Commercial Real Estate News
Demand for U.S. Life Sciences Space Spikes 28 Percent Annually in Late 2024
CBRE's latest market data shows the U.S. life sciences real estate sector posted positive net absorption in Q4 of 2024, even as an increase in construction completions pushed the vacancy rate to 19.7%.
The fourth-quarter figures reveal gradual improvements across the 13 largest life sciences markets, with momentum likely to continue into 2025. Lab leasing activity reached 3.4 million sq. ft., marking a 28% year-over-year increase. Net absorption totaled 920,000 sq. ft. -- the third gain in five quarters -- indicating healthy demand for lab spaces despite market challenges.
Several factors fueled this progress in 2024, including record-high life sciences employment, numerous new federal drug approvals, and a 19% year-over-year increase in venture capital funding, totaling $30.4 billion. Additionally, lab construction surges that began during the pandemic are tapering off, with ongoing projects dropping to 12.1 million sq. ft. by the end of Q4 -- nearly two-thirds lower than the 2024 peak.
On a regional level, 10 of the top 13 U.S. life sciences markets saw positive net absorption in Q4, led by the San Francisco Bay Area and San Diego.
2025 U.S. Market Outlook
CBRE's newly released 2025 U.S. Life Sciences Outlook highlights continued growth driven by key factors such as an improving economy, robust sector employment, and a more favorable capital market environment.
However, the industry faces potential challenges. Approximately 8 million sq. ft. of new lab space is expected to be completed in 2025, contributing to higher vacancies in major markets like Boston, the San Francisco Bay Area, and San Diego.
"The life sciences sector operates on longer cycles than real estate, as drug discovery and development often take over a decade," said Matt Gardner, CBRE's Americas Life Sciences Leader. "But near-term economic indicators suggest better conditions for life sciences real estate this year."
