Office-to-lab conversions are sweeping across the Northeast United States, as developers look for ways to bring more life sciences space to market amidst unprecedented demand.
According to CBRE’s recent U.S. Life Sciences Midyear Report, released July 20, five Northeast markets – Boston-Cambridge, New Jersey, New York City, Philadelphia and Washington, D.C.-Baltimore – are among the nation’s premier life sciences markets. And with strong and growing demand for lab space stretching along that section of the East Coast, buildings with high ceilings, high floor load capacities and permissive zoning designations are being partially or wholly repositioned into lab space.
As of June 2021, 4.2 million square feet of space was actively being converted into lab use across 30 properties in the Northeast. By comparison, 31 ground-up life sciences projects totaling 7.7 million square feet are under construction in the region.
Conversions offer the possibility of delivering lab space more quickly than ground-up construction, and with most lab occupiers looking to take space as quickly as possible, this speed to occupancy is a major benefit.
Markets in the Northeast are demonstrating that a variety of commercial property types are suitable for conversion and can offer lab space in unique buildings and locations where none previously existed.
Converting space
The trends in New Jersey specifically show there is currently no new construction of lab space in the suburban markets, but conversions of office to lab space are beginning to take place.
Additionally, there has been a sizable construction cost increase to retrofit or renovate a lab space in line with the national trends experienced over the past nine months.
In the Northeast, the average size of a conversion is 140,000 square feet. This is roughly 45% smaller than the 247,000-square-foot average for properties being built from the ground up. Some current conversion projects also occupy part of a larger property or complex, allowing owners to market their assets to a diverse tenant mix.
Converted properties in the region tend to skew older, making use of the warehouses and factories of the Northeast’s industrial legacy. The average age of lab conversion properties in the Northeast is 78 years.
While these industrial spaces with their large floorplates and high ceilings seem particularly well-suited to the needs of a 21st-century lab occupier, mid to late-20th century office buildings also account for just under 40% of converted square footage. In the Washington, D.C. metro area, lab conversion properties are, on average, only 35 years old. In the frenzied Boston market, buildings of all ages and profiles are being snapped up with nearly 1 million square feet of space being converted in buildings less than 50 years old.
The Northeast’s trove of commercial building stock reflecting the economic cycles of the past 150 years is now being repositioned to support the region’s embrace of the life sciences. From 1850s warehouses to suburban office parks and centrally located office towers, the cities of the Northeast have been left with a profusion of conversion opportunities. As rising investment levels push life sciences firms to expand, the demand for lab space is expected to add impetus to the conversion trend.
