The U.S. life science market showed early stabilization in the third quarter as leasing and tenant demand modestly improved after several quarters of slowdown. Vacancy rates climbed only slightly, signaling that the correction phase may be nearing its end. While national fundamentals remain challenged, activity in top markets such as Boston, San Diego and the Bay Area picked up, supported by a rebound in venture funding and the continued expansion of biomanufacturing investment.
Funding and investment indicators improved across multiple fronts. Venture capital volumes rose over 30% quarter-over-quarter, driven by large late-stage rounds concentrated in the Bay Area and Boston. M&A activity accelerated for the second consecutive quarter, while institutional capital and users continued to target high-quality R&D assets. A sharp slowdown in new laboratory deliveries and the cancellation of speculative projects point toward supply moderation and gradual rebalancing heading into 2026.
Key Takeaways:
- Leasing activity and tenant demand increased quarter-over-quarter, led by major transactions in Boston and San Diego.
- Vacancy rose only 20 basis points to 26.2%, suggesting conditions are leveling after several quarters of decline.
- Venture capital funding climbed 34% from the prior quarter to about $20.6 billion YTD.
- Life science M&A year-to-date volumes reached $59B, following two consecutive quarters of growth.
- More than $270 billion in new U.S. biomanufacturing investment is planned by leading pharmaceutical firms.
- Roughly 16.9 million SF of laboratory projects have been canceled or repositioned, easing future supply risk.
