Return to Positive Absorption in Q4 May Signal Improving Life Sciences Market in 2024

Executive Summary

• Two percent annual life sciences job growth as of November was slightly more than the 1.8% increase in total U.S. nonfarm payrolls since January.
• Venture capital funding for life sciences companies decreased in Q4 after increasing in the previous two quarters. 2023 annual funding also was down year-over-year, although it was on par with early 2020 rolling-four-quarter totals.
• The lab/R&D vacancy rate increased by 2.3 percentage points quarter-over-quarter to 13.1%, well above the 8% average from 2016 through 2020. The sharp rise in vacancy was mainly due to 4.3 million sq. ft. of vacant construction deliveries in Q4.
• Most of the top 13 U.S. life sciences real estate markets recorded positive net absorption in Q4. San Diego led with 211,000 sq. ft., followed by Seattle with 194,000. While 2023 annual net absorption was negative 1.85 million sq. ft., the 491,000 sq. ft. of positive net absorption in Q4 helped soften the blow.
• With new top-tier space coming to market, average asking rent for the top 13 U.S. life sciences markets increased by 4.1% quarter-over-quarter to a record-high $70.07 NNN per sq. ft.
• Lab/R&D space under construction fell to 32 million sq. ft. in Q4 after a record 40 million sq. ft. in Q2, with 20.7 million sq. ft. scheduled for delivery over the next 12 months. A record 7.7 million sq. ft. was delivered in Q4, 44% of it preleased.