Life Science REIT Alexandria Gaining Pricing Power

Peter Moglia, chief investment officer at Alexandria Real Estate Equities (NYSE: ARE), joined REIT.com for a video interview at REITWorld 2016: NAREIT’s Annual Convention for All Things REIT at the JW Marriott Phoenix Desert Ridge.

Alexandria provides real estate for the life science and technology industries. The company is active in the San Francisco Bay Area, Boston, San Diego, New York and Seattle markets, among others.

Efficiency gains at the Food and Drug Administration have improved its annual average approval rating by 64 percent during the past five years, he said.  As a result, the life science industry has been incentivized to put more money into research and development, which has boosted demand for lab space, Moglia added.

Alexandria has averaged about 95 percent occupancy during the last 10 years, or four percentage points above the average office REIT, according to Moglia. The company’s occupancy level currently stands at 97 percent, which has  “given us a lot of pricing power,” he said.

Since 2011, rents in Cambridge, Massachusetts, are 36 percent higher and rents in San Diego are 32 percent higher. During the last two years, rents in San Francisco have increased more than 20 percent, Moglia said.

“We feel really good about our solid fundamentals, and our development pipeline has never been stronger,” Moglia said.

 Moglia noted that healthy demand in the life science market means that Alexandria is now seeing increased competition for assets. He pointed out that this trend validates Alexandria’s business model and underscores the value of its portfolio.