Life sciences landlords are seeing the faintest signs of a turn in the lab market after two years of stalled leasing and empty megaprojects. However, they caution that any recovery will be slow and uneven, with many bracing for a long wait for demand to return.
According to Uma Moriarity, senior investment strategist and Global Head of Sustainability at CenterSquare Investment Management, “it’s hand-to-hand combat to retain your tenants and make sure that you’re backfilling any vacancies and things like that.”
Biotech stocks are pushing up toward levels seen in the banner year 2021, which is a positive indicator for life sciences companies.
Rental rates nationwide have declined nearly 18% since 2023 to $64 per SF, according to a report.
TransMedics recently announced a plan to relocate its global headquarters to BioMed Realty’s 188 Assembly Park Drive project in Somerville, Massachusetts. The company will receive nearly two years of free rent and a base price of approximately $3.50 per SF per month.
BioMed faces 1M SF of lease expirations in 2027 and has leased 1.5M SF over the past 12 months, representing 8% of its total portfolio.
Other landlords, such as Longfellow Real Estate Partners and Kilroy Realty, are also struggling to fill their properties, with Longfellow’s all-electric Bioterra development in San Diego remaining without any tenants.
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Kilroy’s Oyster Point life sciences campus in South San Francisco is only 49% leased and 7% occupied, prompting landlords to turn to tenants outside of the traditional biotech space to fill their properties.
Colliers Executive Vice President Joe Fetterman noted that developers and their investors are broadening the funnel of potential tenants significantly, as they try to sell their properties and attract new tenants.
The real problems for landlords will be debt-driven, according to Fetterman.
As Fetterman said, “this is a case-by-case basis,”
Landlords will have to offer significant concessions to attract tenants and hope that the recovery will come sooner rather than later.
They must find new ways to fill their properties.