Conversely, the S&P Biotech index has sharply decreased in recent years, reflecting a reset on the part of investors regarding risk, according to Fetterman.

“Increased interest rates and the considerable challenges of navigating discoveries through clinical trials and approvals is concerning for investors in early and mid-stage drug development companies,” he says. Companies are turning to layoffs, subleasing of space, M&A, licensing, diversification and other strategies to provide necessary pathways for promising therapies.

Fetterman sees new construction in most markets limited to pre-committed, build-to-suit projects where specific requirements cannot be met by existing inventory. He also says that increased vacancy rates have affected key markets.

“As vacancy has risen, landlords, developers and lenders focused on incentives, including free rent and tenant improvement contributions. But with more lab buildings coming online, there’s increased downward pressure on rents.” He adds that lenders are driving the sale of purpose-built product at steep discounts to their most recent sale price or delivery cost.

Regulatory Uncertainty
Recent and potential policy, funding and tariff changes are also leading to uncertainty for the life sciences sector. For example, a new 15% cap on indirect cost recovery for all new National Institute of Health grants and for existing grants awarded to institutions of higher education has created a significant reduction in the funding that institutions have historically received.

“This has caused research institutions to eliminate post-doc positions and reevaluate budgets,” notes Fetterman. “The new policy impacts the ability for discovery to advance further within the institutional research ecosystem.”

Additionally, the Food & Drug Administration (FDA) is undergoing significant restructuring eliminating 3,500 jobs and leadership transitions amid policy shifts, , contributing to uncertainty around approval timelines., At the same time, FDA Commissioner Dr. Martin Makary said he would speed up approvals for rare-disease treatments, cut reliance on animal testing by incorporating computational models and shorten the industry’s typical 10-year drug-development timeline.

“Pharma companies are currently expanding US manufacturing operations and non-US based drug production companies are exploring establishing US operations, to mitigate potential impacts of evolving trade policies, including anticipated tariffs on pharmaceuticals.”