Alexandria Posts $1B Loss, Forecasts More Challenges For Lab Leasing

Life sciences real estate companies have wrestled with a new reality after a dismal 2025. The largest of them all, Alexandria Real Estate Equities, reported deep losses despite healthy leasing volume and set future expectations for continued challenges.

ARE notched a nearly $1.1B operating loss in the fourth quarter of 2025, executives said Tuesday in the company’s earnings call. Leasing reached 1.2M SF, the best performance all year, but other metrics fell, such as rental rates and lease renewals.

Same property net operating income dropped 6%, and was down 3.5% year-over-year. And the aggressive plan to sell roughly $3B in assets over the course of 2026 underscored ARE’s goal to trim costs during a particularly difficult market environment.

Chairman Joel Marcus said the REIT was both reacting to a “fast-changing industry landscape” and “getting used to a new reality.” 

Impairments were more than double what the company expected at $1.7B, largely related to land holdings and projects in the Bay Area.

But it appears the difficult landscape, as well as leasing challenges, had already been priced in by investors and accurately forecast by ARE. Despite the stark results, the market reaction was much more muted than last fall, when the stock dropped 19%.

As Chief Financial Officer Marc Binda said during the relatively brief Tuesday call, the Q4 results hit the midpoint of guidance from the previous quarterly call. ARE’s stock closed a few points higher the day of the earnings call, though it’s down roughly 40% since January 2025.

With forecasts of a challenging leasing landscape, and worries of “potential tenant wind-downs and downtime without immediate backfill,” ARE guidance forecast a potential 2% decline in leasing volume in 2026, with anywhere from 87.7% to 89.3% of space leased by year-end 2026.

Part of the challenge has been the difficult public funding environment for biotech, which has hampered leasing activity, according to ARE Senior Vice President Hallie Kuhn. 

Despite overall venture capital funding in the industry hitting and even exceeding levels seen in recent years, those dollars simply aren’t making it to smaller startups, which tend to make up the bulk of leasing, according to Kuhn. 

Marcus added that the lack of a robust IPO market and the challenge of gaining secondary funding without significant results are hampering that critical sector of the leasing market.

“New companies continue to be very conservative,” Kuhn said. “While we’re seeing demand, and tours are increasing, decision-making is still taking longer, and companies are very cautious about taking on new space and expanding. It’s certainly not back to the healthy, robust environment that we’d like to see.”

ARE saw rental rates on renewals and releasing of space decrease by 9.9% and 5.3%, respectively, in Q4, and executives predicted more challenges, especially in Q1.

Stagnation continues across leasing in major markets, according to recent Q4 data from national brokerages. In San Francisco, vacancy remains just below 33%, and while Q4 saw 1.2M SF of lab leasing, one-third of that came from two deals for Neuralink and University of California, San Francisco. 

Vacancy climbed to a record-high 28% in Boston, with supply increasing and leasing activity slipping. San Diego has emptied its construction pipeline, with unneeded new supply driving vacancy past 28%. 

Those gaping vacancy figures make lease negotiations that much harder for operators such as ARE. 

CEO Peter Moglia added that smaller spaces under 50K SF are moving, but the “middle of the barbell,” spaces between 50K SF and 100K SF, which are typically taken by growing public biotech companies, just aren’t transacting.

Tenant-friendly conditions continue to influence lease terms, he noted. Tenant improvement allowances remain elevated, and free rent is becoming more prevalent in negotiations. He said a couple of recent leases used significant amounts of free rent to win the deal. 

“If we continue to have 20-30% availability in major markets, we’ll continue to do that,” Moglia said.

More concessions may be called for soon. ARE’s new reporting highlighted key lease expirations in the Boston, San Francisco and San Diego markets totaling 1.2M SF throughout 2026, which are expected to remain empty between six and 24 months. Binda projected occupancy growth wouldn’t start coming back until the second half of 2026.

But despite the leasing headwinds, Binda said he still expects the company to hit the $1.40 to $1.60 Q4 2026 earnings range it previously forecast. ARE’s aggressive plan to sell nearly $3B in assets this year comes as the company ramps up its asset recycling program, selling off excess assets amid a darker outlook. In Q4, ARE earned $1.5B in dispositions over 26 transactions.

Moglia said going forward, the sales mix should stay consistent with what the company announced in December during its investor day: 20% stabilized property, 21% land and 59% nonstabilized property.

“When we need to get things sold, we’re confident we can, even though it’s a large amount to execute on," Moglia said.