmericas Research +1 (617) 531-4243Lisa.Strope@am.jll.com

Wes SimonAnalyst, Boston ResearchAmericas Research +1 (617) 531-4216Wes.Simon@am.jll.com