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Investment in Life Sciences is Beginning to Slow

Though the interest in life sciences exploded over the COVID-19 pandemic, a new report is showing that investment in the sector is beginning to taper off. The $7.7 billion in investment sales of life sciences and R&D assets during the first half of this year is down 34 percent from the same period as last year. Asset valuations have also dropped between 5 percent and 25 percent over the last 60 to 90 days and rent growth has halted from the 10 percent to 30 percent each year experienced during the pandemic.

The good news is that despite steadying demand, there are indications of continued interest in the industry. For instance, sales of life sciences assets increased by 11 percent in the first half of 2022. 

But life sciences is not exempt from the issues currently miring commercial real estate. As rising interest rates and the prospect of a recession cause caution across all asset sectors, investors and tenants are easing off the throttle. For the first time in more than a year, the industry saw a loss in April’s commercial property transactions, which totaled $39.4 billion nationally. This was a 16 percent decrease from the same month last year.
The decline in the sector’s capital may seem alarming, but experts insist that the sector is normalizing rather than failing. Life sciences boomed in 2021, making the disparity look worse than it is. The sector could simply be stabilizing, but the truth is that we won’t know for sure until the end of this year or the beginning of next year if the slowdown in investment activity will be anything close to detrimental.

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