The life sciences real estate sector has faced challenges in recent years, including a decrease in demand, an influx of new properties and a decline in funding. However, according to JLL’s “U.S. Life Sciences Property Report,” there are signs that the industry may be turning around.
Firstly, lease terms have become shorter as tenants hold more negotiating power. This trend is particularly evident for middle-market deals which have seen an average decrease of two years compared to two years ago.
Secondly, certain regions such as Boston, the Bay Area and San Diego continue to drive leasing activity despite market conditions. High-quality assets also remain highly sought after by tenants.
Thirdly, while overall demand for lab space has increased nationwide since 2019 levels before the market overheating occurred; it remains primarily concentrated in three markets – Boston ,the Bay Area and San Diego.
Fourthly,the supply/demand ratio is still not balanced with some major markets experiencing oversupply due to lab users with limited funding being unable to sign leases.However,this imbalance is expectedto moderate over time through a reduction of supply and incremental growth in demand.
Lastly,in terms of new developments,the frenzy from early 2020s has slowed down but there will still be approximately 13 million square feet added by 2023.This increase will leadto higher vacancy rates,but this trend should improve beyond 2024 when only about15 million square feet are projected for delivery annually going forward.JLL predicts that this balance between supplyanddemandwill create opportunitiesfor investorsinthe comingyears.These trends demonstratea potential resurgenceofthelife scienceslabsector,and Connect CREhas allthedetailsinourlatestreportonthisexcitingindustry.
