With Demand Gone Dry, 19M SF Of Labs Could Be Converted By 2030

The labs are not all right.

After years of new supply without the tenant demand to support it, life sciences real estate nationwide is at an inflection point, with 18.7M SF likely to change uses by 2030, according to a new JLL report.

Although construction pipelines are emptying, the oversupply problem appears to be here to stay for the foreseeable future, exacerbated by economic headwinds and new technologies allowing companies to do their work in smaller spaces.

That means increased distress and conversion possibilities over the next five years for roughly 30% of today’s available lab space, which totals 61M SF, by JLL’s count.

“There are secondary markets and submarkets that didn’t exist three years ago, with millions of square feet of space and recent leases that you can count on one hand,” JLL Research Director Mark Bruso said. “Those are the kind of markets where you will probably see more of this kind of activity in the next couple of years.” 

Those secondary markets include Los Angeles, Houston, Philadelphia, Denver and Seattle. Primary markets like Boston, San Diego and the Bay Area aren't immune.

Today, 223 lab buildings stand fully vacant, representing 60% of the total vacancy, and offer a variety of conversion possibilities. JLL has tracked 22 buildings that have been fully converted from lab use, and it predicts many more will follow. 

To determine how much space will likely be converted or leased to other industries, JLL analyzed every single lab building in the United States, rating buildings based on their propensity to be converted to or leased out for uses other than lab or biotech research. 

Those possibilities become more practical considering the age of these empty spaces. As of the second quarter, lab buildings delivered between 2022 and 2024 remain approximately 48% empty. Life sciences facilities also have significant power and water utility connections, which are sought-after building features for many potential high-tech users.

Bruso said that this shift, which will play out over the next 12 to 24 months, will vary market by market and asset by asset. JLL has tracked 4M SF of lab space in the year to date that has either gone through some kind of lender-driven distress event or the ownership has pivoted entirely to nonlab leasing. 

The increased use of artificial intelligence and the prevalence of AI-native biotech startups may be another factor lowering lab real estate demand. JLL’s report also found that AI-native firms, which accounted for more than 15% of venture capital biotech deals, use roughly one-third less space than traditional biotech companies. 

With these firms taking an increasing share of funding in recent years, it follows that their growth may require less space, leaving more square footage vacant and further depressing rents.  

In the search for tenants, owners have chased office users, including more flexible research and development users and tech companies, Bruso said. Oxford Properties has been soliciting the venture community and incubator spaces to activate underutilized space, according to Vice President Abby Mondani. 

The vast majority of these conversions will happen after a distress event, Bruso said. The asset gets pegged with a lower value, which makes it more suitable for lenders and those involved to chase alternative uses and start to recoup their investment. 

He suspects that many lenders and banks will try to avoid taking property back because of the challenge of operating lab space, prolonging the tough decision about changing uses and tenant bases. 

Of the 22 conversions JLL has tracked, 14 are now office spaces, five are used as R&D or flex industrial, and three found more unique second acts, including a med tech office, other industrial use and a new Northeastern University nursing school in Fall River, Massachusetts.

Advanced manufacturing, especially high-tech applications like drones or electronics, often seek manufacturing space with the same clean room capacity and water and power supplies as some smaller biomanufacturing sites. 

Unlike the larger biomanufacturing sites that have been in high demand with the current wave of domestic investment and reshoring, smaller facilities measuring roughly 150K SF have been actively searching for tenants, according to Matt Gardner, leader of CBRE’s advisory life sciences practice. 

The math for these kinds of conversions often depends on a reassessment of value or a lender losing patience, since lab tenants pay a premium for space compared to other uses.

For a suburban Boston space, Bruso said, a lab user would pay $60 or $65 per SF for a lease, with roughly $200 per SF in tenant improvement costs contributed by the landlord. A flex R&D user would only pay $20 per SF, and with substantially lower TI, likely $30 or $40 per SF. In downtown Boston, lab space may be $110 per SF, where a tech office user could pay $70 or $80 per SF. 

There have been some success stories for operators that have been well-positioned to strike deals with different kinds of tenants. In Massachusetts, King Street repositioned Pathway Devens, a campus originally developed for biomanufacturing, into an advanced manufacturing center.

Another lab facility in Watertown leased 60K SF to a cleantech firm in October 2024. And in Kenilworth, New Jersey, Onyx picked up a large biomanufacturing and research facility from Merck, only to lease a significant portion of it to CoreWeave last year to use as a data center in a deal worth $322M.

In Mission Bay, San Francisco, AI companies have sought out empty space in areas with lots of underutilized lab buildings. In early August, news broke that OpenAI was also considering signing at 455 Mission Bay Blvd., a property owned by Alexandria Real Estate Equities.

Gardner said that, like advanced manufacturing, data center developers may find opportunities inside some biotech manufacturing facilities. They will likely find many willing suitors in the life sciences sector.

“It's not any one, two or a small cadre of ownership groups that have got this issue,” Bruso said. “I think it's pretty widespread, given the supply across the market.”