The U.S. life sciences real estate sector is experiencing some turbulence in 2025, as business uncertainty contributed to a sharp drop-off in demand in Q1. But a notable uptick in pharma companies announcing U.S. investments could lead to a boom in domestic biomanufacturing, according to JLL’s latest U.S. Life Sciences Property Report.
The study details that 15 major pharmaceutical companies year-to-date have announced more $270 billion in U.S. biomanufacturing and R&D investments planned over the next five to 10 years, driven by the threat of additional pharmaceutical tariffs and other cost pressures.
As the market continues to evolve and is influenced by ongoing economic uncertainties, innovative real estate strategies are expected to emerge, particularly in how companies approach their lab and biomanufacturing spaces to maximize efficiency and flexibility in this new landscape. [Reptile8488/Getty Images]
The report also highlights several key trends shaping the sector, including declining leasing activity in Q1, downward pressures on rents, shrinking inventory, smaller deals driving market activity, and tenants preferring the highest-quality buildings in the top submarkets.
“Life sciences companies are taking a guarded approach to real estate decisions due to uncertainties in the economy, policies and the funding environment,” said Travis McCready, head of industries, leasing advisory and chair, global life sciences advisory board at JLL.
“While the pullback in public funding is great cause for concern and a supply shake-up is on the horizon, the desire to strengthen the supply chain, geopolitical factors, patent and data security concerns and uncertain tariff landscape have all sparked strong interest in domestic pharma manufacturing.”
“The U.S. is the world’s biggest importer of pharmaceuticals, and life sciences companies are now more likely to incorporate reshoring into their long-term strategies,” added Kevin Wayer, division president, global life sciences at JLL. “As the market continues to evolve and is influenced by ongoing economic uncertainties, we anticipate seeing innovative real estate strategies emerge, particularly in how companies approach their lab and biomanufacturing spaces to maximize efficiency and flexibility in this new landscape.”
Amid a promising trend in biomanufacturing investments, the broader lab market is sputtering. After lab leasing showed signs of recovery in 2024, there is a notable slowdown in early 2025 amid persistent oversupply and weakened demand. Currently totaling 200 million square feet, the U.S. lab market would require 20 to 25 million square feet of net absorption or supply reductions to return to equilibrium.
“It would take three times the uptake of space seen per year during the peak of the last cycle to reach equilibrium,” said Maddie Holmes, senior research analyst, life sciences industry insight and advisory at JLL. “The reduction in tenant demand across the U.S. suggests muted leasing volume growth for the rest of the year as the sector grapples with uncertain economic conditions.”
Smaller deals are now primary market drivers, comprising 76% of deals closed in the first quarter, but total deal volume remains above the pre-pandemic average, notes the JLL report.
The report highlights varied market performance across regions. Top life sciences markets Boston, the San Francisco Bay Area, and San Diego, all facing similar challenges, including a prolonged period of oversupply and weak demand. This is leading to elevated availability rates and significant downward pressure on rents.
Midsize markets such as Greater Washington, DC, New Jersey, and Raleigh-Durham show more stability with moderate rent changes. Los Angeles stands out with its single-digit availability rate, driving rent growth due to limited growth space for tenants.
The U.S. lab sector is experiencing a sustained period of oversupply, leading to elevated vacancy levels and forcing many struggling buildings to consider changing uses. JLL has tracked a net reduction of 1.2 million square feet in built lab space across 13 buildings over the past four quarters, which is part of the 3.2 million square feet that has changed or is in the process of changing uses.
This shift, driven equally by pivots to new user types and capital challenges, is expected to slightly alleviate the oversupply in the 200 million square foot lab market.
JLL Research observed a 185% spike in demand for biomanufacturing space in key markets over the past six months, as both end-users and contract development and manufacturing organizations (CDMOs) look to expand their domestic operations.
Amid a promising trend in biomanufacturing investments, the broader lab market is sputtering. After lab leasing showed signs of recovery in 2024, there is a notable slowdown in early 2025 amid persistent oversupply and weakened demand. [Reptile8488/Getty Images]
“Large and public commitments by global pharmaceutical companies is off the charts,” said Mark Bruso, director, Boston and national life sciences research at JLL. “Even if it takes a while to materialize, it is undoubtedly an unmitigated tailwind for the manufacturing sector.”
JLL has tracked a significant change in the composition of lab deals across the U.S. Long-term leases and direct relocations have become increasingly rare, with a shift towards shorter-term commitments and in-place renewals. In-place deals are at an all-time high, indicating that many companies prefer to stay put in a difficult decision-making environment. Subleases are also popular with no immediate signs of changing market dynamics, and JLL anticipates this trend holds.
The report also highlights a clear preference among tenants for high-quality Class A space in prime locations. The best products in the best neighborhoods remain the most sought-after destinations for life sciences companies.
“Without a significant surge in demand, we expect prime lab assets to outperform in this oversupplied market,” Bruso added. “Lower-quality properties face potential distress over the next two years. However, this creates opportunities for patient investors to acquire and reposition high-potential lab spaces that need new operators or capital infusions.”
In the top 11 markets tracked, only four—San Francisco, San Diego, Raleigh-Durham and Philadelphia—have delivered new space so far this year totaling 4.2 million square feet. 8.5 million square feet are under development, which is 69% less than Q1 2024. Speculative development will be on hiatus for the long-term future, at the very least, mitigating any risk of adding additional space to the market in that period.
“It’s a question of when—not if—the biopharma sector recovers and life sciences companies start needing more lab space again,” McCready added. “Owners and occupiers who can navigate the current market conditions may find attractive opportunities as we progress through 2025 and beyond, so that when the next growth cycle starts, those who remain will be well positioned to ride the next wave of innovation.”
The post Biomanufacturing Gains as Lab Leasing Lags appeared first on GEN - Genetic Engineering and Biotechnology News.
The study details that 15 major pharmaceutical companies year-to-date have announced more $270 billion in U.S. biomanufacturing and R&D investments planned over the next five to 10 years, driven by the threat of additional pharmaceutical tariffs and other cost pressures.
As the market continues to evolve and is influenced by ongoing economic uncertainties, innovative real estate strategies are expected to emerge, particularly in how companies approach their lab and biomanufacturing spaces to maximize efficiency and flexibility in this new landscape. [Reptile8488/Getty Images]
The report also highlights several key trends shaping the sector, including declining leasing activity in Q1, downward pressures on rents, shrinking inventory, smaller deals driving market activity, and tenants preferring the highest-quality buildings in the top submarkets.
“Life sciences companies are taking a guarded approach to real estate decisions due to uncertainties in the economy, policies and the funding environment,” said Travis McCready, head of industries, leasing advisory and chair, global life sciences advisory board at JLL.
“While the pullback in public funding is great cause for concern and a supply shake-up is on the horizon, the desire to strengthen the supply chain, geopolitical factors, patent and data security concerns and uncertain tariff landscape have all sparked strong interest in domestic pharma manufacturing.”
“The U.S. is the world’s biggest importer of pharmaceuticals, and life sciences companies are now more likely to incorporate reshoring into their long-term strategies,” added Kevin Wayer, division president, global life sciences at JLL. “As the market continues to evolve and is influenced by ongoing economic uncertainties, we anticipate seeing innovative real estate strategies emerge, particularly in how companies approach their lab and biomanufacturing spaces to maximize efficiency and flexibility in this new landscape.”
Lab leasing volume sputters after 2024 rebound
Amid a promising trend in biomanufacturing investments, the broader lab market is sputtering. After lab leasing showed signs of recovery in 2024, there is a notable slowdown in early 2025 amid persistent oversupply and weakened demand. Currently totaling 200 million square feet, the U.S. lab market would require 20 to 25 million square feet of net absorption or supply reductions to return to equilibrium.
“It would take three times the uptake of space seen per year during the peak of the last cycle to reach equilibrium,” said Maddie Holmes, senior research analyst, life sciences industry insight and advisory at JLL. “The reduction in tenant demand across the U.S. suggests muted leasing volume growth for the rest of the year as the sector grapples with uncertain economic conditions.”
Lab market performance varies across regions
Smaller deals are now primary market drivers, comprising 76% of deals closed in the first quarter, but total deal volume remains above the pre-pandemic average, notes the JLL report.
The report highlights varied market performance across regions. Top life sciences markets Boston, the San Francisco Bay Area, and San Diego, all facing similar challenges, including a prolonged period of oversupply and weak demand. This is leading to elevated availability rates and significant downward pressure on rents.
Midsize markets such as Greater Washington, DC, New Jersey, and Raleigh-Durham show more stability with moderate rent changes. Los Angeles stands out with its single-digit availability rate, driving rent growth due to limited growth space for tenants.
Lab inventory is shrinking
The U.S. lab sector is experiencing a sustained period of oversupply, leading to elevated vacancy levels and forcing many struggling buildings to consider changing uses. JLL has tracked a net reduction of 1.2 million square feet in built lab space across 13 buildings over the past four quarters, which is part of the 3.2 million square feet that has changed or is in the process of changing uses.
This shift, driven equally by pivots to new user types and capital challenges, is expected to slightly alleviate the oversupply in the 200 million square foot lab market.
Global pharma makes major commitments
JLL Research observed a 185% spike in demand for biomanufacturing space in key markets over the past six months, as both end-users and contract development and manufacturing organizations (CDMOs) look to expand their domestic operations.
Amid a promising trend in biomanufacturing investments, the broader lab market is sputtering. After lab leasing showed signs of recovery in 2024, there is a notable slowdown in early 2025 amid persistent oversupply and weakened demand. [Reptile8488/Getty Images]
“Large and public commitments by global pharmaceutical companies is off the charts,” said Mark Bruso, director, Boston and national life sciences research at JLL. “Even if it takes a while to materialize, it is undoubtedly an unmitigated tailwind for the manufacturing sector.”
JLL has tracked a significant change in the composition of lab deals across the U.S. Long-term leases and direct relocations have become increasingly rare, with a shift towards shorter-term commitments and in-place renewals. In-place deals are at an all-time high, indicating that many companies prefer to stay put in a difficult decision-making environment. Subleases are also popular with no immediate signs of changing market dynamics, and JLL anticipates this trend holds.
The report also highlights a clear preference among tenants for high-quality Class A space in prime locations. The best products in the best neighborhoods remain the most sought-after destinations for life sciences companies.
“Without a significant surge in demand, we expect prime lab assets to outperform in this oversupplied market,” Bruso added. “Lower-quality properties face potential distress over the next two years. However, this creates opportunities for patient investors to acquire and reposition high-potential lab spaces that need new operators or capital infusions.”
The path forward
In the top 11 markets tracked, only four—San Francisco, San Diego, Raleigh-Durham and Philadelphia—have delivered new space so far this year totaling 4.2 million square feet. 8.5 million square feet are under development, which is 69% less than Q1 2024. Speculative development will be on hiatus for the long-term future, at the very least, mitigating any risk of adding additional space to the market in that period.
“It’s a question of when—not if—the biopharma sector recovers and life sciences companies start needing more lab space again,” McCready added. “Owners and occupiers who can navigate the current market conditions may find attractive opportunities as we progress through 2025 and beyond, so that when the next growth cycle starts, those who remain will be well positioned to ride the next wave of innovation.”
The post Biomanufacturing Gains as Lab Leasing Lags appeared first on GEN - Genetic Engineering and Biotechnology News.