Introducing HM Science, a Specialized Life Science Division of Hughes Marino
After over three decades of representing biotech, medical device and other health care clients with their specialized operational requirements, Hughes Marino announces the launch of its specialized life science division, HM Science. Life science companies that do research, manufacturing and distribution of biotech, medical device and health care related products operate in a complicated regulatory environment, so HM Science was established to provide bespoke services to this industry sector. While individual Hughes Marino professionals have been representing life science companies their entire careers and cumulatively have thousands of client experiences in the sector, HM Science brings this talent together on a North American basis to offer tenants best of class representation no matter where they operate.
The launch of HM Science comes at a critical time in the life science real estate sector. After three years where tenants were faced with space supply shortages, hyper-inflating rents and historically longer lease lengths, this is being reversed in real time as the capital markets have created significant headwinds for the sector. While this turmoil will likely be a multiyear challenge for companies looking to raise capital, those tenants that are well capitalized with strong science and leadership teams are going to find the life science sector quickly whipsawing to be the most tenant favorable market we’ve seen in years.
While the office space sector has been soft for over two years, providing life science companies that solely occupy office space unprecedented values and sublease opportunities, summer of 2022 saw the beginning of biotech lab space hitting the market for sublease. Now, that small wave is becoming a tsunami, as all major life science markets around the country are beginning to become flooded with sublease opportunities offering rental rates 20%-25% below landlords’ offerings, plug and play laboratory facilities with equipment in place and sublease terms ranging from 2-5 years.
San Diego, Boston and the San Francisco Peninsula already have 1,000,000 to 2,000,000 square feet of life science sublease space on the market, with Seattle closer to 500,000 square feet. With new sublease offerings being added across the country weekly, choices for tenants are unlike anything we’ve seen in the last 3-4 years. Additionally, some biotech companies are unfortunately going to run out of cash in 2023, and have no choice but to relinquish their lab space back to their landlord, which will create another unfortunate increase of the supply of lab space that the market did not anticipate.
Adding to this supply coming on the market from tenants subleasing or defaulting, 2023 and 2024 are likely to be a perfect storm whereby speculative lab space under construction adds to the swamping of the life science market with options that tenants can take advantage of. In San Diego, there is approximately 4M square feet of lab space under construction for delivery in 2023 and 2024, 8M square feet in Boston, 1.2M square feet in Seattle, 2M square feet in the Raleigh metro area and 5.5M square feet in the San Francisco Bay area. All of this will remove the pricing power that landlords have enjoyed for the last three years, and in the short term, we are going to see increasing tenant improvement allowances, increasing free rent and landlords being willing to consider 5-7 year leases versus demanding 10-12 year terms.
As the team specializing in the representation of the life science tenants, HM Science will be delivering extraordinary value during this transitional time as our tenant clients look to create operational efficiencies and cost reductions, seek to relocate, downsize or renew in place.
