In the dynamic landscape of biotechnology, the Research Triangle—encompassing Raleigh, Durham, and Chapel Hill in North Carolina—has emerged as a formidable contender in the U.S. biotech arena, ranking fourth after industry giants like Boston, San Francisco, and San Diego. This region is a beacon for pharmaceutical titans such as Novo Nordisk, Purdue Pharma, GSK, Merck, Amgen, Biogen, and Pfizer, and is renowned for hosting the largest aggregation of Contract Research Organizations (CROs) globally. However, its position in the biotech hierarchy may be more reflective of the scarcity of lab-ready real estate rather than the sheer market size.

The Raleigh-Durham area, distinct from other biotech capitals, offers approximately 10.6 million square feet of R&D lab space with limited availability. The trio of research universities—Duke University, the University of North Carolina at Chapel Hill, and North Carolina State University—form the cornerstone of the “Triangle,” propelling the life science ecosystem forward. The spin-off companies from these academic powerhouses significantly contribute to the low availability of both sublease and direct lab space. Unlike other sectors, the rise of remote work has not impacted the demand for physical lab spaces here. In contrast, other major life science markets are experiencing a surplus due to overdevelopment, unprecedented funding levels, and preemptive space acquisition for anticipated growth, leading to increased availability through subleases or defaults. This trend has not yet manifested in the Triangle.

Edwin Yarbrough, Executive Vice President of Hughes Marino, who established the firm’s Raleigh-Durham office, observes that while Raleigh-Durham is a key biotech hub, it does not match the scale of markets like Boston and San Diego. A recent sublease report by Hughes Marino revealed that, unlike other cities with millions of square feet available, the Triangle had only a handful of subleases and speculative suites, a number that is gradually rising but still pales in comparison to its larger counterparts.

Preparing for New Developments

The Triangle’s real estate market is unique, with nearly every single-story flex building designated as “R&D/Lab” space. These range from properties converted by seasoned life science landlords to speculative R&D spaces by those eager to join the sector. Biotech and life science companies in the Triangle, seeking to renew or secure new leases, expand, downsize, or renegotiate existing agreements, require the expertise of seasoned advisors to sift through the options and seize opportunities promptly.

Options are scarce, especially for entities in search of modern spaces featuring amenities like coffee bars, food services, breweries, rooftop decks, fitness centers, or even GMP-compliant lab spaces equipped with the necessary HVAC, plumbing, ceiling height, and electrical infrastructure. Expert guidance is crucial for understanding the landscape, the offerings, and the landlords that tenants will depend on for operating these sophisticated facilities.

Despite a dip in demand, the RTP/I-40 corridor continues to see the development of new R&D spaces. The region’s inaugural high-rise lab building, Via Labs, will be a centerpiece of the vibrant HUB RTP, standing eight stories tall and offering 265,000 square feet of amenity-rich R&D space.

Longfellow Real Estate Partners, the developer, is on the lookout for a lead tenant to kickstart construction on the $1.5 billion project, which envisions RTP as a densely populated, multi-use urban district complete with housing, retail, and dining options, alongside extensive lab and workspace.

Yarbrough emphasizes the necessity for companies to engage knowledgeable advisors who can navigate the evolving real estate landscape, understand the nuances of public offerings versus actual transaction outcomes, and provide objective, conflict-free counsel. He advocates for a proactive approach, leveraging off-market opportunities and ensuring negotiations are tenant-favorable in a rapidly changing environment.

North Carolina’s Mini Cambridge

Over recent years, downtown Durham has transformed into a “mini Cambridge,” bustling with companies and startups at the nexus of science and technology, complemented by a vibrant arts scene, nightlife, pedestrian-friendly streets, and top-tier dining options.

The upcoming Heritage Square development, a $500 million project spanning 10 acres, promises to introduce luxury housing, premier office and lab space, retail, and dining venues. This is just the beginning of a multi-phase development initiative. Longfellow is also poised to commence construction on a new 200,000 square foot lab building as part of their Durham ID master plan.

According to the 2023 State of Downtown Durham report, 21 new developments will add over 2,300 housing units to the city’s core. Moreover, Durham is enhancing its pedestrian infrastructure with projects like the Durham Rails Trail, a segment of the expansive 3,000-mile East Coast Greenway stretching from Maine to Florida.

While Durham has not yet reached the stature of Cambridge, the city is experiencing a surge of interest and development, making it an attractive hub for startups and biotech firms eager to join the burgeoning scene.

Yarbrough advises that with the right real estate partner and sufficient time to execute a thorough process, companies can secure exceptional spaces and terms, fostering a culture that attracts and retains top-tier talent.

He recommends initiating real estate projects well in advance—ideally two years before lease expiration—to avoid rushed decisions and ensure optimal outcomes.