The U.S. life sciences real estate market continues to favor tenants as landlords contend with elevated vacancies, softer rents, aggressive concessions, and mounting debt pressures. While there are early indications that the sector may be stabilizing, the recovery is expected to be gradual and uneven across properties and markets.
For tenants looking for laboratory, research and development, or specialized commercial space, current conditions are creating opportunities that were difficult to find during the sector’s pandemic-era boom.
Lab Rents Continue to Face Pressure
One of the clearest signs of the market shift is the decline in rental rates.
According to JLL data cited by CRE Daily, nationwide lab rents have fallen nearly 18% since 2023, reaching approximately $64 per square foot. Landlords are also offering increasingly attractive incentives, with average free rent on new leases reaching roughly one month for every year of the lease term.
The concessions highlight just how competitive the leasing environment has become. In some cases, landlords are offering extended free-rent periods, significant tenant improvement allowances, flexible lease structures, and move-in-ready space to attract occupiers.
JLL describes the current environment as exceptionally favorable for tenants, particularly as high vacancy levels continue across major life sciences markets.
Tenants Have More Negotiating Power
The imbalance between available laboratory space and active tenant demand has shifted negotiating leverage toward occupiers.
Companies considering a new lease, relocation, or expansion may now have greater flexibility to negotiate not only rental rates but also tenant improvement packages, free rent, lease length, security deposits, and other economic terms.
For growing biotech and life sciences companies, these conditions may provide an opportunity to secure higher-quality facilities at more competitive effective rents.
The flight to quality is particularly important. JLL reports that tenants are increasingly gravitating toward newer, well-located properties while older or less differentiated assets face greater leasing challenges.
Landlords Are Expanding Beyond Traditional Biotech Tenants
With traditional biotech demand unable to absorb all available space, some landlords are broadening their definition of a potential life sciences tenant.
Advanced manufacturing, pharmaceutical, healthcare, and other research-oriented users are increasingly being considered as potential occupants for properties originally developed primarily for biotech companies.
CRE Daily highlighted this diversification as one of the strategies owners are using to increase occupancy and generate leasing momentum.
The strategy could become increasingly important for projects that entered the market during or shortly after the pandemic-era development boom and have struggled to achieve their original leasing assumptions.
Major Life Sciences Projects Are Still Feeling the Slowdown
The challenges aren’t limited to smaller or secondary properties.
Several prominent life sciences developments remain partially occupied or vacant. CRE Daily noted that Longfellow’s 323,000-square-foot Bioterra project in San Diego opened in 2025 but remained without tenants at the time of the report.
Kilroy Realty’s Oyster Point Phase 2 in South San Francisco was reported as 49% leased and only 7% occupied during the company’s second-quarter earnings call.
These examples illustrate a larger issue facing the sector: even high-quality properties in established life sciences markets must compete aggressively for a limited pool of tenants.
New Construction Is Slowing, Which Could Help Restore Balance
There is some encouraging news for property owners.
The life sciences development pipeline has contracted substantially. CBRE reported that approximately 3 million square feet of lab/R&D space is expected to be completed in 2026, the lowest annual total in a decade. Lab construction activity has fallen sharply since mid-2023.
Less new supply entering the market should eventually help existing vacancies get absorbed.
Demand indicators are also showing signs of improvement, but CBRE expects absorption to remain insufficient in the near term to dramatically reduce historically high vacancy levels. Average asking rents are therefore expected to remain under pressure.
Debt Could Become the Next Major Challenge
The next phase of the life sciences real estate cycle may increasingly be determined by financing rather than leasing alone.
Many properties were acquired, financed, or developed when valuations were higher and life sciences demand appeared significantly stronger. Owners now have to manage lower rents, expensive concessions, slower lease-up periods, and debt obligations simultaneously.
That creates a difficult equation: landlords need to offer competitive economics to secure tenants while still generating enough property-level cash flow to meet financing requirements.
CRE Daily notes that the severity of the problem is likely to vary considerably by property. Occupancy, loan maturity dates, leverage, acquisition basis, and original underwriting assumptions will increasingly determine which assets can successfully navigate the downturn.
A Market Reset Rather Than a Sector-Wide Collapse
Despite these challenges, the current environment does not necessarily indicate a permanent decline in life sciences real estate.
There are signs that market fundamentals are beginning to stabilize. JLL reported that lab availability across major U.S. markets has started contracting after several years of expansion, suggesting the market may have reached an important turning point.
At the same time, the recovery is unlikely to benefit every property equally.
Modern, well-located buildings with flexible infrastructure and strong ownership may be positioned to capture recovering demand first. Older or highly leveraged properties may continue to struggle, particularly when competing against newer buildings offering substantial concessions.
What This Means for Tenants, Landlords, and Investors
For tenants, the current market presents a potentially valuable window to negotiate favorable lease economics, secure higher-quality space, and obtain landlord-funded improvements.
For landlords, leasing flexibility is becoming increasingly important. Owners may need to reconsider asking rents, concessions, lease structures, and even the types of tenants they are willing to accommodate.
For investors, asset selection and debt exposure deserve close attention. The performance gap between high-quality, well-capitalized properties and struggling assets could widen considerably as loan maturities approach.
The life sciences real estate market may be finding its bottom, but the next phase will likely be defined by selective recovery rather than a broad rebound. Owners who can maintain financial flexibility and attract tenants through competitive leasing strategies may be best positioned for the eventual recovery.
