Life Sciences Market Trends Q2 2023

by Dennis Kirkpatrick and Mike Marston

people working in a lab
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The Life Sciences construction market remains strong in 2023 but a sense of normalization to pre-pandemic levels is emerging across the broader market.

Multiple years of significant federal and private funding in R&D and manufacturing are starting to parallel a slowing global economy. Whether it is a reduced demand for COVID treatments, high inflation and interest rates, geopolitical uncertainty, supply chain challenges, lender impacts and banking stresses, or other influencing factors, there is no question Venture Capital (VC) investment and capital spend are showing signs of contraction.

Projects moving forward in 2023, whether in construction or design, have a sense of monetary caution. An emphasis on right sizing projects and eliminating the “nice-to-haves” is driving a behavioral shift from the past two years. This, combined with Global Social Responsibility goals, such as sustainability and trade partner diversity, emphasizes a requirement to plan it right from the beginning.

Markets to Watch

R&D and Biotech

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DPR's R&D Projects. Market activity reflects the quantity of projects and potential opportunities, and DPR’s high level analysis of the market.

The demand for R&D lab space has mostly stabilized across the market with some geographies seeing an increase over the past couple of years. The Bay Area and Cambridge continue to anchor the U.S. coasts, with moderate growth across all DPR geographies, including increases in emerging markets such as Texas and Colorado.

The market is more focused on ensuring tenant security prior to building in lieu of speculative building. Ongoing pressures of inflation combined with lower VC rates of investment are allowing the market to better understand their current state, and therefore better predict the future.

General lower performance and ROI over the last couple of years is showing potential optimism of recovery, dependent on the reduction of ongoing Federal interest rate hikes. More investment in growth opportunities like biotech will infuse energy into the R&D industry and drive more demand accordingly.

Markets to Watch

cGMP Manufacturing Expansion Continues

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DPR's cGMP Projects. Market activity reflects the quantity of projects and potential opportunities, and DPR’s high level analysis of the market.

As mentioned in 2022, the development of new drugs and therapeutic biological products continues to drive manufacturing expansion. Financially stable organizations with existing revenue streams combined with clinical launch products continue to support the cGMP market but funding for emerging markets remains unknown. The need for early-stage clinical space exists within emerging firms and evaluation of constructing their own cGMP spaces will continue.

The North America market remains saturated with new projects and emerging players requiring a continued focus on finding the right partners. The supply chain—especially equipment—remains a risk to project budgets and schedules.

While commodity pricing seems to be easing, the recovery to manufacturers is slow. Projects need to focus on equipment and material supply chains early in their projects to align financial and schedule expectations.

An emerging market worth noting is food science. Relying on similar manufacturing principles as the Life Sciences industry, it presents a dependable and sustainable food source alternative to a growing global population. The market is primarily VC funded, so concerns exist, but projects are developing across North America and APAC at a smaller scale, with larger expansions in the coming years.

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Looking for more general market insights? Take a look at our full market conditions report of Q2 2023. Or take the full report with you by downloading the PDF.

Photo: Warren Patterson Photography

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