Despite financial challenges for many companies in the life sciences, the Triangle’s real estate market for lab and research space remains strong with its vacancy rate near the industry average and rent prices continuing to rise.
The vacancy rate for space in the Triangle was at 7.4 percent in the first quarter, according to a report from the real estate firm CBRE. While this was slightly above the 6.7 percent average for the 13 markets included in the report, it’s better off than other markets that saw double-digit vacancy rates.
While demand for space has slowed from the highs of the past two years, when funding for the industry also reached record highs, the local real estate market remains fairly robust, said Lee Clyburn, executive vice president of CBRE-Raleigh. Deals continue to take place – and when they do, they remain on solid, long-term leases.
For instance, according to the CBRE report, the average rental rate in the Triangle has risen from $29.11 per square foot in the third quarter of 2021 to $38.50 in the first quarter of 2023. As of the time of the report, there were 12 tenants seeking lab space in the Triangle and the total demand for the area was 471,757 square feet.
While construction continues to take place, at least one of the Triangle’s largest real estate developers is slowing down some efforts. Alexandria Real Estate (NYSE: ARE), which operates nearly 4 million square feet in the Triangle, is planning to reduce its construction spend this year by $250 million by pausing or delaying projects.
This includes delaying a roughly 150,000-square-foot facility on Davis Drive that the company began building in response to demand from existing tenants. Some of these companies pulled back on expansion plans due to the challenging financial market, leading Alexandria to hit pause on finishing the project, said Joel Marcus, the company’s executive chairman and founder.
Despite the slowdown, the California company is moving forward with a pipeline of $2.5 billion of projects that are already pretty heavily leased.