A short-term recovery for the life sciences sector appears unlikely as it contends with multiple headwinds, according to a new report from JLL. However, the firm emphasizes that long-term structural advantages remain strong across major U.S. life sciences hubs.
The sector is currently undergoing a transformation that has tipped the market in favor of tenants. Lab leasing activity slowed sharply in the first quarter of 2025, stalling after limited momentum in 2024. Vacancy rates have soared from 6.6% in 2022 to 27% today, with newly delivered buildings bearing the brunt of oversupply. Completions between 2022 and 2024, now face a vacancy rate of 48%—roughly three to five times higher than older buildings, JLL reported.
Leasing activity is closely tied to venture capital deployment, which has also been on the decline.
“As money poured in during 2020–2021, leasing activity spiked as companies, flush with cash, leased more space than needed amid tight market conditions,” said JLL. “Since that peak, U.S. lab leasing has declined by an average of 8% per year, while venture funding is down 12% annually.”
Biotech’s share of overall VC funding has dropped from 15% to just 7%. Meanwhile, AI-native biotech firms are gaining ground and now represent one in six VC deals. These companies are redefining space needs, leasing about a third less space per employee than traditional biotech firms.
As a result, JLL expects lab planning to shift dramatically. Increased emphasis will be placed on computing power, robotics and smart lab infrastructure. The integration of automation and AI is not only transforming physical lab space but may also change who conducts research — and where.
Chinese biotech firms are another emerging force shaping the U.S. life sciences market. These companies now account for four times more in-licensing deals with U.S. biopharma firms than they did in 2021, adding further complexity to domestic demand trends.
JLL projects that a significant portion of current lab space will need to be repurposed. Of the 61 million square feet of available life sciences space today, nearly 19 million square feet could shift to other uses over the next five years. If so, availability could decline from 29% to 20% by 2030.
Other near-term challenges include trade policy volatility, weak funding pipelines and limited exit opportunities. Still, markets rich in talent and well-positioned for AI integration and biomanufacturing are expected to lead the eventual recovery.
JLL’s cluster analysis ranks Boston as the top U.S. life sciences talent hub, followed by the Bay Area and Washington, D.C. All three also rank as the leading startup ecosystems, with the Bay Area in first place.
In specialized segments, the Bay Area, Boston and Los Angeles lead as AI-biotech hubs, while the Bay Area, Minneapolis and Boston top the medtech category. New Jersey, Raleigh-Durham and Boston dominate biomanufacturing, JLL found.
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