Commercial real estate industry insights.

Seattle Gaining Cred as a Life Sciences Cluster

by Shawn Wayt | Mar 17, 2020

As headlines announce the spread of coronavirus in the state of Washington, scientists inside a Seattle research institute are conducting a clinical trial for a vaccine designed to protect against the deadly disease.

This important work is enhancing Seattle’s standing as a life sciences center. Even before this research thrust Seattle into the spotlight, it had already established itself as a leading tech hub and was muscling into the heavyweight class for life sciences. With these distinctions come growing numbers of affluent workers whose droves are benefitting the multifamily, office, and retail sectors.

Boosting Seattle’s life sciences cred is a landmark deal to turn one of its last big chunks of land into a life sciences hub. The city sold the Mercer Mega Block to Alexandria Real Estate Equities, a life sciences developer, for $138.5 million. The mayor calls it “one of the most consequential property deals the City of Seattle has ever done,” according to GeekWire. Alexandria is making a one-time $5 million payment to help address homelessness. The agreement stipulates that Alexandria build 175 units of affordable housing, space for a community center, and three childcare centers. The city plans to use most of the proceeds to address the affordable housing and homelessness crises, which Seattle’s tech boom has exacerbated. The council says the transaction isn’t merely a sale but a policy solution.

Though not as torrential as tech job growth, employment in the life sciences saw a 13 percent uptick statewide from 2014 to 2017. According to the most recent data from 2017, nearly 36,000 people are employed in life sciences jobs, according to the trade group Life Science Washington. The area is adding around 80 new life-sciences firms each year, according to a 2019 report from state trade group Life Science Washington.

The life science sector and other professional industries is driving an influx of workers—along with healthy investor interest. Both are pushing the multifamily market to new heights. Development in 2019 centered on employment nodes including the South Lake Union, Queen Anne, Redmond, and Downtown Seattle submarkets. Late last year, Seattle-based investment firm Pinnacle Partners and developer Nitze-Stagen broke ground on the city’s first Opportunity Zone development. The $30 million apartment building in Pioneer Square will feature 80 units with transit accessibility and an allotment of affordable units.

While many life sciences companies require laboratory space, much of the tech sector simply needs office space—and lots of it. Currently, demand for office space is outstripping supply. Eight of the top 50 office-property sales in the nation in 2019 took place in the Seattle area, according to an analysis by commercial real estate blog Commercial Café. The top deal in the area, at No. 8 on the list, was the $756 million sale of the Bellevue-based Summit I and II office complex, which includes a third building under construction. Average office-property prices in Seattle’s Lake Union neighborhood make it the eighth most expensive submarket in the country, based on 2019 sales transactions. Besides Lake Union, nine other Washington submarkets made Commercial Café’s list of Top 100 most expensive submarkets. These include Seattle metro’s Bellevue (No. 14), the Seattle central business district (23), the I-90 Corridor (27), and Northern Seattle (29).

The life sciences don’t make up a big portion of overall real estate space, but some developers and investors like the sector because it generally can ride out recessions. An aging population and advances in technology are constant drivers of development in the life sciences. Seattle ranks as one of the top emerging life sciences markets and is well-positioned to break into the leaders’ circle within the next few years.