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Today’s Boom In Lab Supply Is Rewriting The Life Sciences Real Estate Playbook

With increased concessions, more rental discounts and, perhaps by the end of the year, lower rents for labs, the increase in supply continues to alter today’s life sciences real estate market. It is a quiet echo of the sector’s boom in 2021, when record venture capital funding and soaring demand helped finance many of the projects coming online right now.

Relative to the ultra-tight vacancies of just a few years ago, today’s increased supply isn’t a glut. But during a time of cooling demand, new lab space has created a more tenant-friendly market, with increasingly available sublease space and more new developments in the works.


According to new data from CBRE, the second quarter of 2023 ended with a national lab vacancy rate of 9%, a jump from 6.7% in the previous quarter. In addition, Q2 saw roughly 1M SF of negative net absorption, with 40.8M SF of lab and research and development space under construction.

“In Boston, new buildings aren’t delivering to the market 100% occupied, which is very rare compared to where we were two years ago,” Colliers Research Director Jeffery Myers said. “I do expect vacancies to rise further, and I do think there is a possibility the market will shift further in favor of tenants, because I expect vacancies to rise further. Given all that construction, landlords will be forced to find ways to compete.”

Where a biotech startup looking for a 30K SF lease might have had two or three options before, now it has six or seven in play with a variety of landlords, said Austin Barrett, Savills vice chairman and head of life sciences. He expects landlords will get a lot more aggressive, as more-established landlords with more capital and older loans will have more leeway to negotiate.

Projects coming online now were financed in a different environment, Colliers Executive Vice President Joseph Fetterman said. He finds that many developers are splitting ongoing projects into phases, opening just a portion of large megacampus developments, with an aim to reduce risk and exposure and improve their ability to finance build-outs for new tenants. He predicts a slowdown of new in-development projects breaking ground. 

“Developers are studying demand very, very carefully,” Fetterman said. “They want to make sure that if they go, by the time they complete, they’ll be transitioning directly to tenant improvement work.” 

That excess of space isn’t going anywhere. Fetterman said the sublease space has increased, with 1.9M SF available in Boston, 1.1M SF in San Francisco, 1M SF in San Diego and about 900K SF in Maryland. In addition, there’s significant product in the pipeline in all major markets: roughly 22M SF in Boston, 10M SF in the Bay Area, 5.6M SF in San Diego and 2.5M in Philadelphia. 

As demand starts to slow down, it’s leaving some landlords handcuffed in terms of what they can and can’t do to attract tenants, due to loan covenants, Barrett said. There are even recent examples of landlords selling assets at massive losses, such as Alexandria Real Estate Equities' sale of 275 Grove St. in Newton, Massachusetts, for a $139M impairment charge. 

The supply situation has also taken the wind out of the sails in certain secondary markets, which had been banking in part on escalating costs in core markets pushing more firms to look elsewhere. Now, the growth of markets like Atlanta, Chicago and Denver will take longer to mature.

“If you're outside of some of those key nodes, you're kind of waiting in line,” Myers said. “And so the question is, will the line be long enough so that people peel off and say, ‘yeah, Boston's not going to work, I'm going to go to one of these emerging markets.’ Or, ‘hey, rents have come down, this is where I really want to be, so South San Francisco, here I go.’”