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Cell & Gene Therapy: A Catalyst for CRE Growth in Philadelphia

12/18/2020

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An analysis of cell and gene therapy’s impact on commercial real estate in the Philadelphia Metro Region.

The cell and gene therapy field emerged almost two decades ago from research that was compiled by the academic and medical institutions located in University City in Philadelphia. The industry is reaching a tipping point, with cell and gene therapy’s market capitalization forecast to grow at a compound annual growth rate of 37% over the next five years. This report outlines the various ways in which cell and gene therapy has and will continue to transform the life sciences industry and, in effect, Philadelphia’s economy.

In this report, we will explore how Philadelphia has become the global center for cell and gene therapy discovery due to its research infrastructure, human capital, commercialization, proximity and density.

Key findings include:

  • The region’s history as a home for major pharmaceutical manufacturers, coupled with its large network of academic research institutions and hospitals, has made Philadelphia one of the top places for life sciences talent in the country.
    • The city of Philadelphia has three Tier 1 universities, more than any other major U.S. city besides New York, which is why Philadelphia ranks third in the nation for NIH grant funding, receiving more than $1 billion annually.
  • Institutional and private sector investment in cell and gene therapy has culminated in job creation and commercial real estate activity, centered around the life sciences hub in University City:
    • Philadelphia is one of only three regions in the country in the top 5 for both biotechnology R&D and pharmaceutical manufacturing jobs.
    • Life sciences leasing activity has increased from 38% of all transactions in University City between 2009 and 2016, to more than half of all transactions between 2017 and 2019.
    • Since 2010, Philadelphia-based life sciences companies have received $3.8 billion in venture capital funding, with half of that funding allocated in 2018 and 2019 alone.
  • Demand for lab space has outpaced supply in University City:
    • Lab vacancy in University City was under 2% in the third quarter of 2020, despite more than 70% of the current inventory having been built in 2014 or later. Rents also increased 17% during this period, as demand outpaces supply.
    • The need for lab space in the short-term coupled with little-to-no space left in University City is driving life sciences tenants to consider other options throughout the region, including the suburbs where there is lab space available, as well as the repurposing of vacant office space in older downtown office buildings into lab space.
  • COVID-19 has had a chilling effect on office leasing, but not for lab space:
    • While overall year-to-date leasing in University City is down 23 % over the same period a year ago, leasing for lab space in the submarket is up 36% year-over-year, with almost three-quarters of that space leased by cell and gene therapy companies.

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