Biotech's Outlook Brightens, But Lab Landlords Face Deepening Vacancies, Falling Rents
The life sciences industry seems poised for a turnaround, posting better funding results and stock prices to start the year.
But those improvements have yet to trickle into life sciences real estate, with vacancy increasing again in the first quarter and asking rents dipping further as huge swaths of new space sit empty.
“There's definite industry optimism,” JLL National Life Sciences Research Director Mark Bruso said. “I say industry optimism because that industry optimism hasn't really translated yet into what I call real estate optimism.”
A period of volatility and uncertainty for life sciences companies collided with a wave of new construction around 2023, setting up today’s market for a supply-and-demand imbalance that has landlords scrambling.
The increase in nationwide vacancy to 23.2% is a reversal from the slight dip to end 2025, according to preliminary CBRE data provided exclusively to Bisnow. The lab market clocked more than 1.1M SF of net negative absorption, and asking rents declined for the fifth consecutive quarter to $67 per SF.
Vacancies in properties built as a result of the pandemic-era boom in lab construction are well above the national average, according to a Savills research analysis.
Of the 60M SF of labs completed from 2020 to 2025, 55.6% are vacant. The figure gets worse for the 2025 vintage of labs, which remain 73.4% vacant. Since 2023, 34 entire buildings have been completed without a single tenant in place.
Amid that lackluster real estate performance, there were bright spots for the industry at large.
Life sciences companies have increased hiring for five consecutive months at a 2% annual growth rate, the fastest since June 2023, according to CBRE data. The XBI, an exchange measuring the health of biotech stock, reached its highest level since mid-2021 and has jumped roughly 17% since the end of March.
Venture capital remains strong, with $7.5B raised in Q1 2026, above the two-year average and roughly $800M higher year-over-year. There have also been a handful of initial public offering exits this quarter: Generate Biomedicine raised $400M in February, Aktis Oncology raised $318M in January, and Kailera just raised $625M in one of biotech’s largest-ever IPOs.
Most in the industry believe more IPOs are coming as the year unfolds, according to Matt Gardner, leader of CBRE’s advisory life sciences practice.
These IPOs could include many high-profile companies like SpaceX and Anthropic, Gardner said. IPOs and more robust streams of VC mean life sciences companies can grow their headcounts and research aspirations, driving the need for more space.
But, stacked up against millions of square feet of vacant space, landlords can’t just rely on growth among startups and newly public life sciences companies.
The string of dismal quarters has accelerated the trend of owners, desperate for leasing in long-vacant properties, reclassifying or converting their life sciences space. The nation’s total inventory of life sciences space dropped by roughly 1M SF as a result, helping offset lagging demand, according to CBRE.
These new users tended to be so-called heavy tech users such as advanced manufacturing, energy innovation or defense tech, or artificial intelligence companies, particularly in the Bay Area.
Two properties in the Bay Area pivoted to office use — including an Alexandria Real Estate Equities site in Mission Bay targeted at AI companies — a lab in Boston converted to advanced manufacturing, one property in Philadelphia went to flex industrial, and a couple buildings in San Diego converted to research and development/advanced manufacturing.
“Activity is promising, yeah, and it's also promising for the convergence of two things happening at the same time,” Gardner said. “One, absorption in life science is picking up — this quarter, we obviously saw a little slowdown — but the previous two quarters were positive net absorption. But then, two, demand from other sectors pulling some of that space out.”
Before the pandemic, JLL tracked roughly 110 leasing deals in the Big 3 life sciences markets — the Boston area, San Diego and the Bay Area — every six months, Bruso said. Right now, the pace is roughly 150 every six months, suggesting that while activity is happening, biotech companies are taking significantly less space.
“1M SF isn't going to change everything, right?” he said. “It's telling me that we're probably skimming off the bottom right now and turning in a positive direction. It's just going to take a long time. It's going to be slow growth, a slow grind back to normal.”
Gardner sees the bifurcated market continuing, but not for long. While life sciences tenants remain very conservative and continue to sign relatively small and short leases, there are signs of activity, like the 3.2M SF of leasing in Q1, the second-highest quarter since 2023. As the overall economy improves, he sees the gap narrowing.
“The reality is that we're sort of coming out of that proverbial rainy day, hopefully, but we’re not quite sure when the funding environment frees up more, so continue the sort of cautious paradigm about not taking the brakes fully off,” he said.
