The U.S. life sciences real estate market entered Q3 2025 with the clearest signal of stabilization it has seen in two years. National net absorption turned positive for the second straight quarter (+300,561 SF), vacancy leveled at 14.4%, and for the first time since 2023, Boston, San Diego, and San Francisco all recorded positive absorption simultaneously. Meanwhile, large users reappeared, highlighted by Novartis’ 466,598 SF San Diego lease—the biggest in the country this year.
Funding remains selective, construction pipelines are finally slowing, and leasing activity is increasingly bifurcated between large corporate commitments and smaller, budget-conscious requirements. For corporate occupiers, the next 12–18 months present the strongest leverage environment in a decade—but only for those who are reading the market correctly.
Below we’ll break down where the life sciences sector stands now, how demand is evolving, and what corporate tenants should prioritize as the market normalizes.
Capital Markets: Less Volume, Bigger Checks, Slower Exits
Life science innovation still depends on funding velocity—and that velocity has shifted meaningfully.
Venture Capital: Lower Deal Count, Higher Dollars
Q3 2025 marked the lowest quarterly deal count in almost ten years, with 110 venture deals totaling $6.7B. The decline is substantial, but the composition of capital matters more than the volume. Over 85% of all VC dollars went into rounds exceeding $29M, a clear signal that investors are avoiding speculative early-stage bets and concentrating on later-stage, de-risked science.
Top-funded subsectors:
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Digital diagnostic health
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Precision medicine
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MedTech and devices
The shift toward “safer science” directly affects space demand. These later-stage companies tend to:
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Lease larger footprints
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Require more GMP, flex-biomanufacturing, and specialized infrastructure
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Make longer-term real estate commitments
This aligns with the increase in large leases signed in Q3.
IPO Market: Still in Hibernation
Only two life sciences IPOs priced in Q3, raising $1.1B. More importantly, 55% of IPOs in the past 12 months now trade below their offering price, signaling that public markets remain unconvinced—and unforgiving.
For tenants, this weak IPO window translates into:
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Slower growth cycles
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Fewer rapid scaleouts
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Longer decision-making timelines
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Heightened interest in short-term leases and flexible expansion rights
NIH Funding: High Volume, Temporary Freeze
The NIH allocated $35.1B YTD toward research, including $17.25B in Q3 alone, but distributions halted on October 1 due to the federal government shutdown. Academic powerhouses such as Johns Hopkins, UCSF, Washington University, Michigan, and UPenn continue to absorb the lion’s share of awards.
This matters because institutional NIH recipients historically anchor the submarkets that outperform during downcycles—a pattern we’re seeing again in Boston, Philadelphia, and San Francisco.
Leasing Trends: Bifurcation, Budget Pressure, and the Return of Large Users
Even with improvement in absorption, the composition of leasing activity reveals a more cautious marketplace:
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68% of all Q3 leases were under 30,000 SF
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Several new large deals, including four >100,000 SF
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Longer lead times and slower decision cycles across the board
This “barbell market” dynamic is the hallmark of a cautious recovery: institutional-scale tenants re-enter while emerging companies conserve capital.
Notable Q3 Leases
The top transactions include:
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Novartis — 466,598 SF (San Diego)
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Lila Sciences — 191,000 SF (Cambridge)
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Neuralink — 145,500 SF (South San Francisco)—announcing plans to move HQ back to California
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CBSET — 87,370 SF (Waltham)
This is the strongest quarter for megaleases year-to-date—an encouraging sign for landlords and a strong negotiating window for tenants.
Sublease Inventory Still Exerts Pressure
While sublease deal share dropped in some markets (just 10% in Boston), the availability of discounted, plug-and-play lab space continues to weigh on rents. Sublease options are particularly impactful in:
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San Francisco
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San Diego
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New York
Where they are contributing directly to falling averages.
Regional Market Analysis: Where Strength is Returning—and Where It Isn’t
Below we’ll look at a strategic overview of the key markets in the life sciences industry.
Boston: Stabilizing but Oversupplied
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773,000 SF leased in Q3, up 42% QoQ
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Still 14.9% vacancy
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Asking rents declined for the third consecutive quarter (–$0.90 YTD)
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Suburban nodes like Somerville and Watertown anchor activity due to cost advantages
Boston is improving but supply continues to outpace absorption. Expect continued downward rent pressure through mid-2026.
San Diego: The Most Dynamic Market in the U.S.
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14.7% vacancy, manageable given recent delivery
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334,230 SF YTD absorption
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Strong leasing led by Novartis
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Job growth: +9,900 life science jobs in 12 months
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Funding totaled $235M across 18 deals in Q3
San Diego remains the U.S. market where demand, talent, and supply are most aligned.
San Francisco Bay Area: Recovering with Strong Funding Tailwinds
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Q3 saw positive net absorption
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VC funding hit a five-quarter high: $8.6B
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Rents dropped $0.22 PSF due to sublease pressure
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Neuralink’s 145,852 SF lease signals renewed corporate conviction.
SF is re-leveraging its research infrastructure, but affordability issues remain.
Philadelphia: Quietly Becoming the Most Resilient Mid-Tier Hub
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223,044 SF of Q3 absorption, 323,265 SF YTD
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Rents flat for three straight quarters
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NIH funding: $2.29B YTD
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Home to the world’s first personalized CRISPR therapy delivered in May 2025.
Philadelphia’s stability stands out in a national landscape of volatility.
New Jersey: Manufacturing-Driven Growth Amid Soft Leasing
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18.3% vacancy, one of the highest nationally
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Strong industry base: 3,500+ companies and 415,000 workers
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New biomanufacturing commitments from Enzene and Regeneron.
NJ is strategically positioned for onshoring benefits but will lag high-growth R&D markets.
Raleigh–Durham: VC Inflation and a Barbell Supply Market
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$812M across 66 VC transactions
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Vacancy: 8.7%
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Space inventory polarized between <5,000 SF and >50,000 SF options.
RD remains one of the top value markets for companies seeking talent density and lower cost structures.
Washington DC / I-270: Supply-Constrained and Well-Positioned
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12.6% vacancy
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Almost no construction pipeline
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Major upcoming development: 13.9-acre University of Maryland AI & biotech hub.
DC is one of the most insulated life sciences real estate submarkets in the U.S.
Construction Pipeline: Slowing at the Right Time
Nationally, 18.6M SF of life science space remains under construction—heavy, but significantly calmer than the 2021–2023 pipeline surge. Boston, San Francisco, and Philadelphia continue to dominate new development activity.
For corporate tenants, this matters strategically:
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New deliveries will keep vacancy elevated into 2026
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Rent growth will stay muted
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Concessions will remain strong, especially in high-supply coastal markets
Timing matters. This is a rare moment where corporate tenants can secure aggressive economics on Class A lab and R&D space that would have been cost-prohibitive three years ago.
What Corporate Tenants Should Do Now
The data paints a clear picture: this is the most advantageous market for large-scale life sciences occupiers since the early 2010s. But the window will narrow.
1. Leverage Oversupply in Coastal Gateways
Boston, San Francisco, and parts of New Jersey have a multi-year runway of elevated availability. Corporate users can:
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Lock in long-term leases at cyclical price lows
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Capture higher TI packages
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Negotiate for expansion rights, contraction rights, and outsized free rent
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Pursue turnkey sublease options to reduce capital outlay
2. Prioritize Flexibility in Uncertain Funding Cycles
With NIH distributions paused and venture funding selective:
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Structure leases with termination options
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Build scalability into infrastructure requirements
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Avoid overcommitting ahead of funding milestones
The “grow into it” model is not aligned with 2025 capital realities.
3. Consider High-Growth Secondary Markets
Raleigh–Durham, Philadelphia, and Houston offer:
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Lower rent profiles
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Strong talent pipelines
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Growing corporate ecosystems
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Less construction-driven volatility
These markets provide strategic diversity beyond the traditional gateways.
4. Take Advantage of the Flight-to-Quality Gap
A key trend emerging: Class A leasing is outperforming Class B in every major hub.
Upgraded space matters for:
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Talent retention
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GMP and regulatory compliance
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Capital-raising optics
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Operational efficiency
Given today’s concession packages, many tenants can “trade up” to higher-quality space without meaningful cost increases.
5. Prepare for Post-Shutdown Demand Rebound
Once NIH funding resumes—likely before mid-2026—expect:
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Pipeline acceleration
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Hiring increases
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Renewed R&D demand near major academic anchors
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Rapid absorption of specialized spaces
Occupiers that wait for stability will miss the most favorable negotiating cycle.
A Strategic Window for Corporate Real Estate Leaders
The life sciences real estate market in Q3 2025 is no longer defined by the volatility of 2023–2024. It is defined by selective funding, disciplined growth, and a significant rebalancing of supply and demand. For corporate tenants, this presents a rare alignment:
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Soft rents
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Elevated vacancy
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Strong concessions
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Slower competition for space
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Improving demand signals from large, stable users
C-suite leaders who act during this window will lock in long-term advantages in cost, flexibility, and portfolio resilience—advantages that will diminish once federal funding restarts, IPO markets thaw, and new construction tapers off. If there were ever a time to reassess your life sciences real estate strategy, optimize footprint efficiency, and renegotiate from a position of strength, Q3 2025 is it.
