The life sciences real estate market has faced challenges in recent years due to a decrease in demand, an influx of new properties, and a decline in funding. However, JLL’s latest “U.S. Life Sciences Property Report” suggests that the tide may be turning. The report highlights five key trends indicating that the lab sector is poised for a resurgence.
Firstly, lease terms have been shrinking since the early 2010s when they averaged five years. As demand outpaced supply during the latter half of the decade, landlords were able to negotiate longer leases with tenants. However, as tenant demand now exceeds supply once again in 2020s’ early stages; tenants are pushing for shorter lease terms.
Secondly, certain regions such as Boston and San Francisco Bay Area have seen strong leasing activity despite overall market downturns. These areas also boast high-quality assets which remain highly sought after by potential lessees.
Thirdly although there has been an increase in lab space demand nationwide; it is predominantly concentrated within three markets – namely Boston and San Francisco Bay Area along with San Diego – while other major markets still lag behind pre-pandemic levels by over half according to JLL’s data analysis.
Fourthly there remains significant disequilibrium between supply and demand across most major markets today; particularly so within oversupplied areas like Boston or SFBA where some prospective lessees lacked adequate funding resulting from their inability sign leases at all while others could only do so on unfavorable terms compared historical averages meanwhile Los Angeles & Raleigh-Durham managed maintain more balanced ratios throughout this period per Connect CRE research team findings .
Lastly new-supply vacancies forecasted fall significantly following completion current wave construction projects expected peak year (2024) before stabilizing thereafter until next cycle begins around mid-decade point based upon projections provided herein courtesy our friends @JLL .
