In a glimmer of hope for one of the most battered sectors of commercial real estate, the vacancy rate for U.S. life sciences space went down for the first time in three years at the end of 2025.

At the end of last year, 23.4% of U.S. lab space was vacant, a drop of 0.4% from the third quarter, according to a new CBRE report. Tenants signed 2.5M SF of leases nationwide, although with move-outs that translated to just 156K SF of space absorbed

Asking rents fell for the fourth consecutive quarter to roughly $70 per SF, according to CBRE, and that doesn't account for the increasing concessions and creative lease structures landlords are offering to push deals across the finish line.

Those caveats could spell trouble for the owners of the 211.7M SF of life sciences space in the U.S. as well as the 4.5M SF of lab space under construction — all of whom will have to contend with life sciences employment growing just 0.2% year-over-year and predicted to remain slow. Although the amount of space under construction is at its lowest point since 2017, and more than half of that is preleased.

The funding environment also poses a challenge for the sector’s future growth.

Life sciences companies faced significant challenges last year when the government slashed federal funding for research grants, leading the U.S. National Institutes of Health to cancel billions of dollars’ worth of grants.

Leasing activity was sluggish at less than 11M SF signed in 2025, and few are predicting a quick turnaround. There were 293 tenants seeking space at the end of the year in the market for a total of 11.5M SF, a far cry from the 48M SF of vacant space across the country.

Modest increases in venture capital funding are a bright spot for the sector’s potential growth. Although VC lending fell from $8.9B in Q3 to $8.4B in Q4, it was the best six months for VC investment in life sciences since 2022, according to CBRE.

The artificial intelligence boom is also translating to some success for life sciences leasing, with AI-native biotech firms already capturing one-sixth of VC funding in 2025, according to JLL.

AI looks set to continue being a driver for life sciences. This month, Nvidia and Eli Lilly and Co. announced a partnership to invest $1B in developing a Silicon Valley lab targeting accelerated medicine development via AI infrastructure.

And while researchers predicted that demand could stabilize this year, as much as 19M SF of labs could still fall into distress or be converted to other uses by 2030, according to a JLL report from October.

Some owners are already facing difficulties. Alexandria Real Estate Equities posted a $1.1B loss during Q4 this week, with net operating income at its properties falling 3.5% year-over-year.

The REIT is looking to sell around $3B in assets in 2026 as it adjusts to “a new reality,” Chairman Joel Marcus said during a Tuesday earnings call.