Life Sciences Megatenants Are In Dwindling Supply After Record Lease

A record-setting lease in San Diego made waves in the life sciences real estate community earlier this month, with Alexandria Real Estate Equities reeling in Novartis to the tune of 467K SF.

That deal, combined with other Big Pharma leases in key biotech markets, sparked optimism for a beleaguered industry starved for lease commitments for more than a year.

But the number of big fish in the life sciences sea has dwindled, setting up fierce competition for huge swaths of life sciences real estate sitting empty across the country and more serious contemplation of seeking out nonbiotech tenants.

“There are not that many more whales looking for space, okay?” JLL Vice Chairman Chad Urie said. “If you look at pharma presence in San Diego, it's pretty easy to see that a good percentage of those groups have made their real estate play.”

Novartis’ lease for a build-to-suit space at ARE’s Campus Point project in San Diego is the largest deal the REIT has ever signed, marking a “seminal moment,” according to Chairman Joel Marcus.

But for many landlords, these large leases come with a realization that those looking to fill up campus-sized, top-flight lab spaces left empty in the current downturn may not have many potential tenants, or options, left. 

National leasing volume was down sharply in the first quarter, according to JLL, hitting below 4.5M SF versus nearly 9M SF the quarter before and down roughly a third from the same quarter last year. There was also a steep falloff over the last two quarters of leases signed that were more than 30K SF, dropping from 34 to 15.

In San Diego, there is plenty of existing space, according to Savills Vice Chairman Shane Poppen. Both Sterling Bay’s Pacific Center — the ​​690K SF first phase was just delivered earlier this year — and IQHQ’s Research and Development District project are carrying high vacancy. 

But Novartis bypassed both and opted for a building still under development.

“People say this deal moved the needle in the market,” said Poppen. “If anything, it made the market worse. There’s one massive deal happening, and they chose a building that didn’t exist.”

The Novartis lease can be read two ways, Poppen said. It’s a statement that San Diego is a market that Big Pharma firms want to have a big presence in — a sentiment underscored by recent deals by Eli Lilly and Pfizer, which have also signed leases in the city in the last year.

It’s also a sign that the kind of space these megatenants want is shifting and isn’t what is currently sitting empty on the market. More than 3M SF of new space was delivered in San Diego in 2025 alone, according to Savills data.

This shift is happening across the nation, especially in the country’s other two main lab markets of Boston and San Francisco. Each has substantial empty and vacant space, with 13.7M SF vacant in Boston and 10.8M SF vacant in the Bay Area, and rents have declined more than 10% from their peak in late 2022.

Owners have already mentioned the potential of leasing to nonlab users like artificial intelligence or defense firms. 

One-third of JLL’s institutional life sciences owner clients are starting to make the shift toward seeking out nonlab tenants for their empty spaces, and the other two-thirds are contemplating it, Urie said. JLL has tracked more than 3.2M SF of former lab space transitioning to other uses in recent quarters.

The Novartis deal also represents a sea change in the way the life sciences industry works, Urie said. Companies, including those in Big Pharma, are in the process of reinvesting in research and development space that factors in AI.

There have been several large-scale transactions in San Diego, and Urie said he’s seeing 800K SF of new requirements in Boston for similar Big Pharma-related expansions. But most of those projects are already in progress and aren't enough to make a major dent in vacancy — at least, not yet.

“​​Because of this change in technology, we're sitting at the cusp of the brightest horizon our industry has ever seen,” Urie said. “But to get there is going to take a couple years of pain. There’s going to be rather substantial pain for ownership of life science assets, there's no way around it.”

Pivoting to other users of these empty campuses isn’t necessarily a simple answer, Poppen said. Adjusting megacampus layouts to accommodate these new users, especially the growing AI market and defense users who might require different manufacturing, warehousing and energy needs, may prove expensive. 

The remaining large, empty lab space in San Diego, such as RaDD and Pacific Center, was “designed to catch those megadeals” like the Novartis and PMS lease from last year, Poppen said. 

Going forward, Poppen said those owners will have to pivot to try and fill up those large spaces floor by floor, a tough strategy in today’s market. It’s hard to chip away at such a significant amount of space. Many of these locations are vertical, multistory facilities that work for lab users but aren't necessarily what an advanced manufacturing tenant might want.

“It’s not like the spigot is going to be turned on dramatically, in terms of the funding cycle, over the next 12 months,” Poppen said. “We all hope ‘26 will be better than ‘25, just like we wanted ‘25 to be better than ‘24.”