Clouds 'Beginning To Abate’: Breakthrough Bets Big On A Life Sciences Market Rebound

While most general investors and landlords are vacating the life sciences market, some see a generational opportunity.

This may seem counterintuitive. Leasing has drastically slowed, vacancy has crept to 23.4%, and there still is a wave of speculative projects that entered the market in the third quarter, according to CBRE.

However, Breakthrough Properties, a joint venture between Bellco Capital and Tishman Speyer, sees the market conditions as an opportune time to pick up well-located properties for attractive prices. The real estate partnership is ramping up a new $1.5B fund to target life sciences assets in core and up-and-coming markets.

Breakthrough CEO Dan Belldegrun said the trends that once painted a gloomy picture of the market are poised to improve. This will come, he said, thanks in part to Big Pharma's onshoring, an increasing flow of venture capital funding and innovations like artificial intelligence.

"Many of the clouds that were over the industry are beginning to abate, and the fundamentals of the industry that got everyone energized by the sector, originally, are once again shining through," Belldegrun told Bisnow.

Belldegrun said he sees opportunities in structured finance deals ranging from disrupted deals in core markets to projects in markets that remain undersupplied.

He also pointed to the Biotech XBI Public Index, which is up 34.83% year-to-date and outperforming the S&P 500 for the first time in years. Demand across the sector is slowly rebounding. The sector is experiencing a basis reset as properties are sold at discounts and loans default.

Belldegrun said a window of opportunity will soon present itself as interest rates stabilize and a bump in M&A activity sets up an anticipated growth cycle. In addition, the world's biggest pharmaceutical companies have committed billions to onshoring in the U.S.

"The years ahead, the sector dynamics that I just described are almost entirely inverse to the dynamics that have challenged the industry over the past few years, creating what we believe to be the most exciting moment to invest in the sector," Belldegrun said.

The company has raised $430M in commitments for its second fund, Breakthrough Properties Growth Portfolio II fund. The new fund seeks to acquire lab buildings at a discount, banking on the market's current imbalance between supply and demand.

The firm closed on its first fund in 2022, which also targeted $1.5B. The fund hit its hard cap and took on additional co-investment capital.

As Breakthrough moves to make big bets on the market’s recovery, other owners are feeling the pain.

This month, one of the largest life sciences landlords in the space, Alexandria Real Estate Equities, slashed its quarterly dividend by 45% to 72 cents per common share. The last time Alexandria declared a quarterly dividend under a dollar per share was September 2019.

Alexandria has also been selling off noncore and underperforming assets across its portfolio, posting a $234.9M net loss in the third quarter. The REIT cited expected losses from dispositions for its dividend price change, noting it could face impairments of up to $685M related to property sales in Q4.

Belldegrun said Breakthrough’s new fund will be different in important ways from its previous lab sector fund. The new fund will emphasize biomanufacturing, ignited by the recent onshoring efforts by the Trump administration.

Big Pharma companies have invested $370B in U.S. investments throughout 2025, partly as a result of President Donald Trump's tariffs and stricter trade goals, according to market data from DPR Construction. The administration announced in late September that it would tack a 100% tariff on imported pharmaceutical products, Fierce Pharma reported.

Belldegrun said booming manufacturing hubs like North Carolina's Research Triangle will benefit from this. Traditional research and development hubs like Boston will also see demand for the technical talent based in those markets, he said.

"These commitments have just been made, and $400B-plus of commitment to onshore into the United States is just an enormous, enormous number," he said. "Those markets will benefit from it, as will the key manufacturing hubs."

In its first fund, the company developed Torrey Heights in San Diego, which is the new headquarters of Pfizer, and One Helix in Amsterdam, which is the cell therapy center for AstraZeneca. Belldegrun said the only development deals his team sees available today are ones that are already in their pipeline and are preleased.

"Today, we do not believe that the opportunity set is in spec development," he said. "It is much more of an opportunity to own a product at significantly below replacement costs, given the market dynamics."

Another difference in market conditions, Belldegrun said, is artificial intelligence. A dominant driver of the U.S. economic activity right now, it permeates the life sciences space as well. One-sixth of all biotech venture capital deals have been with AI-native companies year to date as of October, according to JLL. However, AI-powered ventures are taking up roughly one-third less space of traditional biotech tenants due to the reduced headcount that comes with automation.

"We believe strongly that AI is going to be one of the great accelerators for biotech innovation in the years to come, and the ability for it to speed up drug development, speed up the efficacy of drug development, is going to be extremely meaningful," Belldegrun said.

Like with Breakthrough’s first fund, Belldegrun also sees tremendous opportunity in European markets that have historically been overshadowed by the U.S. market in terms of investment. He said part of the problem is the high barrier to entry markets and language barriers that make it difficult to do business.

"At the end of the day, science is global," Belldegrun said. "Our clients at Breakthrough — the AstraZenecas, the Pfizers, the Mercks and others of the world — are global organizations that need to be global."