The availability of lab spaces in Boston remains at a high rate of 32% for the sixth consecutive quarter. This metric reflects the dynamics of the local life sciences real estate market, a crucial component in Boston’s standing as a global hub for biotechnology and medical research. A recent report from JLL highlighted a significant surge in sublease activity, with a major GMP (Good Manufacturing Practice) space of 250,000 square feet hitting the market, marking the largest space return in the third quarter of 2024.

Despite the challenges posed by high vacancy rates, the life sciences sector in Boston is poised for recovery, bolstered by the increasing flow of venture capital investments. In fact, VC funding has surged by 30% year-over-year across the United States, providing optimism for future market stability. The report from JLL forecasts that vacancy rates may peak this winter before gradually declining, helped by a 12% reduction in asking rents from their previous highs, bringing them back to mid-2021 levels.

A Stable Pipeline and the Future of Lab Space Demand

The pipeline for new lab spaces in Boston has slowed, with just 4.8 million square feet in the works. This figure is the lowest seen since mid-2019. As construction projects are completed over the next few months, only about 644,000 square feet of speculative space will be added to the market in the coming years, highlighting a shift towards more measured growth. However, the current supply of research and development (R&D) space still vastly outstrips demand, with over 16 million square feet available—a ratio that is 8 times greater than the existing demand.

This contrast points to a market in neutral, where supply and demand are balanced but without a clear indication of drastic shifts in either direction. Historically, the ratio between supply and demand had been far tighter, at just 1.3x before the pandemic, making the current surplus of space a key factor for businesses seeking to expand or establish new facilities.

Navigating Boston’s Lab Space Market: A Guide for Tenants and Investors

For life science businesses seeking lab space in Boston, the current availability presents both challenges and opportunities. The 32% vacancy rate indicates a high supply of options, but the increasing number of subleases and the competitive nature of the market mean that companies must be strategic in their approach.

Factors such as location, specialized infrastructure, and lease flexibility will play pivotal roles in decision-making. Additionally, for those planning long-term operations, it’s worth considering the upcoming limited supply after 2028, as speculative developments in the pipeline are already becoming more scarce.

As the life sciences industry continues to grow, particularly in biomanufacturing, gene therapy, and research applications, Boston’s lab space market will continue to evolve. Companies and investors should stay attuned to shifting trends and seek expert guidance to secure the most suitable spaces for their needs.

With a market poised between high availability and anticipated future demand, Boston remains an attractive location for both established industry players and emerging biotech startups. For businesses navigating the current lab space landscape, now is an opportune time to explore available options and capitalize on favorable conditions before the supply of lab spaces tightens in the years ahead.

As we enter 2025, the Boston lab space market is facing some unique challenges, with little new development on the horizon. According to recent industry insights, no new lab buildings are expected to be completed in Boston this year, a stark contrast to the robust construction activity seen in prior years. However, while new construction is slowing, lab fit-outs are emerging as a key growth area in the market.

A Shift in Focus: Lab Fit-Outs to the Rescue

With limited new lab space coming online in 2025, the demand for lab fit-outs is likely to continue growing. These projects involve converting existing office or commercial space into specialized lab environments. Tenants in need of tailored lab configurations are turning to these fit-out solutions, which offer greater flexibility and cost-efficiency compared to new builds.

Healthcare institutions, higher education organizations, and life sciences companies, in particular, are expected to drive this trend. Lab fit-outs can be an ideal solution for companies that are scaling up or diversifying their operations without the long timelines and high costs associated with new construction.

Why New Lab Construction is Slowing

The slowdown in new lab construction can be attributed to several factors. First, the market saw a significant amount of new lab buildings completed in 2024, which has led to higher vacancy rates in the sector. With more lab space available than ever before, developers are proceeding with caution and holding off on new projects until the market absorbs existing vacancies.

Additionally, shifting economic conditions and changes in the life sciences industry have contributed to more conservative investment in large-scale developments. Companies are reassessing their real estate needs in response to a changing market, which is making developers and investors hesitant to commit to new lab buildings.

Opportunities for Tenants and Landlords

For tenants, the absence of new lab construction could provide an opportunity to negotiate better lease terms and secure more favorable spaces. With a higher availability of existing lab spaces, companies may find it easier to secure the ideal location for their needs, often at more competitive rates.

For landlords, the focus will shift towards enhancing and repurposing existing spaces. To stay competitive in this evolving market, landlords will need to invest in modernizing older buildings to meet the specific needs of lab tenants. Lab fit-out projects, whether for clinical labs or research and development spaces, will become critical as landlords look to cater to the growing demand for customized lab environments.

The Future of Boston’s Lab Market

Despite the challenges, Boston remains a major hub for life sciences and research. The city’s highly regarded universities, world-class medical institutions, and growing biotech sector will continue to make it a destination for lab tenants. While the development of new lab buildings may take a back seat in the short term, lab fit-outs and adaptive reuse of existing spaces are expected to play an increasingly important role in keeping up with market demands.

As we move through 2025, businesses in Boston’s life sciences and healthcare sectors should prepare to navigate a market with limited new construction but abundant opportunities for tailored lab space solutions.

The Boston lab space market has hit a significant milestone with vacancy rates now surpassing 30%. This shift represents a major change for the region’s life sciences sector, which has long been known for its competitive real estate market and high demand for specialized laboratory spaces.

What is Behind the Shift?

Several factors have contributed to this increase in vacancy rates. First, the pandemic’s impact on research and development activities forced many companies to reassess their space needs, leading to a decrease in the demand for lab space. Additionally, some companies that were previously scaling up are now scaling back as they adjust to changing economic conditions.

The rising vacancy rates may also reflect an oversupply of lab space that was developed during the industry’s previous growth surge. As more properties came online, some tenants found themselves with excess space or have become more cautious in their expansion plans.

What Does This Mean for Tenants?

For tenants, this shift offers new opportunities. With more available lab space, life sciences companies and research institutions can negotiate better lease terms, potentially securing more favorable pricing, flexible lease durations, and access to spaces that were once in high demand. For those looking to expand or relocate, the increase in vacancy rates could present a window of opportunity to secure prime real estate without facing the intense competition that existed just a few years ago.

What Does This Mean for Landlords?

On the other hand, landlords may face increased challenges in securing tenants for their lab spaces. With vacancy rates on the rise, property owners will need to adapt their strategies to remain competitive in a more saturated market. This might involve offering incentives such as reduced rents, more flexible lease terms, or increased amenities to attract prospective tenants. Additionally, landlords may need to invest in upgrades or renovations to ensure their properties meet the evolving demands of life sciences tenants.

The Road Ahead for Boston’s Lab Market

While the 30% vacancy rate is a notable shift, it is by no means a sign of decline for Boston’s lab market. The city continues to be a global hub for life sciences innovation, with its world-class universities, research institutions, and a thriving biotech community. As the industry continues to adapt to changing market conditions, the future of Boston’s lab spaces will likely see a recalibration — one where tenants and landlords alike must be strategic in order to stay competitive.

As the situation evolves, it’s important to keep an eye on how the market responds to this growing vacancy rate and how it could influence future trends in the life sciences and lab space sectors.

Outlook highlighted ACEC’s first non-public marketplace symposium on health care and life sciences sectors
Photo courtesy of ACEC

Developers are pushing proposals that might triple the already massive quantity of lab area in Greater Boston over the subsequent numerous years.

That ought to imply a massive growth in work for design firms as they pivot to satisfy the call for new studies and biotech production homes wanted via way of means of life sciences companies, consistent with presenters at an American Council of Engineering Companies convention withinside the Boston suburb of Cambridge, Mass. on April 29.

ACEC’s first ever “non-public marketplace symposium” targeted at the fitness care and life sciences zone, convening a slate of professionals at the booming enterprise held in Cambridge’s Kendall Square, a worldwide hub for drug studies.

The selection to maintain the occasion is a mirrored image of each how the life] sciences zone has emerged as a prime increase region for A/E agencies and the emergence of the Boston region as the “freshest marketplace withinside the in relation to those markets,” stated Erin McLaughlin, ACEC vice chairman for non-public marketplace resources.

“The A/E enterprise is due to the fact our developer customers withinside the business actual property area are more and more shifting in the direction of designing—or even constructing spec area—that especially objectives lifestyles technology tenants,” she stated.

The life sciences zone is developing in markets throughout the U.S., with a call for brand new lab and biotech studies areas, inclusive of Philadelphia, Washington, D.C., Chicago, Seattle, Raleigh/Durham, and San Francisco, which, at almost 34 million square feet, is barely large now than Greater Boston, stated Aaron Jodka, director of U.S. capital markets for Colliers, in a presentation to ACEC members.

But it truly is approximately to change – and in a massive way – over the following few years amid a flood of proposals for any other 60 million square feet of introduced life sciences associated area withinside the Boston region, with 10 million of that involving “near-term” proposals, he stated.

Helping fund that expansion, Massachusetts biotech agencies landed a file of greater than $32 billion in investment in 2021, more or less break up among pre-IPO project capital and post-IPO investment, Jodka stated.

Flush with coins and expanding, as many as 26 life sciences agencies are on the hunt for as much as 50,000 square feet of lab and assist area, with others seeking to replenish greater than 100,000 square feet, he stated.

By contrast, the Boston region’s closest competitors, the Bay Area and Philadelphia, also are awaiting robust increase, with general proposals totaling 50 million and simply greater than 30 million square feet, respectively, in lab and life sciences space.

“It’s an exceptional area to be whilst speaking approximately life sciences,” Jodka stated. “Net, we’re developing an entire lot quicker than the relaxation of the world. We are outperforming different markets.”

In addition, greater than 3.8 million square feet of workplace area, greater than a dozen homes withinside the Boston region, at the moment are being transformed via way of means of builders into lab area, he introduced.

“This is really an increasing marketplace for the A/E enterprise, and most customarily those areas require specific layout issues which could accommodate laboratory, manufacturing, and different specialized functions,” ACEC’s McLaughlin stated.

Meanwhile, life sciences agencies, as they enlarge and construct new lab projects, also are more and more in want of ever greater state-of-the-art understanding from architectural and engineering companies, stated Robin Greenleaf, handling foremost of IMEG, previously Architectural Engineers, and country-wide chair of ACEC via the cease of May.

As the life sciences, enterprise pushes to lessen its emissions and meet hard new federal and kingdom standards, it’ll want assistance from the entire variety of layout disciplines, from architects to structural and electric engineers, she stated.

“We want all oars pulling on the identical time,” stated Greenleaf, the primary female to chair ACEC in its 115-year history.

The Boston area office real estate market could be worse amid the turmoil of the pandemic.

On the laboratory market, on the other hand, things couldn’t be hotter.

It’s no exaggeration to say there’s no room for labs. at Cambridge. Research by real estate company Colliers revealed a vacancy rate of exactly 0.0% in the city for laboratory space for the third quarter of 2021.

The picture isn’t much different for Charles: Boston’s lab availability rate was 0.3%. Demand for lab space was steadily increasing even before the pandemic, with Boston-Cambridge boasting the highest prices per square foot nationwide.

The health crisis only increased demand, cementing Greater Boston’s position as the industry’s “place to be.” Take another proprietary report, this one from CBRE, which looked at life sciences trends for 2021: In the last three years alone, ending in Q3 2021, total laboratory space in Boston has doubled, adding about 20 million square feet.

The San Francisco Bay Area has slightly more life sciences jobs than the greater Boston area (129,000 vs. 104,000), but according to CBRE, Boston has the highest proportion of life sciences PhDs of any region. Even more revealing about the future is that life science companies in the Boston area raised $10.7 billion in venture capital in the first nine months of 2021, almost as much as the next two regions, San Francisco and San Diego together. In fact, exactly one-third of the capital of the nation’s life science companies went to companies in the greater Boston area.

At 42.2 million square feet, Boston has by far the largest life sciences and laboratory center in the country, and prices suggest demand will not slow down. At more than $90 per square foot, space in the greater Boston area is more expensive than anywhere else, yet eastern Massachusetts also has the lowest vacancy rate at just 1.1%, according to CBRE calculations.

Big players include lab rebuilds Moderna (NASDAQ: MRNA), Bristol Myers Squibb (NYSE: BMY), and Ginkgo Bioworks (NYSE: DNA). who signed key office and laboratory leases in 2021.

Looking ahead, more than 10 million square feet of new life sciences space will be built in the Boston area, another figure at which the region is grossly disproportionate to its peers. San Francisco is the closest but there is only one. a third of that number. RECOMMENDED It’s no wonder 3.2 million square feet of other space in the Boston area is being converted into labs.

Colliers expects Somerville and Watertown, natural extensions of the Cambridge submarket, to see much higher growth going forward. If you look at traditional office space, the numbers in the Boston area look very different, although not that far removed from other major markets during the pandemic.

The Boston market had an office vacancy rate of 15.8% in the second quarter of 2021, as recently reported by Colliers. This corresponds to 14.2% statewide and 12% in the major metropolitan areas of the Northeast, the latter being disproportionately boosted by the still-low numbers in Manhattan.

In fact, while Manhattan continues to do relatively well for office occupancy, so do some of Boston’s inner neighborhoods, at least compared with areas farther out. That could be an indicator that the draw of Boston’s denser areas continues during the pandemic.

Back Bay, which typically draws the highest lease rates, had just 8.6% of its space empty in the third quarter, according to Colliers. That was half or less of rates along Route 128 and beyond.

While Manhattan continues to do relatively well in terms of office occupancy, some of Boston’s inner-city neighborhoods also do well, at least compared to areas further out. That could be an indicator that the appeal of Boston’s more populated areas is sustained during the pandemic.

Back Bay, which typically commands the highest rents, had just 8.6% of its space vacant in the third quarter, according to Colliers. That was half or less of fares along Route 128 and beyond.

Recently, new rules have come into effect in Boston, with the goal of deterring corporate tax-saving “inversions.” An inversion is a way for companies to shift earnings and profits to foreign markets, thus lowering U.S. tax obligations. The question is, will those new rules hurt the biotech research sector in Boston?

Most experts say no, though there are a few that believe it will hurt the biotech sector.

Some believe that the new treasury rules are simply aiming to penalizing companies that are attempting to shift earnings to low-tax countries. This ensures that companies will continue to use tax avoidance strategies as influences to business decisions, which will make U.S. companies operating globally to not be as competitive as they could be, as well as not attracting as much investment as they could be.

Another viewpoint that believes the new rules will negatively impact biotech companies say that even if the biotech companies don’t currently use inversion tactics, the Treasury Department’s rules will reduce the potential value of inversions, leaving companies less profitable in the long run. This could make the biotech and pharmaceutical companies less competitive than similar companies in foreign settings.

However, many people do not believe the new rules will make a major impact. The biggest reason cited is that many of the Boston biotech companies are more focused on research, product development and drug trials, as opposed to product sales and income growth. As a result, much of the work done by

Boston biotech companies is pre-revenue, making the need for inversion much smaller, meaning that there is no significant impact to the biotech companies in the area. These types of accounting tactics are typically made my very large drug companies, which does not necessarily fit the profile of most of Boston’s biotech firms.

Other experts say that even if these new rules hurt local biotech companies, it is still good for Boston as a whole. Corporate tax inversions typically come from a large company buying a small foreign company and then moving the headquarters overseas to reduce U.S. tax burdens. This can be seen as an exploitation of the tax codes, which hurts the local economy and local governments. Thus, even if it did hurt the Boston biotech companies’ bottom’s lines a bit, it would still be a net positive for the economy as a whole.

Photo Credit: Umberto Salvagnin