Leasing Slides For Alexandria Amid 'Very Tough Operating Environment'
Alexandria Real Estate Equities is still adjusting to the painful reality of a life sciences market mired in excess inventory and depressed demand.
The largest lab REIT experienced a significant slowdown in leasing activity at its properties in the first quarter, reflecting the broader stagnation in the market and causing it to revise down its 2026 guidance.
Alexandria is facing “a very tough operating environment,” Chairman Joel Marcus said on the firm's first-quarter earnings call. The path forward involves reducing capital spend and funding needs and shrinking the pipeline, he said.
Alexandria’s Q1 2026 numbers showed a significant slowdown in leasing activity. Occupancy dropped from 91.7% in the first quarter of 2025 to 87.7% to start 2026.
Over the quarter, leasing was nearly cut in half, sinking from 1.2M SF to 647K SF due to lower-than-expected renewals. Quarterly rental income is down roughly $100M from the average rates in 2025.
While Alexandria showed $358.9M in net income in Q1, a significant turnaround from Q4, when the firm lost $1.1B, there’s still a rough path ahead. The company is facing 747K SF of lease expirations in Q2 and more than 1.5M SF of lease expirations in 2027. Alexandria expects downtime on these spaces.
“This should put pressure on occupancy for Q2 2026,” Chief Financial Officer Marc Binda said.
Alexandria also didn't sign any leases with public biotech companies this quarter, something Marcus called "unheard of" for a tenant group that makes up just over one-quarter of the company's rental income.
Alexandria’s Q1 numbers showed rental rates dropped 15% this quarter alone. This was partially explained by a 48K SF lease at 480 Arsenal St. in Cambridge, Massachusetts, which was re-leased to an existing entertainment studio user.
Alexandria intends to reevaluate the business and financial strategy on five properties across 1.6M SF, including 242K SF at the 311 Arsenal St. and 3000 Minuteman Road redevelopment projects in Cambridge, seeking to lease all or a portion of these projects to “lower-cost alternative uses,” such as advanced technology, which Marcus defined as manufacturing or research functions, not merely office space for an artificial intelligence company.
“Rental rates are not as buoyant as lab, but those represent good opportunities,” he said.
Making a switch to a different type of tenant, including pivoting to advanced tech, would lower construction costs but would also lower the long-term rental rate potential of these properties, since lab leasing commands a premium.
Many of these properties, including 40 Sylvan Road and 311 Arsenal St., are located on Alexandria megacampuses, which the company focused on for the last two years as it shed other assets it considered not core to its portfolio.
These challenges highlight a larger issue in biotech, with the fate of the industry at large diverging from the lab real estate sector. CBRE’s just-released Q1 data showed nationwide vacancy at 23.2%, with more than 1.1M SF of negative net absorption in Q1, along with the fifth consecutive quarter of declining rents.
The negative numbers remain even more distressing considering that life science companies have seen increased hiring, strong venture capital investment and a jump in the XBI, an exchange measuring the health of biotech stock, to its highest level since mid-2021.
During a discussion on pinch points that are harming leasing activity, Marcus also mentioned a number of federal policy and regulatory hurdles, a change in tone from his earlier welcoming of Trump administration policies in early 2025.
In addition to capital markets pressure, federal biotech policy was also making a negative impact. Marcus noted that the “turmoil” at the National Institutes of Health impacted early-stage startups, as did the recent reversal of a cut to matching research funding.
Recent Food and Drug Administration decisions around regulatory approvals and processes have been a “huge problem” that is a “shock at a core level,” he said, citing news from Tuesday that the agency was moving to rescind approval of a drug made by Amgen, claiming data was manipulated.
Marcus went on to say these factors, along with new investment in Chinese biotech, have created a “more challenging operating environment.”
Alexandria has leaned heavily on its asset recycling program, seeking to support existing capital and spending needs by selling off excess property. Earlier this year, Alexandria announced plans to sell roughly $3B in assets over the course of the year.
The company completed $151M in sales in Q1 but said there are $2.2B of transactions in process and that it has historically completed most of its sales at the end of the year. Decisions about the other 20% of potential sales are expected over the next few months, according to Binda
“We believe there is strong institutional interest for our core assets at a reasonable cost of capital,” he said. “And accordingly, we believe that joint ventures for some of our core assets could be a significant component of our capital plan.”
Guidance for occupancy was downgraded 150 basis points, while net operating income was down 100 bps and rent revenue was lowered 700 bps.
In response, Alexandria stock dropped roughly 5% in trading on Tuesday. Alexandria remains down 36% over the last year.
Alexandria’s performance underscores just how tenant-friendly the current lab leasing landscape has become, with landlords offering significant discounts and concessions to biotech companies amid a gaping supply glut and, in an increasing number of cases, seeking alternative tenants outside of biotech.
