Lab/R&D Fundamentals Weaken Despite Improving Demand Drivers

Executive Summary

• Lab/R&D net absorption was negative for the second consecutive quarter at -1.2 million sq. ft., driven by occupancy declines in West Coast markets.
• The lab/R&D vacancy rate reached a new high of 23.8%.
• Average triple-net asking rent fell by 8.1% year-over-year to $65.95 per sq. ft., the sixth consecutive quarterly drop.
• Biotech R&D employment growth rose at its fastest pace since mid-2023, while annual venture capital funding reached its highest level since Q3 2022
• Tenant requirements for lab/R&D space increased for the first time in a year by nearly 500,000 sq. ft.