As we look ahead to 2025, the Boston-Cambridge life sciences market is navigating a period of adjustment, marked by rising vacancies, a slowing construction pipeline, and evolving tenant preferences. While challenges persist, the region’s unparalleled ecosystem of innovation and collaboration continues to position it as a global leader in the life sciences sector. Here’s a detailed analysis of the current market dynamics and what to expect in the coming year.

MARKET HIGHLIGHTS

• Vacancy Rates Reach Historic Highs: Overall vacancy rates have risen by 770 basis points (bps) year-over-year, reaching 19.8%—a record high for the market. Direct vacancy rates have also climbed to 13.5% as sublease supply expires and new space comes online.
• Construction Pipeline Slows: The development pipeline has decreased to 5.6 million square feet (msf) as new projects face delays due to subdued demand and leasing challenges.
• Shift Toward Flexible, Collaborative Spaces: Life sciences companies are increasingly prioritizing adaptable, innovation-driven spaces over traditional lab setups. This shift reflects the growing collaboration between life sciences, tech, and AI, as well as the need for flexibility in a rapidly evolving industry.

MARKET TRENDS

1. Rising Vacancies Reflect Market Adjustments

The Boston-Cambridge life sciences market is experiencing a significant rise in vacancies, with overall rates reaching 19.8%—a 770 bps increase compared to the previous year. Direct vacancy rates have also climbed to 13.5%, driven by the expiration of sublease agreements and the delivery of new, unleased space. This trend underscores the challenges landlords face in a tenant-friendly market, where companies have more options and negotiating power than ever before.

2. Construction Pipeline Contracts Amid Subdued Demand

The construction pipeline has shrunk to 5.6 million square feet, reflecting a slowdown in new projects as developers grapple with subdued demand and leasing challenges. While this contraction may help balance supply and demand in the long term, it also highlights the cautious approach developers are taking in the current market environment.

3. Evolving Tenant Preferences: Flexibility and Collaboration

As the life sciences industry increasingly intersects with technology and artificial intelligence, tenant preferences are shifting. Companies are now prioritizing adaptable, collaborative spaces that foster innovation over traditional lab setups. This trend reflects the need for flexibility in a rapidly changing landscape, where interdisciplinary collaboration is becoming essential for breakthroughs in research and development.

LOOKING AHEAD TO 2025

Opportunities for Tenants

The current market conditions present a unique opportunity for tenants. With a record amount of available space—both direct and sublease—companies have the leverage to secure high-quality spaces at favorable terms. Landlords are increasingly offering flexible lease agreements and incentives to attract and retain tenants, making this an ideal time for companies to expand or upgrade their facilities.

Challenges for Landlords

For landlords, the rising vacancy rates and slowing construction pipeline pose significant challenges. Competition for tenancy is intensifying, and it may take several years for the market to fully recover. However, the region’s strong fundamentals—including its world-class research institutions, talent pool, and innovation ecosystem—provide a solid foundation for long-term growth.

The Role of Tech and AI

The growing integration of technology and AI into life sciences research is reshaping the market. Companies are seeking spaces that can accommodate hybrid work environments, advanced data analytics, and cross-disciplinary collaboration. This trend is expected to drive demand for flexible, tech-enabled spaces in 2025 and beyond.

As we move closer to 2025, the Greater Boston life sciences market is undergoing a significant transformation. While the region remains a global leader in innovation and biotech, the current landscape is marked by rising vacancies, increased tenant options, and shifting industry dynamics. Here are the key insights shaping the market today and what to expect in the coming quarters.

Key Takeaways

• Vacancies are climbing as new developments come online.
• Tenants now have access to a record amount of direct and sublease space.
• Tight venture capital flows and stock market challenges are impacting near-term growth.
• Millions of square feet of uncommitted space are still under construction, adding to future supply.

A Tenant’s Market Emerges

More than 20% of life sciences space in Greater Boston is currently available, with vacancies yet to reach their peak. The market now boasts over 11 million square feet of available space, split between 73% direct leases and 27% subleases. This unprecedented inventory offers tenants a wide range of high-quality options, a stark contrast to the competitive pressures of 2021, when vacancies plummeted to just 1%.

However, tenant activity has slowed significantly. Recent layoffs at major companies like Takeda and Ginkgo Bioworks, as well as smaller firms, have contributed to a surge in sublease offerings, which now total a record 3 million square feet. This influx has led to negative net absorption year-to-date, as more space becomes available than is being leased.

With millions of square feet of uncommitted space still under construction, competition among landlords is intensifying. Even under optimistic recovery scenarios, it could take years for property owners to regain leverage in lease negotiations.

Challenges and Opportunities in the Near Term

The life sciences sector is facing headwinds, including constrained venture capital funding and fluctuating stock prices, which are limiting near-term growth prospects. These challenges have prompted many companies to reassess their real estate needs, leading to increased sublease activity and a more cautious approach to expansion.

Despite these hurdles, Greater Boston’s life sciences ecosystem remains robust. The region continues to lead the nation in key metrics such as venture capital funding, NIH grants, and biomed degree completions. From 2019 to 2023, the area absorbed 13 million square feet of life sciences space—more than the entire inventory of most other U.S. metros.

While demand has softened from its peak, tenants are still actively seeking approximately 3 million square feet of space, underscoring the region’s enduring appeal.

Long-Term Growth Prospects

Greater Boston’s full-service life sciences ecosystem positions it for sustained long-term growth. According to Colliers’ 2024 U.S. Life Sciences Report, the region outranks all other major life sciences hubs in the country for investment and leasing opportunities. Its unparalleled combination of industry drivers, large inventory, and tenant demand ensures its continued prominence in the sector.

As we look ahead to 2025, the market is poised for a period of recalibration. While landlords may face challenges in the short term, the region’s strong fundamentals and innovation-driven economy will continue to attract tenants and investors alike. For companies seeking space, now is an opportune time to explore the wide range of options available in one of the world’s most dynamic life sciences markets.

Economic Overview: A Mixed Bag for Growth and Recovery

The Greater Boston labor market has shown signs of slowing momentum. Over the past year, the Boston Metropolitan Statistical Area (MSA) recorded a modest year-over-year employment growth rate of just 0.4%, significantly lagging behind the national rate of 1.7% and trailing many other major metropolitan areas. This sluggish performance is reflected in the contraction of five out of nine major employment sectors, including office-using industries and manufacturing. Notably, tech and life sciences companies have frequently made headlines for workforce reductions. These layoffs, coupled with broader economic challenges, could temper demand growth across various commercial real estate (CRE) property types in the near term.

On a brighter note, the leisure and hospitality sector emerged as the fastest-growing industry in the region, surpassing the national benchmark over the past year. This growth highlights a resilient demand for services in this sector, even as other areas of the economy face headwinds.

Inflation and Interest Rates: A Potential Boost Ahead

Recent inflation data offers a glimmer of hope for economic growth in the latter half of the year. The Consumer Price Index (CPI) rose by just 3% year-over-year in June, marking the lowest increase in over three years. This moderation in price growth could pave the way for the Federal Reserve to lower interest rates, a move that many economists anticipate. According to the Wall Street Journal’s July Economic Survey, 65% of economists predict a rate cut in the third quarter, with an additional 28% expecting one in the fourth quarter.

If these predictions materialize, lower interest rates could stimulate both business investment and consumer spending. Additionally, rate reductions may help reignite activity in the CRE investment sales market, which has been subdued in recent months.

National Economic Trends: Steady but Slowing Growth

The U.S. economy continues to show resilience, with an average of over 200,000 new jobs added monthly during the first half of the year. The stock market has reached record highs, and the likelihood of a recession has diminished significantly. However, the labor market is showing signs of cooling, with the number of unfilled job openings trending downward since early 2022 and now sitting below the post-Great Financial Crisis trend line.

While Oxford Economics forecasts continued job growth nationally, the pace of gains is expected to moderate. Similarly, GDP growth has cooled, reflecting a broader trend of economic normalization after the rapid recovery from the pandemic.

Boston Market Overview

Boston has seen a significant increase in vacant office space, with vacancy rates surpassing those in Cambridge and the surrounding suburbs. By the end of Q2, approximately 25% of the city’s inventory was available, including a record-breaking 2.6 million square feet. However, the availability rate is expected to climb further, as about 1.1 million square feet of unleased space is part of the 1.7 million square feet of new developments scheduled for completion in 2024. The market is experiencing a slowdown in large leasing activity, with Vertex, which had considered moving its headquarters, deciding to stay in its current Seaport location. As a result, several new buildings have yet to secure major tenants, including conversions like the Seaport Science Center (485,000 SF), and new constructions like 2 Harbor (420,000 SF) and 10 World Trade (287,000 SF). This weakening demand has led to a decrease in asking rents.

The Seaport District remains a hotspot for life sciences, consistently attracting significant venture capital and pre-IPO funding. Notable 2024 funding rounds include Seaport Therapeutics ($100 million Series A), Exsilio Therapeutics ($82 million Series A), as well as $50 million rounds for Ratio Therapeutics, SmartLabs, SeLux Diagnostics, and Cerevance. Additionally, Alys Pharmaceuticals raised $100 million in seed funding. The Seaport is poised for the largest increase in occupied space in 2024, with about 560,000 square feet, half of the new supply, already released. This includes a major 330,000-square-foot facility for Eli Lilly in the Fort Point Channel, which will allow the company to significantly expand its local workforce. In contrast, developers in other parts of Boston have struggled to attract tenants for their life sciences projects.