U.S. Life Sciences Real Estate Market Normalized in Q4 After Robust Growth of Previous Two Years

New supply of life sciences real estate outpaced demand in many top U.S. life sciences markets in the fourth quarter, boosting the sector’s vacancy rate back toward pre-pandemic levels, according to a new report from CBRE.

Metrics gauging the life sciences sector varied in the fourth quarter as the industry normalized after robust growth in 2021 and much of 2022. Life sciences employment growth slowed from earlier rates but still progressed at a 4% year-over-year pace. Venture capital funding rebounded in the fourth quarter after three consecutive quarterly declines.

The market for lab space registered similar fits and starts. Average vacancy across the 13 largest U.S. life sciences markets rose to 5.7% in the fourth quarter from 5.1% in the third, but it stayed even with the year-ago figure and below pre-2021 levels. Vacancy figures include space listed for sublease.

Average asking rates increased to a record $62.16 per sq. ft. per year in the fourth  quarter, likely due to new, high-end lab space coming online in many markets. Lab space under construction grew to 40.3 million sq. ft. in the fourth quarter, up roughly 8% from the third quarter. Meanwhile, demand for space declined by 8.4% to 18.5 million sq. ft.

“The past two years set the bar quite high for growth,” said Matt Gardner, CBRE’s Americas Life Sciences Leader. “It’s natural for a red-hot market to cool a bit after such a strong run. A broad perspective of the current market should include record life sciences employment, continued rent growth and a rebound in venture capital along with nonrecurring events like increases in sublease space.”

Top Life Sciences Markets: Select Q4 Stats

Market	Market Size*	Vacancy	Sq. Ft. Under Construction	Sq. Ft. of Current Tenant Demand
Boston/Cambridge	52.7M	3%	15.3M	3M
Chicago	2M	29.6%	456,442	1.2M
Denver/Boulder	3M	5.6%	931,046	960,000
Houston	1.6M	11.7%	854,867	70,000
Los Angeles	5.6M	11.2%	681,710	950,500
New Jersey	15.8M	7.4%	-	440,000
New York City	2.7M	7.7%	866,013	1.4M
Philadelphia	9.7M	10.1%	2.8M	1.9M
Raleigh-Durham	9M	7.6%	688,628	950,000
San Diego	23.9M	4.4%	5.4M	980,000
San Francisco Bay Area	33.8M	6.3%	9.3M	5.6M
Seattle	9.3M	8.9%	1.5M	325,000
Washington, D.C.	12.6M	1.7%	1.5M	821,500
*In square footage of existing lab space.

To read the full report, click here.