U.S. Lab Property Market Shows Early Recovery Signs as Landlords Pivot to AI and Biomanufacturing Tenants
Key Insights
Lab availability in the top 12 U.S. markets contracted by roughly 2 million square feet over the past nine months, marking the first decline in years, according to JLL (search).
Average lab rents have fallen nearly 18% since 2023 to $64 per SF, with free rent climbing to one month per year of lease term, keeping negotiating power with tenants.
Landlords are increasingly filling vacant lab space with non-life-sciences tenants, including AI firms, robotics companies, and even a Pokémon card manufacturer.
The U.S. life sciences lab property market is showing its first tentative signs of recovery after a prolonged supply glut, with lab availability contracting by roughly 2 million square feet across the top 12 markets in the last nine months, according to JLL (search)'s 2026 U.S. Lab Property Report. But beneath the surface, the recovery is being driven by compromises from landlords — sliding rents, growing concessions, and a strategic pivot toward tenants far outside traditional life sciences.
"Lab tenants today have options, and they are choosing building quality," JLL (search) noted in its report, emphasizing that newer buildings have seen their availability rate drop 6 percentage points in the last 12 months, shedding 2.6 million square feet since the second quarter of last year.
Rents Slide as Tenant Leverage Grows
The market remains overwhelmingly favorable to tenants. Average lab rents have fallen nearly 18% since 2023 to $64 per square foot, while average free rent concessions have climbed steadily, reaching one month for every year of lease term in 2025. Average lease lengths have contracted from 90 months in 2022 to approximately 60 months, reflecting tenant caution amid ongoing uncertainty.
Life sciences is the only asset class among all commercial property types expected to see negative rent growth through 2030, according to a Newmark report that projected a 1.2% decline over the next four years. The supply-to-demand ratio stands at 6:1, and JLL (search) cautioned that "the path back to a normalized market will be a long one," adding that "the next 12 months hold promise of incremental — not material — growth."
"Landlords will need to compete aggressively for every deal for the foreseeable future," the JLL (search) report stated.
Non-Life-Sciences Tenants Fill the Void
In a striking illustration of the market's adaptation, a 368,000-square-foot lease at the Spark biotech campus in Raleigh-Durham went to a firm that manufactures Pokémon cards. Meanwhile, in the Bay Area, Lane Partners is pivoting its 500,000-square-foot Berkeley Commons life sciences campus toward artificial intelligence, robotics, and advanced manufacturing tenants.
Bay Area AI companies have more than quadrupled their office space use since 2020, reaching 8.8 million square feet, while 32.3% of Bay Area lab space sat available in the first quarter, according to Newmark.
"It may not be great to have all of that chaff in the overall market, but we have additional sources of absorption outside of life sciences that we may expect to take some of this additional space," said Travis McCready, head of industries leasing advisory in the Americas for JLL (search).
Biotech Funding Shows Renewed Strength
The life sciences industry itself is showing signs of improvement that could eventually bolster real estate demand. The XBI index, which tracks biotech stocks, jumped 37% last year and has traded near historic highs in recent months. Venture capital contributions to life sciences firms rose to $7.5 billion in the first quarter, an $800 million increase over the prior year.
Much of the current demand is coming from early-stage companies seeking space in what JLL (search) describes as the most tenant-favorable market ever. Building operators have responded by delivering move-in-ready space, absorbing compression in first-year rents, and offering free rent within lease terms — flexibility that helps early-stage companies align their leases with funding cycles.
Uneven Recovery Across Markets
The leasing gains have not been distributed evenly. Boston, the Bay Area, and Raleigh-Durham have experienced occupancy improvements, along with younger markets like Denver. But Los Angeles, New Jersey, and San Diego — a longtime life sciences stalwart — saw availability rates rise.
Raleigh-Durham has posted the greatest improvement, with availability dropping 20% year-over-year. Pharmaceutical companies remain active in the Research Triangle, particularly for GLP-1 (search) weight-loss drug production, McCready noted. In April, Novartis announced plans to lease 56,000 square feet at the Pathway Triangle campus in Morrisville, building on a 202,000-square-foot lease signed last year.
AI-Native Biotech and the Footprint Question
The Bay Area's recovery is being fueled in part by what McCready termed "AI-native biotech" firms. The Gladstone Institute, a nonprofit drug discovery organization that has grown its use of AI, signed one of the largest life sciences leases in the Bay Area this year, taking 105,000 square feet in an under-construction Alexandria Real Estate Equities (search) project.
"Some call them AI-native biotech, and there is no better market for that kind of activity than the Bay Area," McCready said. "That's basically what's driving the positivity and the positive absorption in the Bay Area market."
Concerns that AI adoption would shrink biotech real estate footprints have not fully materialized, according to Ryley Poblete, a senior associate and sciences leader at Gensler. Firms are grappling with how to incorporate AI into research and how it affects lab layout, but the concurrent need for more lab equipment, power supplies, and automation means footprints are not shrinking as much or as fast as feared.
"It's not great for landlords, but it may not be as big a consolidation as you think," Poblete said.
Federal Funding Uncertainty Lingers
A potential tailwind — the reversal of Trump administration research funding cuts — has been tempered by ongoing uncertainty. Nancy Kelley, president and CEO of life sciences consulting firm Nancy J Kelley + Associates, noted that many National Institutes of Health grants that were blocked and then rescinded still have not been disbursed, and changes to funding rules have created additional uncertainty.
"What we've lost, I don't think we can even put a value on, honestly," Kelley said. "We're facing a situation where the federal infrastructure and partnership between the government and academia — and consequently the life science industry — is broken, and it needs to be rebuilt."
The bulk of market improvement stems from tech companies accommodating dry labs in the Bay Area and biomanufacturing companies requiring wet labs in Raleigh-Durham. Areas outside these core hubs are seeing less activity, though JLL (search) noted that "nearly every market is participating" in the recovery, supported by strong biotech fundamentals, public financings, dealmaking, and reshoring trends.