Investment Trends

Lab/R&D Investment Volume Declines but Pricing Remains Tight

Lab/R&D real estate investment sales fell back to relatively healthy historical levels in 2022. Total volume fell by 43% year-over-year to $14.4 billion. The biggest declines were in the San Francisco Bay Area (-62%) and Boston/Cambridge (-42%). Lesser declines occurred in San Diego (-17%) and the rest of the country (-27%).

Figure 28: U.S. Life Sciences Lab/R&D Property Sales (rolling four-quarter sum)

Source: MSCI, CBRE Research, February 2023.

While costlier debt markets affected life sciences asset pricing in 2022, the four-quarter moving average of lab/R&D cap rates stabilized in Q4 2022, mirroring a similar pattern in other sought-after property types such as industrial and multifamily. The spread between the average lab/R&D cap rate and that of all other office property types moved to a steep premium of nearly 83 basis points in Q4 2022 from a discount of more than 60 basis points in 2014.

Figure 29: U.S. Life Sciences Lab/R&D Cap Rates (rolling four-quarter average)

Source: MSCI, CBRE Research, February 2023.