AI-Powered Biotech Firms Might Fill The Lab Glut. Luring Them Will Be Expensive

A glut of space paired with a lack of demand has plagued the life sciences real estate market, and developers are banking on the rise of artificial intelligence to be their cure. 

New technologies are having a structural impact on the way research is conducted, and that’s consequentially changing tenants’ real estate needs. But attracting companies using AI isn’t as simple as having space available for move-in, experts said at Bisnow’s New York Life Sciences & Biotech Summit this month. 

“Now, every life science space, education space, healthcare space seems to have some component of a data center within it at this point,” HDR Education and Science principal Sally Lee said on stage at the Times Square Marriott Marquis. “The infrastructural demand is something that is a dealbreaker in some cases.”

Amid a significant drawback in funding in the field, AI-native biotech companies account for 15% of all venture capital deals, up from 9% in 2023, according to JLL’s 2025 report on life sciences. That’s expected to increase as researchers continue normalizing and incorporating AI into their day-to-day lives. 

It also makes the firms utilizing AI among the few tenants on the market receiving the financing required to grow their workforce and, consequently, their workspace. Even so, on a per-employee basis, AI biotechs lease roughly one-third less space than a traditional life sciences tenant.

In a real estate sector where rapid construction has caused vacancy to spike from 6.6% in 2022 to 27% in 2025, per JLL, AI companies may look like fresh meat. 

“Deep tech” or “tough tech” companies — those that merge traditional research methods with advanced engineering — have already taken more life sciences space than their orthodox peers over the past few years. For leases over 10K SF, signed between January 2023 and July 2025, high-tech occupiers outnumbered pure-play biotech deals 562 to 515, according to JLL’s analysis of the sector’s top markets. 

“You're starting to see scientists using the biology and enhancing it with the use of AI. Over the next couple of years, as that wave continues, you're going to start to see more capitalized companies,” Partnership Fund for New York City President and CEO Maria Gotsch said. “They may need a little bit less of the wet lab space, but they are still going to need wet lab space.”

The potential uptick in demand may sound encouraging, but housing a tenant that heavily uses AI often requires expensive building upgrades, panelists warned.

Among those needs are increased slab loads that can support heavy mechanical systems. Additionally, like data centers, life sciences buildings will need enough electricity and water to support the equipment, according to Lee.

Lee said her firm is creating more “damp spaces,” where mechanical systems can be scaled up or down depending on how the space is used.

“It does create a little bit more front-end costs to build in these sort of reserve infrastructural needs,” Lee said. “But it has paid off, especially in moments like this, where there's been increased volatility.”

To create that kind of flexible space in an 86K SF building, Columbia University turned to manufacturers in Italy to design necessary equipment, Columbia University Medical Center Assistant Vice President of Capital Project Management Madeline Julian said. 

“There were no heat pumps in the market that could actually do what we needed these heat pumps to do in the square footage that we had available to install them,” Julian said. “Innovating while flexing and trying to accommodate demand, it's just really a process.”

That process can be costly, and increased costs can be a problem for developers already burdened with debt and a dim short-term outlook, giving lenders and investors pause.

“The single thing affecting this entire industry — from the science side, research side, commercialization side, real estate side — is the cost and availability of money. Period. End of story in our world,” Janus Property Co. principal Scott Metzner said. “Flexibility, from a for-profit perspective, not institutional perspective, costs money.”

At the Harlem Biospace, a $9M biotech incubator in Janus' Mink Building, the developer designed its graduation suite to have up to five chemical fume hoods but only started with one in place.

An initial wave of prospective tenants would have needed more than five, but then half of those potential occupants “washed out,” Metzner said. Those who are moving in can work with one.

“Meanwhile, we had to spend that money up front, both on the engineering and the construction,” Metzner said.

In New York City, life sciences inventory totals nearly 3M SF, with availability above 27%, according to a third-quarter CBRE report. That’s a huge amount for a market that has not historically had a large presence in the sector but a small slice of the national inventory’s 205M SF, 61M SF of which is available, according to JLL. 

Despite having less inventory than other life sciences hubs, New York is fighting somewhat of an uphill battle to lure companies, which tend to cluster. It is not considered among the top five hubs for talent in medtech, biomanufacturing or AI, according to JLL. It is No. 5 on the brokerage’s list of top startup ecosystems. 

JLL estimates that to get back to a neutral leverage market nationally, approximately 30M SF has to be absorbed by leasing or removed due to distress or adaptive reuse. At the peak historical absorption rate, it would take three years. At the average absorption rate recorded between 2015 and 2019, the more likely scenario, it will take nearly seven.

“Spending money, whether it's on flexibility or [tenant improvements], is going to be increasingly difficult,” Metzner said. “Watching the cost and availability of money is almost the key indicator of what our business model is. That's a long-winded way to talk about flexibility, but it's important for us every day in our decision-making.”