JLL Finds 'Remarkable Change' In Greater Boston's Lab Demand

The life sciences real estate sector in Greater Boston still has a deep hole to dig out of, with millions of square feet of lab buildings sitting vacant, but a new report shines a positive light on the future of the market’s demand.

The number of tenants looking for space in the region increased from 28 to 49 from the first quarter to the second, according to JLL’s latest market report, which called this a "remarkable change" in demand.

"I think Q2 is a bit of an inflection point in the market cycle," JLL Director of Boston Research Mark Bruso said. "All of the evidence is saying, 'Listen, there is a lot of tenants out there looking for space, the most we've had in four or five years. And they're going to eventually sign deals, and they're going to chip away at this mountain of oversupply.'"

The region’s life sciences market benefited from more than 2.4M SF of leasing activity in the first half of the year, including renewals, representing the second-highest-ever volume during a first half, according to JLL.

The leasing activity figure is a green shoot for a market that slowed drastically over the last few years, but more than half of that total came from two large deals: Sanofi's decade-early 900K SF extension in Cambridge last quarter and Transmedics' 500K SF lease in Q1 to relocate from Andover to Somerville. 

While these deals are indicators that life sciences companies continue to want a presence in Greater Boston, they don’t make a sizable dent in the huge amount of vacant space that has sat on the market since developers built a wave of spec projects during the biotech boom. Bruso said that even with the jump in demand, it will still take years to fully absorb the amount of space available.

"It doesn't do anything in terms of moving the market, other than knowing that Sanofi is just here for the longer haul, and that was a huge deal," Bruso said.

Vacancy across the market stood at 33.7% at the end of the second quarter, according to JLL, with direct availability totaling 14.2M SF.

A Savills report released Thursday pegged the vacancy rate in the Boston-Cambridge market at 26.4%, up 610 basis points year-over-year, due to the addition of 2.5M SF of new space to the market. It also highlighted Lyra Therapeutics’ April move to exit its leases in Watertown and Waltham after dealing with setbacks in its drug trials — adding 51K SF of availability to the market. 

The availability will likely take a long time to come down, as JLL found most tenant requirements in the market are for 25K SF or less.

"You could do 15M SF deals and still not get to where we were from a vacancy level prior to the run-up," Bruso said. "That just gives you the scope of how large the recovery path is ahead for us."

Eighteen life sciences deals were signed in the second quarter, which JLL says is "broadly in line" with the past nine months of activity. Bruso said that was nowhere near the activity seen at the peak in 2020 and 2021, but it was on par with the healthy activity seen pre-pandemic.

New lab buildings have been the beneficiaries of the jump in leasing activity, with these buildings seeing 1M SF of positive net absorption in the first half of the year, according to JLL. The market still has 2.2M SF of under-construction space coming online, but 85.2% of it was preleased as of Q2.

"They want turnkey, move-in-ready space, and so the space we're seeing outperforming and attracting a lot of tenants, at least in the first six months of the year, has been new labs, right?" Bruso said. "It just stands to reason, just like office was a couple years ago, when the market's bad and you've got a lot of supply, the best of the best will be where tenants want to be."

The oversupply is causing rents to decline, with Greater Boston's overall asking rents at $75.15 per SF last quarter, down from $76.72 the quarter before. Since mid-2022, rents have declined more than 20% in the region, according to JLL.

Greater Boston still has the priciest lab rents in the country, and landlords anticipate they will continue to drop as a way to drive more absorption of the market's vacant space. Bruso said he expects rents to continue to fall into 2027 and even early 2028.

"The sector feels good at the end of the day," Bruso said. "Even if we maintain and grow this level of demand, there will still be rent falling, because there's just seven times as much supply as there's demand in the market."

Early demand signals suggest the second half of 2026 will feature a healthy number of leases closing. At the end of the quarter, tenants had signed roughly 1M SF in letters of intent, according to JLL.

"The next six months will probably be the best six months we've had in five years, but that is a low bar to clear, right?" Bruso said. "We'll look back and say 2026 was a turning point in this market cycle, and although rents will probably still be falling and there will still be really, really high vacancies, we can at least say that 2026 was better than 2025."