Second only to industrial real estate, life sciences real estate has thrived throughout the pandemic, and there’s no sign of it slowing down. Houston, Texas, is one city seeing strong growth in this sector. While energy, manufacturing, and aerospace are still the dominant industries there, Houston’s IT sector is an important hub for nanotechnology and biotechnology.
What Makes Houston Right for Life Sciences?
The life sciences industry requires an ecosystem that Houston is well positioned to provide. It’s a sector that needs well-educated workers, even more so than technology generally. Houston ranks seventh in the country for the number of adults with STEM (science, technology, engineering, and math) degrees—over 400,000, according to a recent JLL report. The same report also ranks Houston in eighth place for wage positioning of the sector, which implies that highly qualified workers will continue moving to the city. This seems even more likely, given that Texas is one of the few states without personal, state, or corporate income taxes.
This worker profile also looks for proximity to and association with prestigious academic research institutions. Houston fits the bill here, too—the Greater Houston Partnership (GHP) records over 25 research and innovation centers in the area. Not least of these is the Texas Medical Center (TMC), the largest medical center globally, with 61 member institutions and some of the brightest minds in the field.
According to the GHP, funding to Houston from the National Institutes of Health (NIH) totaled $670 million in 2018. That year, venture capital and private equity investment in the city’s life sciences startups totaled $161 million. Today, close to 2,000 life sciences companies, hospitals, health care facilities, and research institutions employ over 300,000 workers—even more than the energy sector, which has traditionally dominated the Houston economy. Corporate life sciences employers include Merck, Novartis, Bayer, and Fisher Scientific.
Other life sciences clusters ranking above Houston in a CBRE report last year include the San Francisco Bay Area, Boston, and San Diego. However, Houston stands apart from these metro areas with a much less expensive cost of living—which can be a major factor for companies wishing to relocate.
Current Life Sciences Real Estate Availability
Life sciences real estate includes office space and even medical suites. However, the laboratory, manufacturing, and warehousing space associated with the industry differ from most other commercial real estate. Life sciences real estate can be complex and expensive. For example, a 2018 JLL report says lab construction costs at that time ranged from $350 to $1,350 per square foot.
Most Houston lab spaces, with a few build-to-suit exceptions, are light industrial properties that were converted to cater to the industry. Right now, there’s not even enough of that to meet the needs of the city’s early-stage life sciences ventures exiting incubator environments.
There are, however, millions of square feet of dedicated life sciences real estate in the pipeline:
- This August, Medistar Corp. and Healthcare Trust of America broke ground on Horizon Tower, a 30-story tower due for completion in 2023. It includes 17 stories of dedicated life sciences and medical space, 13 stories of parking, and ground-floor retail space (15,000 SF). It’s part of a five-acre campus called Texas A&M Innovation Plaza, which includes residential space for medical students and centers around an acre of open-air greenspace.
- Hines and 2ML Real Estate Interests are developing Levit Green. Adjacent to TMC, it will constitute 52 acres of mixed-use prime real estate, including research facilities, offices, residential, shopping, entertainment, and greenspace.
- Rice University’s new ION Hub is a 266,000-square-foot construction designed to promote collaboration among the city’s entrepreneurs, businesses, and academic communities.
- TMC’s TMC3 is set to open in 2022. The 37-acre campus is mixed-use but life sciences-focused, and phase I includes 950,000 square feet of research space. When complete, the campus is predicted to create 30,000 jobs and create an economic impact of $5.2 billion.
Life Sciences Will Continue to Grow
The pandemic indeed focused the world’s attention on the life sciences industry, but several other drivers were pushing growth in the sector long before COVID-19 became part of our everyday vocabulary.
An aging baby boomer population has converged with advances in medical and information technology. AI-powered research, wearable devices, and a greater understanding of genetics are all revolutionizing healthcare. Treatment has the potential to become far more personalized, and the relationship between patients and their medical professionals is also changing. It all adds up to a huge market for life sciences products and services.
Accordingly, tech giants like Apple, Google, Microsoft, and Samsung are entering the field. Their reach, drive, and budgets are putting smaller medtech companies under pressure to compete. At the same time, venture capital, academic, federal, and philanthropic funding for the life sciences has also reached unprecedented rates.
There’s no doubt that exciting times lie ahead for the life sciences, and Houston is geared to being part of that.