As speculative lab development slows across the Bay Area, the Peninsula’s life sciences market is adapting, not collapsing.

But to succeed in the market, flexibility is the watchword, according to panelists at Bisnow's Bay Area Life Sciences Conference earlier this month.

South San Francisco, long the hub of life sciences in the Bay Area, saw the most development in the past cycle.

But it now has the most supply and a higher vacancy rate than other parts of the market, so the first part of being flexible is on location, according to Peter Banzhaf, co-founder and managing partner at Helios Real Estate Partners. He added that “tenants in that marketplace, which is more mature than other areas in the county, want to stay there.”

“Because pharma R&D was so concentrated in South San Francisco for so long, we're watching microclimates pop up around the Bay Area and down the Peninsula, specifically that are of adjacent but not direct competition to those R&D projects,” Transwestern National Director for Laboratories and Life Sciences Peter Conte said at the event, held at Redwood Life in Redwood City.

The market is cooling and there are fewer blockbuster leases these days, panelists said.

Still, demand is holding steady for one specific product: small, bright, flexible lab spaces that are prebuilt and ready for immediate move-in.

The shift reflects a reality in which tenants are no longer planning years ahead. They need space now, and they need it tailored to leaner operations and uncertain funding timelines.

That means landlords’ best bet is to offer flexible lease terms.

“The move-in cycle has shortened up to: ‘I need the space now,’” said William Syme, partner at Woodstock Development.

Flexibility is crucial when it comes to timelines and capital planning, according to Sherif Eldash, preconstruction manager at GCI General Contractors.

With cutbacks in federal funding and initial public offering markets remaining sluggish, landlords are hoping — and preparing — for a rebound in private equity and venture capital.

“It's hard to be flexible when you already have something built, because you've already committed a certain amount of capital,” Banzhaf said. “But when you want to activate your existing asset, you have to be flexible.”

As the sciences continue to evolve, including moving more toward artificial intelligence and robotics, tenants’ needs are shifting as well.

That means developers, contractors and engineers face unique challenges when tailoring spaces to specific industries. The needs of gene therapy are very different from those of AI-driven biotech or manufacturing.

Landlords are having to think creatively about aligning buildings with the needs of tenants. For one thing, it has become harder for speculative buildings to compete with existing product that can be more easily modified.

It’s crucial for contractors, engineers and developers to think about how innovative features like integrated AI functions factor into lab space design, panelists said. Some labs now have devoted data centers incorporated into spaces to power AI, essentially equipment rooms tailored to handle large heat and electricity loads.

“It's not a lab space. Is it leaseable? Where does that fit into the square foot calculation? It's a challenge, but you have to think about it,” said Robert Fagnant, associate partner at Syska Hennessy Group.

Other types of life sciences companies have begun to integrate AI and robotics to automate even the more mundane tasks. That calls for specialized power, heat, sterile conditions and floor isolation to handle vibration. Those spaces then require HVAC optimization to maximize energy efficiency and keep tenant costs down.

In the clinical world of hospitals and treatment facilities, spaces must be able to accommodate the needs of patient care. That adds another level of consideration for compliance and documentation, Conte said.

As the Peninsula’s life sciences market evolves, the real estate market has to evolve along with it, panelists said. But evolution operates on a longer timeline than the average fiscal quarter, which means taking a long view.

Otherwise, “How are we going to understand what they need in the next few months, next few years?” Fagnant said.