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Why Hospital-to-Lab Conversions May Be a New Strategy for Life Sciences

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Franco Faraudo & Nicholas Pipitone
December 31, 2024

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PROPMODO EXCLUSIVE

Life sciences real estate faces oversupply challenges, but innovative hospital-to-lab conversions offer a glimpse of recovery.

The life sciences real estate sector, once a star during the pandemic, has faced a significant downturn as oversupply and rising vacancy rates plague key markets like Boston, San Diego, and San Francisco. Despite a brief uptick in activity mid-2024, developers are grappling with millions of square feet of unleased space, and CBRE forecasts a slow recovery that could take years. Against this challenging backdrop, innovative solutions like hospital-to-lab conversions are emerging as potential lifelines for cost-conscious startups and developers.

Race Street Labs, a striking example of adaptive reuse, transformed Philadelphia's former Hahnemann University Hospital into 200,000 square feet of affordable lab space for biotech startups. (Image: Race Street Labs)

Hospital conversions are gaining traction due to their built-in infrastructure, which cuts down on costs and time compared to traditional office-to-lab projects. Philadelphia's Race Street Labs exemplifies this trend, transforming a long-vacant hospital into affordable lab space for biotech startups. With competitive rents and existing mechanical systems, the project highlights the potential for repurposing obsolete healthcare facilities in urban hubs near talent pools and universities. While challenges like narrow layouts and code upgrades remain, these conversions may offer a quicker, cheaper path to meeting market demand.

Despite current struggles, industry experts are optimistic about the sector's long-term prospects. With venture capital funds at historic highs and big pharma ready to invest, the life sciences market could be poised for a resurgence. For now, as developers explore innovative reuse projects like Race Street Labs, the sector offers a glimpse into how adaptability might drive recovery.

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