Los Angeles is emerging as a hotbed for the life sciences industry, with rapid growth in funding, talent, and innovation. Over the past five years, venture capital funding for life sciences in the region has surged by a staggering 566%, far outpacing the national average of 345%. Alongside this, Los Angeles boasts the second-highest number of biological and biomedical sciences graduates in the nation, fueling its ascent in the field.

A Thriving Ecosystem for Life Sciences

According to a national report by CBRE, the L.A.-Orange County region ranks seventh in the country for research talent. The area produces 4.5% of all biological and biomedical sciences PhDs in the U.S., thanks to powerhouse institutions like UCLA, UC Irvine, and USC. This academic infrastructure is a key driver of talent supply, enabling the region to house the fifth-largest pool of life sciences researchers nationwide.

Industry leaders attribute much of the region’s success to its diversity and entrepreneurial spirit. “Particularly over the past five years, this region has had some phenomenal success stories in the startup space,” says Jeff Pion, vice chairman at CBRE. Visionaries like Arie Belldegrun and Patrick Soon-Shiong have attracted significant venture capital and talent, while the local university system bolsters the pipeline of innovation.

The Talent Advantage

One of the distinguishing factors of the L.A. life sciences market is its robust talent pool. However, this strength is also a challenge. Unlike compact hubs such as San Diego or the Bay Area, L.A.’s talent is dispersed across a wide geographic area, making infrastructure and investment more critical.

Despite these challenges, the region’s life sciences sector has grown rapidly. From 2015 to 2020, Los Angeles achieved the fifth-highest growth rate in life sciences researchers, positioning it as a major contender in the industry.

The Push for Infrastructure

With demand for lab space on the rise, Los Angeles is facing a critical need to expand its infrastructure. Lab vacancy rates are tight nationwide, even with robust construction activity, and the life sciences sector’s unemployment rate is at a historic low — less than 1% as of April 2023.

“The quality and availability of labor are key considerations for any expanding industry,” notes Ian Anderson, CBRE’s head of life science and healthcare research. “Expanding life sciences companies can choose from dozens of U.S. markets depending on their labor and real estate needs.”

Beyond the Lab

The growth of life sciences isn’t limited to drug development. The industry is also expanding into personalized treatments, advanced materials, and even future foods, making Los Angeles a key player in addressing global challenges.

As the life sciences sector continues to flourish, Los Angeles has the potential to solidify its position as a leading hub — provided it invests in the necessary infrastructure and lab space to support this momentum. With venture capital flowing and talent thriving, the city is on the cusp of a breakthrough that could redefine its role in the global life sciences landscape.

While California’s life-science markets in the San Francisco Bay Area and San Diego grapple with an oversupply of lab space, Los Angeles stands out with its unique dynamics. According to CBRE’s second-quarter life-science report, L.A. is experiencing lower vacancy rates compared to other major metros.

Low Vacancy, Low Rents

Andrew Riley, an executive vice president with CBRE, highlights that L.A. isn’t overbuilt with lab space. However, the sector faces a lack of demand for the available supply, driven by economic conditions and companies focusing on cash conservation. This mismatch has kept life-science rents in L.A. relatively low, even in top submarkets. Compared to cities like San Francisco, San Diego, Seattle, Boston-Cambridge, New York City, and Denver-Boulder, Los Angeles boasts the lowest asking rent at $53.52 per square foot and the lowest vacancy rate at 9.6%.

Venture Capital Trends

Venture capital funding for L.A. life science fell from nearly $800 million in Q2 2023 to around $600 million last quarter. This decline has led to conservative real estate expansion plans among early-stage venture-backed companies, contributing to the low leasing rates.

Future Demand and Supply Dynamics

Riley notes that while life-science supply was a concern in the past, it has become less pressing over time. Currently, there is about half-a-million square feet of tenant demand, a figure Riley believes could easily double. Even a single tenant seeking significant lab space could shift supply dynamics considerably.

Submarket Opportunities

There are ample opportunities to lease lab space across various submarkets, including West Los Angeles, the Conejo Valley, Pasadena, and the South Bay. West L.A. and the Conejo Valley lead in asking rents, with West L.A. at $71.52 per square foot, the highest in Los Angeles, followed by the Conejo Valley at $59 per square foot, and San Gabriel Valley at $47.

Challenges and Investor Interest

West Los Angeles remains a prime area of interest for life-science tenants due to its proximity to UCLA and central location. However, real estate investors face challenges in providing life-science solutions due to competition from those looking to reposition assets for creative office space. The high price per square foot for land in West L.A. compared to Pasadena or the Conejo Valley adds to the difficulty.

Market Predictions

Riley predicts continued mergers and acquisitions as startups and growing companies ramp up their research and development efforts, leading to a deeper commitment to L.A. and expansion plans. He also hopes to see more incubator lab space across L.A., similar to BioLabs in Torrance, which offers both open space for startups and individual suites as dedicated lab space.

Los Angeles’ life-science market, with its unique blend of low vacancy rates and affordable rents, presents a compelling landscape for both tenants and investors navigating the evolving real estate dynamics.