Greater Toronto Area Is Missing Out on Opportunities as Demand for Laboratory Space ‘Balloons’

CBRE’s first-ever Toronto lab market report shows that the 3.5 million sq. ft. of demand for lab space exceeds currently available supply by 141 times

Ballooning demand for laboratory space is attracting investor interest in the Greater Toronto and Hamilton Area life sciences sector. But there is a severe shortage of lab space in the region to meet surging demand from domestic and international companies, according to CBRE’s first-ever Toronto Lab Market H1 2022 report.

There are more than 3.5 million sq. ft. of active lab tenant requirements in the GTHA, however, lab vacancy in the GTHA is virtually nonexistent, at only 0.2% of the 12.3 million sq. ft. of inventory in the region. Put another way, demand for lab space exceeds currently available space by a factor of 141.

Most of the existing GTHA lab inventory is concentrated in smaller-sized facilities, which limits tenants’ ability to expand or grow at scale.

“The predominance of single-tenant lab inventory in the GTHA is the result of a lack of investor participation in the lab real estate market in Ontario,” notes CBRE’s Daniel Lacey, a life sciences specialist who co-authored the new report. “The shortage of true multi-tenant lab properties has limited options of occupiers over the years, with most having to use their own capital to expand their facilities.”

Demand for lab space in the GTHA is being led by the pharmaceutical industry, which single-handedly accounts for 44.7% of total demand. Advanced technology, biotechnology and medical technology make up the next top industries in terms of occupier demand.

There is some relief on the horizon. MaRS Discovery District (with 2.3 million sq. ft. of space) and McMaster Innovation Park (0.7 million sq. ft.) are the region’s two major life sciences campuses. And there are more to come, including a 160,000 sq. ft. campus at Sheridan Innovation Centre in Mississauga, slated to open in Q3 2023. And a 187,000 sq. ft. project – converting a conventional office into labs – is planned for 700 University Ave.

But the demand and opportunities need to be acted upon quickly or other cities will benefit.

Canadian landlords and investors have been risk-averse when it comes to life sciences development, Lacey notes, wary of the upfront setup costs that need to be amortized over a longer period than with conventional office tenants. And immediate returns on investment are highly unlikely, an added disincentive.

The result is that life sciences occupiers lacking the upfront capital or the ability to wait for years before occupying spaces have often been compelled to look to U.S. markets for available lab space.

“Canada is a tech leader and a magnet for tech talent, but we could miss the boat when it comes to life sciences,” says Lacey. “If we build it, they don’t have to come, they are already here. But if we don’t build quickly, Toronto and Hamilton will miss out on a major opportunity to shine on the world stage.”