Federal Funding Cuts Push Houston’s Life Sciences Boom Further Out Of Sight

As an emerging life sciences market, Houston fosters young companies in early-stage research. At least, that's the goal.

But the sector relies on hundreds of millions of dollars from the National Institutes of Health, and that funding is under heavy threat due to proposed budget cuts from the Trump administration.

Houston life sciences insiders say funding disruptions could translate to fewer startups leasing space in a market where supply still overpowers demand following a huge development cycle. And though local brokers think the city will ultimately reach its destiny as a leading life sciences hub, the turning off of the federal tap is likely to slow its approach.

The Trump administration slashed $1.8B to $2.7B in NIH research funding during the first three months of this year, according to various estimates. Meanwhile, the president's proposed 2026 budget cuts NIH funding by $18B, and other policies, like tariffs, are driving up construction costs.

“The president has a new angry feeling every six hours,” said Zach Leger, a life sciences broker and senior associate with Stream Realty Partners. “It’s really hard.” 

Life sciences became a distinct real estate category in the mid-2010s, catching the attention of top development companies, according to Allen Crosswell, managing principal of NewQuest Crosswell, which owns a 21-acre tract adjacent to the Texas Medical Center in Houston. 

That submarket has grown substantially in recent years with the development of Levit Green, a 53-acre mixed-use life sciences district from Hines, and TMC’s Helix Park, a 37-acre life sciences campus.

But in Houston and elsewhere, leasing was slowing even before President Donald Trump took office, worsening the impacts of new funding hits.

“[Developers] went off and found ways to build it, not really knowing what the demand metrics were,” Crosswell said of life sciences developments in general. “I think it kind of got overcooked, and the capital markets kind of dried up. The product is now absorbing.” 

Houston’s life sciences market had a 14.3% vacancy rate in the first quarter, according to a Stream Realty Partners report, while the Texas Medical Center, where three buildings totaling 870K SF have opened since 2023, was 22.7% vacant. 

“The whole theory was, ‘If we build these buildings, the tenants will come,’” Leger said. “Well, we're not there yet.” 

That’s not unique to Houston. Even established life sciences markets like Greater Boston have vacancy rates of 25%. But as a smaller market that attracts early-stage research companies, Houston could be especially vulnerable to NIH funding cuts.

Drug developers who have not reached the commercial stage rely on NIH grants, angel investors, venture capital and other funding methods since they don’t have a product to sell yet, Leger said.

Newer life sciences developments in Houston have become a home for those researchers. Venture capital firm Portal Innovations occupies an entire floor at TMC3 Collaborative Building, where it offers lab facilities and development resources for life sciences startups. 

Emerging biotechnology company PranaX last year leased 7.4K SF at Levit Green Phase 1, where Sino Biological, a cell-based research and drug development company, was the first tenant. 

Aside from NIH grants, local medical institutions have access to state funding programs like the Cancer Prevention and Research Institute of Texas, Leger said, but that mainly goes toward institutions rather than early-stage companies. 

“What could benefit us here longer term is the fact that we have CPRIT and some of these other companies. It’s a different avenue for funding and money,” he said. “The NIH isn’t going to stop. It’s not just going to completely go away, but right now, there’s still a lot of uncertainty.” 

TMC, for example, expected to announce plans for two undeveloped parcels on Helix Park in Q1, TMC CEO William McKeon told the Houston Business Journal. So far, however, no new construction announcements have been made. 

Everything in healthcare has “tentacles,” so impacts reverberate throughout the market, said Shehzad Roopani, partner at medical office developer Edloe Ventures. 

Roopani said Houston’s population growth still makes him confident that he can lease up his medical office projects, which tend to stay under 50K SF. But Edloe Ventures isn’t immediately initiating the rapid growth that it ultimately envisions for itself.

“It’s a little bit more of a wait-and-see,” Roopani said. “A deal that sounded really good last year, now we just say, ‘Maybe we wait.’” 

Institutions are probably holding off on construction starts, Leger said. That’s not just because of NIH funding disruptions, but also the increasing cost of construction and rapidly changing policies from the Oval Office, he said. 

What’s happening in Washington will probably stagnate life sciences construction plans further, Crosswell said, adding he is confident there is an endgame.

“I don’t really know how Trump will play it out, but I trust that there is a plan in place and … he’s going to turn the spigot back on for those things that are beneficial to the health and wellness of a U.S. citizen,” Crosswell said.

Leger, by contrast, has a few choice words for the Trump administration’s policy decisions, saying, “Some of the ideas coming out right now are absolutely cuckoo for Cocoa Puffs.”

Still, he said, they also come with silver linings and opportunities for Houston. The administration may expand approval of stem cell and gene therapies, which Houston is uniquely positioned to benefit from as institutions like MD Anderson use them for cancer treatment research.

“It’s an interesting time to be dealing with the world of drug development and life sciences,” Leger said.

Geopolitical tension has also pushed drug manufacturers to invest in onshoring their operations, leading to opportunities like Eli Lilly and Co. considering Houston for a $5.9B biomanufacturing plant. 

“Every shake-up is an opportunity,” Leger said.