Report: Vacancy rates in the city’s life science sector hit new highs

BY JACQUELINE NEBER

Although the city’s life science companies took a record amount of real estate in 2022, vacancy rates have grown in the first quarter of this year, according to a report from CBRE.

The report shows that national life science vacancy rates have increased to 6.7% for the first quarter of the year. At 39%, New York’s rate is significantly higher than the national average; it’s up about 24% from the first quarter of 2022. In Manhattan alone, the sector’s vacancy rate stands at 34%. For this quarter the vacancy rate for prebuilt laboratory space is 8.2% in the city and 4.8% for space in Manhattan.

There is about 210,000 square feet of available real estate to support the industry in the city, meaning demand for lab space is lower than the supply available.

According to the report, vacancies aren’t the only problem facing the sector. Investors have become more discriminating across the country; life sciences across the U.S. saw the lowest quarterly ab- sorption rate since at least 2016.

Bill Hartman, vice chairman of the life sciences advisory group at CBRE, said New York might have an even harder time recovering from potential economic headwinds than more established cities because companies based in the city tend to be earlier-stage.

“The tenants that are here are generally startups—you don’t see a lot of New York City companies that raise significant capital, other than maybe Calliope and one or two others,” he said. “The runway that they have is less, which means they’ll take less space or may end up just closing some of the operations.”

The first quarter of this year brought in just under 7,000 square feet of leasing activity compared with more than 170,000 square feet in the first quarter of 2022, CBRE found.

As demand has fallen, prices have gone up. The average asking rent for lab space throughout the city was about $108 per square foot, up from about $90 in the first quarter of last year. In Manhattan, the asking rate averaged $122 per square foot, a nearly $20 jump from last year.

Although leasing activity has dropped off, funding is a silver lining in the first quarter. Life science firms in New York raised about $247 million, a higher amount than what was raised in the second half of 2022, but a 20% drop from the first quarter of last year, when market conditions were more favorable to venture capital investors.

The city’s life sciences sector is bucking the dip in life sciences funding seen throughout the country. Life science companies outside of New York pulled in just under $4 billion in the first quarter, a return to prepandemic levels.

The plethora of academic life science institutions in New York continues to play a role in its success, Hartman said, pointing to New York University and Mount Sinai, which both take up a lot of available space and receive huge amounts of federal money from the National Institutes of Health. Experts say the amount of NIH funding the city receives could be evidence of optimism about the industry.

New York has received $879 million in NIH funding so far this year, with $149 million going to NYU’s Grossman School of Medicine and

$146 million going to health sciences at Columbia University. Mount Sinai got $125 million, the Memorial Sloan Kettering Institute received nearly $75 million, and Cornell got about $71 million.

In addition, the city continues to see more companies form out of academic research and stay in the city instead of moving to Boston or San Francisco, the CBRE report said.

The commercial demand beyond the institutions, however, is “thin” right now, Hartman said, which contrasts CBRE’s outlook for the U.S. on the whole. Life science em- ployment rates are growing across the country, and “continued demand for life science space should limit any future increases in vacancy,” the report said.

Ultimately, Hartman added, the health of the sector for the rest of the year will depend on whether the city’s smaller firms can get enough funding to last through a challenging time, get their research into clinics and move into commercialization.

CBRE’s New York office is in Midtown, and the firm is headquartered in Dallas. ■ prominence of the topic, noting that some towns have already been working to increase their supply as the threat of state action continues to loom.

“Obviously, it’s a disappointment that the governor and Legislature couldn’t get something done here,” Romita said following the plan’s collapse. “We’re sort of back where we started before all this happened.” e suburbs’ reputation for opposing new developments is well earned, and the failure of Hochul’s housing compact demonstrates that the resistance remains strong despite broad agreement that the region’s housing production has not kept pace with its population growth in recent years.

But the opposition is not and never has been universal, and the housing compact’s being left out of the budget does not mean the end of pushing for more homes in the suburbs. Pro-housing groups such as the Westchester County Association and Long Island Housing Services are now settling in for what they always expected to be a long road ahead.

“You have to build public support. I heard from some elected o cials that they were getting calls from people opposing it and not the people in favor, which means the people in favor were not organized enough,” said Long Island Housing Services Executive Director Ian Wilder. “We have to get them to reach their elected o cials so their elected o cials know this is an issue they need to support.”

‘Well-planned growth’

Some pro-housing groups were reluctant to even frame the collapse of the housing compact as a total defeat. e mere fact that the issue played such a prominent role in budget negotiations has made the idea of state control over local

REAL ESTATE housing policy seem much more real, encouraging municipalities to gure out how to deal with the shortage on their own now rather than deal with a state-mandated solution later.

Tim Foley, CEO of Westchester’s Builders Institute, pointed to ordinances Ardsley and Tarrytown have recently passed allowing for accessory dwelling units, generally de ned as apartments in a home’s basement, attic or garage, as an example of towns trying to get ahead of potential state requirements around housing.

“ ey think the government in Albany will be passing something on ADUs,” he said. “ ey’d much rather pass it in a way that they think strikes a balance for their community and say, ‘Look, we already have it’ than to have it foisted upon them.” nish line on its rst attempt.

New Rochelle is generally seen as one of the more pro-development areas of Westchester County. e city has already welcomed at least two new apartment buildings with more than 100 units this year alone.

Nearby, in Mount Vernon, new apartment buildings are springing up along the Metro-North’s Harlem line, which accounts for two of that city’s three commuter rail stops.

Bramson took issue with the general perception of adding housing to an area as a necessary hardship for communities to endure, instead framing it as a positive move with far-reaching advantages.

“I do not regard well-planned growth as a burden. I regard it as a bene t,” he said. “If it’s done properly, it breathes new life into downtown areas. It creates new job opportunities. It moderates the upward pressure on housing costs and makes our region far more accessible.” when you force it down people’s throats.” He argued in favor of a more targeted development approach from the state focused on speci c sites that would be good for housing rather than blanket growth requirements. they have historically been the louder voices. e groups also seek to amplify the voices of community members who are in support of more development.

Tarrytown Mayor Karen Brown echoed this point, saying the town thought it would be best to get an ADU law passed “that t our local needs.”

“Judging by projects in the pipeline, I think we will see many of the governor’s housing goals reached organically here in Tarrytown and throughout the Hudson Valley,” she said.

And even the more controversial aspects of Hochul’s plan still found some support among local elected o cials in the suburbs. New Rochelle Mayor Noam Bramson described the initiative as “very positive,” with growth targets that were “reasonable and achievable.” He was disappointed but not shocked that such a big potential change to the suburbs didn’t make it over the ough Mt. Kisco Mayor Gina Picinich agreed that increasing housing and making it more accessible was important, she stressed that every community would have di erent challenges to address and took issue with the idea of a 3% growth target across the board. She also emphasized that the image of Westchester being lled with nothing but expansive single-family homes was inaccurate, particularly in Mt. Kisco.

“ e accusation is that Westchester is just this suburban, single-family-zoned community where people are restrictive and exclusive. It’s not,” she said. “Only 25% of my housing is free-standing single-family homes.”

Patchogue has been fairly supportive of new housing on Long Island, although Mayor Paul Pontieri stressed that “it doesn’t happen