Vacancy rates in the life sciences real estate sector are climbing, and the implications are rippling across the U.S. property landscape. Once considered one of the most resilient and high-growth niches in commercial real estate, life sciences assets are now facing oversupply, funding headwinds, and shifting tenant behavior. According to CBRE, the national lab and R&D vacancy rate reached 22.7% in Q2 2025, while Cushman & Wakefield reported a similar figure of 23.3%, citing negative net absorption and a slowdown in leasing activity.
This marks a sharp pivot from the pandemic-era boom, when biotech and pharmaceutical tenants were racing to secure space. Today, developers, investors, and brokers are recalibrating expectations, rethinking strategies, and watching submarket dynamics with renewed scrutiny.
Oversupply Meets Funding Decline
The surge in lab space construction between 2021 and 2023 was driven by optimism and capital. Venture funding for biotech startups hit record highs, and developers responded with aggressive ground-up projects in major hubs like Boston, San Diego, and the Bay Area. But as interest rates rose and VC pipelines tightened, demand began to soften.
In Cambridge, MA, long considered the crown jewel of life sciences, several speculative developments are now facing delayed lease-up timelines. In South San Francisco, sublease availability has doubled in the past 12 months. And in Redwood City, developer IQHQ recently listed a high-profile property for sale after shelving plans for a multi-building lab campus. These moves reflect a broader trend: speculative development without preleasing is becoming riskier, and capital is shifting toward stabilized or pre-leased assets.
Tenant Behavior Is Shifting
Life sciences tenants are becoming more selective and cost-conscious. Startups are downsizing or delaying expansion, while established firms are consolidating footprints and prioritizing operational efficiency. Flexible lab layouts, shared amenities, and proximity to academic institutions remain attractive, but only if the economics make sense.
Shorter lease terms, subleasing, and hybrid work models are adding complexity to the leasing environment. Tenants are asking for more buildout flexibility, shorter delivery timelines, and performance-based incentives. Brokers report that deals are taking longer to close, and landlords are offering more concessions to secure commitments.
In some cases, tenants are opting for plug-and-play lab suites in coworking-style environments, rather than committing to long-term leases. This shift is forcing developers to rethink how space is designed, marketed, and monetized.
What This Means for Investors
For investors, rising vacancy rates signal a need for sharper underwriting and more conservative assumptions. The days of “build it and they will come” are fading, replaced by a focus on tenant credit, lease duration, and market fundamentals. Understanding how to navigate different phases of the real estate cycle is now essential.
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Capital is still available, but it’s flowing toward stabilized assets, adaptive reuse opportunities, and properties with strong preleasing. Investors who can identify undervalued assets in strategic locations, especially near hospitals or research universities, may find upside in repositioning rather than new development.
Private equity firms and institutional investors are also adjusting their strategies. Some are pivoting toward mixed-use life sciences campuses that blend lab, office, and residential components. Others are exploring joint ventures with healthcare systems or academic institutions to de-risk development and ensure long-term occupancy.
Developers Are Rethinking Strategy
Developers are responding with caution. Many are pausing speculative builds, focusing instead on tenant-driven projects with clear demand signals. Some are exploring conversions, turning underperforming lab space into office, residential, or mixed-use environments.
Waterfront locations, once considered niche, are gaining traction as tenants prioritize wellness and walkability. As noted in Real Estate Today’s coverage of water-access value, proximity to natural amenities can enhance tenant satisfaction and long-term retention.
Design is also evolving. Developers are incorporating modular lab layouts, shared collaboration zones, and ESG-aligned features like energy-efficient systems and biophilic design. These elements not only attract tenants but also support long-term asset value and regulatory compliance.
Policy and Economic Factors at Play
Federal policy and macroeconomic conditions are influencing vacancy rates in life sciences real estate. Patent expirations, regulatory shifts, and global competition are reshaping R&D priorities. Meanwhile, inflation and interest rate volatility are impacting construction costs and financing terms, making speculative development less attractive.
Local governments in key markets are stepping in with incentives, zoning adjustments, and infrastructure support to stabilize the sector. In North Carolina’s Research Triangle, for instance, tax credits and workforce development programs are helping attract new tenants and investors. In Houston, city-backed initiatives are supporting biotech incubators and lab conversions in underutilized buildings.
The broader economic outlook, including healthcare spending, pharmaceutical innovation, and demographic trends, will continue to shape demand for life sciences space. But for now, the sector is in a holding pattern, waiting for funding to rebound and tenant confidence to return.
Submarkets to Watch
While national vacancy rates are high, not all markets are equally affected. Cambridge and South San Francisco remain relatively resilient due to their proximity to talent and institutional anchors. Emerging hubs like Raleigh-Durham, Houston, and Philadelphia are attracting attention for their affordability, infrastructure, and growth potential.
Investors and developers should monitor leasing velocity, tenant mix, and pipeline saturation in each submarket. The ability to pivot, whether through repositioning, flexible leasing, or strategic partnerships, will be key to navigating the next phase.
In some cases, smaller secondary markets may offer better risk-adjusted returns than legacy hubs. Cities with strong healthcare ecosystems, university partnerships, and business-friendly policies are well-positioned to absorb demand and support long-term growth.
Adaptation Is Essential
The rise in vacancy rates is a wake-up call for the life sciences real estate sector. It’s not a collapse, but it is a correction. Stakeholders who adapt quickly, focus on fundamentals, and stay close to tenant needs will be best positioned to weather the shift and capitalize on long-term opportunities.
Whether through smarter underwriting, strategic conversions, or tenant-first design, the next chapter of life sciences real estate will be defined by agility, resilience, and data-driven decision-making. For investors, developers, and professionals ready to pivot, the opportunity is still there, but the playbook has changed.
