When it comes to the life sciences industry, New Jersey isn’t just meeting expectations—it’s thriving. The state secured an impressive 7^th place ranking in JLL’s 2024 Life Sciences Real Estate Perspective and Cluster Analysis, emphasizing its place in the biotech and pharma sectors.

What’s keeping New Jersey in the game? It’s a cocktail of historical prowess and cutting-edge developments that are hard to beat. Picture this: a state dotted with big pharma giants like Johnson & Johnson and Merck, creating a deep talent pool and bustling scene with its logistically convenient location.

Beyond location and talent, JLL’s Managing Director Bob Ryan weighs in on the top themes and trends to take note of, setting the state up for continued growth.

Talent meets biomanufacturing might

New Jersey’s attractiveness as a life sciences hub is largely driven by its deep talent pool and strategic location. The state has long been home to many big pharma companies, including Johnson & Johnson, Merck, Sanofi, Bristol-Myers Squibb, and Novartis.

“This concentration of industry giants has created a rich ecosystem of scientific talent that continues to attract other life sciences companies to the region,” said Bob Ryan, Managing Director at JLL.

As the state ranks No. 2 in the U.S. for biomanufacturing, specifically, Ryan notes that much of this is due to larger big pharma campuses with biomanufacturing operations onsite.

“As a result, the mid-size and smaller companies locate here to tap into that same talent pool,” Ryan states.

Several developments highlight this trend, he continues.

BeiGene’s grand opening of its newly constructed U.S. Biologics Manufacturing and R&D Center at the Princeton West Innovation Campus in Hopewell, NJ is one. The 500,000-square-foot facility represents an $800 million investment.

“We see the talent base as one of the key drivers for life science companies that select New Jersey for their operations and further expansions,” Ryan said.

Supply-demand imbalance continues

Today, New Jersey’s life sciences real estate scene presents both challenges and opportunities, reflecting both its historical strengths and current market trends. The market’s availability rate for lab space sits at 27%, which is about average compared to other major life sciences markets. However, this figure is skewed by the NEST campus, which accounts for about 1.5 million square feet of available inventory.

“The market’s overall availability rate presents an opportunity to satisfy the growing demand for space in the region, evidenced by the success of the area’s major R&D campuses that have come to market for multitenant use,” says Ryan. “The NEST campus, for example, is poised to satisfy demand, offering new tenants the advantage of plug-n-play biomanufacturing and R&D spaces, backed by substantial capital investment.”

Nationally, the 30% availability rate is a stark jump from 24.8% just a year earlier. Vigorous subleasing rates, lackluster demand, and stagnant occupancy rates contribute to this high availability. Looking ahead, by year’s end, there could be roughly 45 million square feet of vacant space.

The path to recovery could play out in a variety of ways, with JLL experts estimating that about 32 million square feet of absorption would need to occur nationally over the next five years to achieve equilibrium.

A notable trend shaping the scene in New Jersey is the continued flight to quality phenomenon.

“We see the flight to quality migration continue to drive requirements in the life sciences sector,” Ryan explains. “Tenants are shedding the outdated workspaces and want to move into new developments and recently renovated properties offering premium amenities.”

The trend is reshaping tenant preferences and driving demand for higher-quality spaces.

Startups grapple with limited early-stage space

One of the most pressing issues in the New Jersey market is the limited product available for startups and smaller companies seeking less than 5,000 square feet of space.

“Historically, this has driven the conversion of smaller spaces in traditional flex buildings by tenants to meet their needs, which is not always feasible for smaller companies with limited capital,” Ryan said.

The nature of venture capital funding has also created stress on startups, as VC firms invest in more mature assets that present less risk. Mega rounds now represent 60% of venture funding inflows, while early-stage and smaller rounds for pre-clinical assets are seeing half the deal flow they did compared to 2019.

Closer to home, Ryan explains that the VC challenges may not pose as great of a threat to NJ-based startups compared to other major metros.

“New Jersey is a more mature life sciences market with more established companies and fewer early-stage companies, so there may be less reliance on VC compared to other clusters,” he said. “That said, there is an opportunity to better foster the startup ecosystem in New Jersey and grow more early-stage companies by problem-solving for the lack of scalable space.”

The New Jersey Economic Development Authority (NJEDA) is addressing the lack of startup space by offering incubator space and step-out labs for the next tier of tenants. Similarly, some landlords are also beginning to pre-build smaller lab suites, including in new construction at the HELIX in New Brunswick, to accommodate growing companies coming out of incubator spaces.

Looking ahead

While New Jersey maintains a strong position in the life sciences industry, the lack of construction pipeline may impact the market as the industry recovers higher demand levels.

“Every few years due to acquisitions or consolidating campuses, a former big pharma single-tenant R&D campus becomes available in the market,” said Ryan.

He explains that most of these have been converted to multitenant campuses serving as new product in lieu of construction. Similarly, office conversions have continued in buildings with strong infrastructure that can be turned into lab space.

As New Jersey addresses its own unique set of opportunities and challenges, national long-term growth in the sector is expected. FDA approvals, patent innovation, and worldwide pharma sales are all on growing or stable ground—all as growth capital rebounds.

Whether you’re an investor, developer, or life sciences company, JLL’s 2024 Life Sciences Real Estate Perspective and Cluster Analysis is the roadmap to navigating the evolving landscape. Download it now to make informed decisions for your life sciences real estate strategy.