Slackening demand and continued supply-side pressures weighed on the U.S. life science sector’s second-quarter performance. Vacancy rates continued to rise across key market biotech hubs, accompanied by further declines in rents. Ongoing uncertainty surrounding federal funding priorities and trade policy persists also contributed to cautious market sentiment. While headwinds persist, domestic biomanufacturing offers some promise, spurred by major reinvestment announcements from leading pharmaceutical firms. As the sector navigates this period of recalibration, its long-term growth prospects remain strong.
Demand Drivers
Metrics have shifted since the start of the year, with leasing velocity and tenant demand waning. The precious funding landscape, biotech IPO slump and regulatory uncertainty have life science companies reluctant to expand their real estate footprints and many cases downsizing or consolidating. M&A activity increased notably over the quarter, but most transactions are not resulting in new real estate requirements.
Industry and Talent Trends
Employment is relatively stable, but growth is trending below historic norms in the life science sector. Macroeconomics headwinds may give way to further labor market challenges as layoffs accelerated during the second quarter of 2025.
Market Fundamentals
Vacancy rates across the U.S. increased over the quarter, reaching 26% nationwide, which represents a 500-basis-point increase from one-year- ago levels. Occupiers are carefully evaluating leasing opportunities, weighing potential benefits against the challenges posed by an excess supply of laboratory space.
Capital Markets
Despite an uptick in investment sale volume for R&D and laboratory assets, liquidity challenges persist. Sales levels remain materially below their pre-pandemic pace, with recent improvements attributed mainly to a single large transaction. Most capital groups remain on the sidelines, though some occupiers are taking advantage of the landscape.
Global Market Overview
Trends impacting the U.S. life science market are playing out on a global scale as well. Funding remains crucial to drive demand in both emerging and established global markets. Moreover, recent tariff policies have the potential to reshape global supply chains. As pharmaceutical companies reassess operational strategies, emerging interest in domestic biomanufacturing could alter international market dynamics, influencing growth within local ecosystems and cluster developments.
Life Science Market Profiles
Market participants are encouraged to evaluate regional life science profiles, factoring in the potential impacts of NIH and NSF funding, as well as strategic shifts prompted by new economic policies and evolving demand-supply dynamics. These profiles serve as a vital resource for informed decision-making in this evolving landscape.
