Silver linings have appeared in certain sectors of the challenged life sciences real estate market, with CBRE’s year-end report touting “improved absorption and increased leasing activity,” while Savills highlights decreasing sublease space and a multibillion-dollar rise in venture capital funding.

But these positive indicators can’t overshadow headwinds facing the sector — specifically, floors upon floors of empty space. The big three markets of Boston, San Diego and San Francisco all now have vacancy rates at roughly 20% or higher, something that hasn’t happened in recent history.

Other major markets present similar pictures, with leasing activity dominated by renewals.

In San Diego, the market saw a striking 88% increase in gross leasing year-over-year in 2024, totaling 2.4M SF.

But a deeper dive into the numbers in a recent JLL report suggests the picture perhaps isn’t as rosy. Of the top 10 leases in the market last year, only one was a new lease, and only five of the renewals and relocations resulted in increased space. Overall, the market showed negative net absorption.

But in a challenging financing and capital-raising environment, renewals may be at least a suggestion of continuity in the market.

“Another way to look at renewals that are of the same size is that they aren't necessarily good or bad,” said Amber Schiada, JLL head of work dynamics research for the Americas. “If renewals are staying in place the same size, that's a good indication that they still feel confident about the business needs and their space needs.”

Boston is facing similar dynamics. The leasing market has been dominated by renewals, with a total of 460K SF of negative absorption throughout 2024. The largest leases of the fourth quarter, a pair of leases covering roughly 120K SF for serial biotech entrepreneur Greg Verdine-backed startups in Watertown, which has been hailed as a biotech boomtown, were signed in October after the newly built space remained empty for months.

Many of these markets have also seen marked year-over-year vacancy increases, and landlords and owners are seeking to sell or lease to tenants outside biotech. Sutter Health just paid $450M to turn a life sciences campus into a medical center, while Kilroy Realty Corp.’s massive Oyster Point development in South San Francisco has attracted finance and tech tenants.

San Francisco’s lab vacancy spiked in Q4, rising from 18.1% last year to 28.7% today, with an estimated 2.7M SF under construction or conversion. At the current absorption rate, that would take about two years of leasing activity to fill.

Those stark figures can seem distressing, Schiada said, but she sees momentum in life sciences real estate, including stabilization as the addition of excess supply slows down and increased touring activity across the country.

“On a headline or overall rate basis, that is alarming,” Schiada said. “But it’s more tied to the new supply we’ve seen delivered.”

Schiada pointed out that leasing activity in San Francisco was 1.5M SF, the highest quarterly volume since 2022.

In Q4 2024, the market saw 350K SF of net absorption. But two big leases, a 203K SF renewal for Genentech, a biotech stalwart, and 260K SF renewal and expansion for Vaxcyte made up a big chunk of the absorption. Without those two leases, the market would be roughly where it was a year ago, only with a lot more supply.

Schiada said she is heartened by the increased leasing activity that closed out the year. In Q4 alone, the national leasing figures sharply increased, with 10% overall quarter-over-quarter growth and 3.4M SF of activity and 920K SF of net absorption.

“Leasing activity going up is certainly a good indicator for the future,” Schiada said.