Chapter 9
Life Sciences
U.S. Real Estate Market Outlook 2026
2 Minute Read
2 Minute Read
Trends to Watch
- Less construction of lab/R&D properties will help stabilize a supply and demand imbalance:
At 6 million sq. ft., the current construction pipeline of lab/R&D properties is the lowest since early 2019 and down significantly from the peak of more than 37 million sq. ft. in 2023. - Large pharmaceutical companies will make significant life sciences facility investments amid increased onshoring activity:
Larger-cap companies and those with advanced clinical trial successes will be leading sources of space demand. - Biotech companies will boost life sciences real estate demand:
The State Street SPDR S&P Biotech ETF (XBI), one of the biotech industry’s bellwethers for equity valuations, surged dramatically in H2 2025. This index’s previous performance has foreshadowed greater leasing demand for lab/R&D space.
Outlook
The remaining construction pipeline of speculative lab/R&D space will be delivered this year, stabilizing supply and demand. Any remaining life sciences space under construction will be limited to fully leased build-to-suit projects.
More demand for lab/R&D space in 2026 will be driven by higher industry employment and a more active capital markets environment, enhanced by greater valuations, improved access to venture capital and slightly lower short-term interest rates. Nonetheless, space demand will remain constrained by more disciplined capital allocations to companies that demonstrate greater success in later stages of clinical trials, rather than early-stage ventures.
The lab/R&D vacancy rate is expected to stabilize this year at a cyclical peak of 23.3%, underpinned by dwindling new supply and slightly improving demand. Some lab/R&D properties will benefit from growing alternative sources of demand, such as robotics companies and other advanced manufacturers that require specialized space. The San Francisco Bay Area may hold an advantage with these emerging sources of demand, which will help to stabilize the market before others.
Figure 12: Life Sciences Lab/R&D Trends
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Life Sciences
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Navigating this complex and competitive environment requires careful consideration of site selection, local incentives, infrastructure and financial strategies.
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U.S. life sciences employment hit a record 2.1 million in March 2025. Job growth is fragile, but the talent base remains resilient.
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