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Life Sciences: Red-hot LSRE sector poised for a bit of a cooldown

However, panelists at recent LSRE conference in San Diego remain bullish on the space

By John B. Mugford

The IMN LSRE Forum “Market Outlook” panel included (from left to right) moderator Kiley Carter of Singerman Real Estate, Lauren Gilchrist of Longfellow Real Estate Partners, Brian Newman of Ventas, Thomas Errath of Harrison Street Real Estate Capital and Michael Gay of Invest Puerto Rico. (HREI photo)

SAN DIEGO – For the past decade or so, the life sciences real estate (LSRE) sector has been a “magical” space for facility owners.

That’s because the LSRE sector – which primarily includes office/lab space, but also encompasses research and development (R&D) space, manufacturing space and more – has seen “10 percent a year compounding annual rent growth in many markets,” said Brian Newman, senior VP and portfolio manager with Ventas Inc. (NYSE: VTR).

Ventas, a Chicago-based real estate investment trust and one of the healthcare real estate (HRE) sector’s largest landlords, has in recent years also become a “top 10” owner of life sciences properties.

For LSRE owners like Ventas, during these “magical” years, “you had these smaller tenants in place, and whether they survived and grew and got bigger, or they just collapsed and disappeared, you (could still) refill them with the next generation of startups, (which really helped) increase your NOI (net operating income) way above inflation rates,” Mr. Newman explained.

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