The U.S. life sciences real estate market is beginning to stabilize after four years of significant oversupply and weakening demand, according to JLL's latest lab property report. Lab availability across the country has begun to contract for the first time in years after rising by roughly 40 million square feet over the past five years, marking an early inflection point in the sector's post-pandemic correction.
Available lab space has declined by approximately 2 million square feet since mid-2025, suggesting availability likely peaked then and that a gradual recovery is underway.
"Nearly every indicator suggests the market has bottomed out and has begun to recover," the report said.
The pullback in availability has been broad-based, with nearly all major markets participating. The Bay Area's AI-driven expansion and Raleigh-Durham's biomanufacturing growth have led the recovery, together accounting for roughly 1.9 million square feet of space absorbed since July 2025, the report said.
Demand remains concentrated in core markets. Boston, San Diego, the Bay Area and Raleigh-Durham recorded nearly 8 million square feet of demand in Q1, up 44% from a year earlier, supported by improved biotech funding, capital market activity and renewed M&A momentum. Secondary markets, however, continue to weaken, with demand down nearly 3 million square feet over three years and rising availability highlighting a widening performance gap.
Tenants are increasingly trading up into newer, higher-quality buildings, mirroring post-pandemic behavior seen in other property sectors. Buildings completed since 2020 have seen availability decline by roughly 6 percentage points over the past year, while 2.6 million square feet of space has been absorbed since mid-2025. Older assets continue to lose occupancy, reinforcing a sustained flight-to-quality trend.
Despite this stabilization, oversupply continues to define market conditions. Tenants have abundant options, while landlords compete aggressively for deals across nearly every major market. Excluding large transactions, direct relocations now average 62 months — roughly 20% shorter than in the late 2010s and about 30% below peak cycle levels. Landlords are offering higher concessions, free rent and turnkey space to secure leases, and conditions are expected to remain tenant-favorable in the near term, JLL said.
The three largest markets — Boston, San Diego and the Bay Area — have averaged 75 deals per quarter over the past two years, a 35% increase from pre-pandemic levels, establishing a higher baseline for activity. Sublease space remains elevated at roughly 11 million square feet, even as absorption has improved.
A new source of demand is emerging, the report said. AI, robotics and other "tough tech" companies, which develop technologies such as semiconductors, quantum computing and energy-storage systems, are increasingly leasing lab and R&D space. In Boston, these users accounted for 30% of lab leasing activity in 2025, up from 10% four years earlier, with similar trends emerging in West Coast innovation hubs.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.