Throughout 2024 the market has seen strength in M&A, IPOs, and PE/VC activity underpinned by a strong backlog of FDA applications and approvals. While positive, the bulk of the activity is driven by Big Pharma as opposed to smaller/midsize pharma clients. The result has been regionally focused larger projects in both R&D and manufacturing with less small-medium size opportunities, a trend we expect to see through 2025.

Drug discovery and development remains strained as it relates to construction. Investment in drug discovery powered by AI technologies, elevated clinical trials, and a thawing 2024 VC market is overshadowed by an excess of available commercial real estate. Established markets, MA and CA, are experiencing the greatest impact lacking speculative building in a high vacancy environment. Interest in less established and emerging markets, for example CO and TX, continues with a potential for future growth. The long-term outlook remains strong, but vacancy rates will likely take a year or two to normalize if the growth over Q3 2024 is maintained. While headwinds are present in our typical R&D builds, we continue to see life sciences buildings spill over into the healthcare and higher education markets.

Manufacturing opportunities in the US and EU continue at historical levels. Bulk Biologic, API and Fill Finish projects dominate the market with multiple brown- and greenfield large/mega scale projects. The rise of GLP-1 drugs for type 2 diabetes and weight management is driving significant construction activity in a sector expected to grow over the next decade. The smaller scale cell & gene therapy projects have all but stalled as entry into the market is costly, timely, and filled with clinical trial failure risk. We continue to see a downturn in small and medium sized opportunities, a likely trend through 2025. Overall, the market will continue to see large patient population modalities through 2025, but we are optimistic novel therapies for smaller patient populations have long term upside. We continue to see a disparity between regions, with the SE, NE, and Midwest seeing the greatest opportunity in 2025 and beyond. We expect the NW, SW, and Mountain states will continue to see smaller opportunities with the potential for several large-scale projects as other regions become saturated.

In summary, the Life Sciences market remains resilient. Investment in drug discovery, CAPEX expansion/reallocation and M&A poses significant opportunity globally in 2025 and beyond.

Due largely to an aging workforce, and demand persistently exceeding supply of a skilled and experienced workforce, construction unemployment will remain at historical lows for the foreseeable future. (3.7% as of 09/24 per BLS). While construction of R&D/lab space, which peaked in 2021/22, has slowed from oversupply conditions, a surge in large scale biomanufacturing construction since 2023 has largely offset this reduction. Combined with other mega project activity in semiconductor, advanced manufacturing, and data center work in the U.S., sourcing of limited qualified and experienced resources is increasingly difficulty for complex and often remote large-scale work.

Although activity can vary by geographic region, the limited pool of available resources which often service multiple locations at a national level in delivering large scale biomanufacturing work ensures impacts can be felt regardless of location or industry. One area experiencing unusually high volumes of biomanufacturing work alone includes the Raleigh-Durham area where we are tracking upwards of $20B in manufacturing planned through 2028.

What does this mean?

Competition for limited resources that perform this work will drive greater uncertainty for securing a qualified workforce and capacity. In turn, meeting aggressive schedules, sourcing of resources, quality of management and installations, and inflationary pressures on attracting labor will be increasingly challenging. Of particular concern are trades such as process (hygienic) piping, mechanical, electrical, and carpentry, which are critical in delivering projects of this nature. A good plan will need to address these challenges at project inception.

Photo: Mellon Studio