Life Sciences Vacancy Rate Increases Amid Slowing Construction Pipeline, Modest Rise in Tenant Requirements

Executive Summary

• Vacant construction deliveries totaling 3 million sq. ft., along with 630,000 sq. ft. of negative net absorption, raised the lab/R&D vacancy rate by 1.7 percentage points in Q1 to 14.8%, well above the 8% average from 2016 through 2020.
• While new leasing activity fell quarter-over-quarter to 1.4 million sq. ft., total leasing activity increased by 560,000 sq. ft. to nearly 3.1 million.
• Average asking rent fell by 0.3% quarter-over-quarter to $69.94 NNN per sq. ft., suggesting that rents have passed their peak.
• Total lab/R&D space under construction fell to 27 million sq. ft. in Q1, the first time it has been less than 30 million sq. ft. since Q2 2022. Lab/R&D space delivered in Q1 totaled 4.1 million sq. ft., 26% of it preleased.
• Venture capital funding for life sciences companies increased in Q1 2024 after decreasing in Q4 2023. Q1 and rolling-four-quarter funding totals were both above pre-2020 levels.
• While its annual growth rate slowed in Q1, life sciences employment reached a record high.