Life sciences lab real estate is clawing back from disaster. Here’s what that means for investors

Published Wed, Apr 22 20269:51 AM EDTUpdated Wed, Apr 22 202612:46 PM EDT

Diana Olick @in/dianaolick @DianaOlickCNBC @DianaOlick

Key Points

Life science laboratories saw a massive drop in demand last year after the National Institutes of Health was forced to cancel billions of dollars in research grants.
Major markets like Boston and the Bay Area had vacancy rates in the life sciences sector of over 30%, according to JLL.
The sector is beginning to stabilize, though, with venture capital investment strong at the end of last year and the amount of space under construction falling.

A version of this article first appeared in the CNBC Property Play newsletter with Diana Olick. Property Play covers new and evolving opportunities for the real estate investor, from individuals to venture capitalists, private equity funds, family offices, institutional investors and large public companies. Sign up to receive future editions, straight to your inbox. Life science laboratories, mainly in biotech and biopharma, saw a massive drop in demand last year after the National Institutes of Health was forced to cancel billions of dollars in research grants. NIH funding was cut severely by the federal government. Of the 10 largest life sciences markets tracked by JLL, the aggregate vacancy rate was 27.4% in the first quarter of this year, up from 25.7% during the same period in 2025. Major markets like Boston and the Bay Area had vacancy rates over 30%. The sector, however, is beginning to stabilize. A separate report from CBRE shows venture capital investment in life sciences in the second half of 2025 was the strongest since 2022. In addition, the amount of space under construction is at its lowest since 2017. An October JLL report predicts, "gradual market stabilization driven by supply rationalization rather than dramatic demand recovery." JLL forecasts that availability rates will decline to approximately 20% by 2030, "assuming continued below-average absorption coupled with significant supply exits through distress sales and adaptive reuse projects." The market correction in the space, however, has been historic, according to Travis McCready, head of industries leasing advisory at JLL. And the trouble isn't just funding cuts. McCready characterized the current oversupply situation as a combination of unprecedented construction combined with a fundamental change in how life sciences companies are using real estate. "This entire story and this entire narrative is evolving in real time," said McCready. "We got really, really good at building that asset class based on the assumption of what type of equipment and enabling technology biotech companies needed, and then came AI and robots." This is where the opportunity presents itself. McCready projects that close to 19 million square feet of available lab space will shift to other uses by 2030, but the companies and markets that adapt will end up stronger and more competitive. That adaptation comes in the architecture. Gensler, the largest architectural firm in the world, recently completed a yearlong, cross-disciplinary research initiative looking at how AI, automation and robotics are reshaping not just lab operations, but real estate strategy itself, from infrastructure requirements and space ratios to the composition of the workforce, according to the company. "It's transformative," said Ryley Poblete, global sciences practice area leader at Gensler. "Where we're going with science, especially with these new tools of automation and AI, is completely changing the way we think about how you would do process." Poblete pointed to the transformation of the so-called wet bench area, where scientists use instruments to conduct experiments. Many of these experiments can now be done with AI or automation, which means as robotics and computers move in, test tubes move out. From a real estate perspective, companies are learning what the new technologies can do and reevaluating the facilities they have to inform whether a space can be upgraded. "That's happening in the real estate portfolios of the large clients, the people who have campuses and assets," said Poblete. The vacancies, according to the Gensler study, are actually masking a quality problem: Much of today's empty inventory was never truly "Class A" lab space to begin with. Even as it looks like the real estate needs of lab sciences are shrinking, there is a growing discussion about what kind of lab real estate will survive and outperform in the next cycle. "Large biotech companies and even the large chemical companies are evaluating their own infrastructures nowadays to really validate that they will be worthwhile taking it forward, or looking at a consolidation strategy or a new build strategy that brings these pieces together in the right environments," Poblete said. Gensler is actively looking at older spaces, assessing the increased power and air needs for larger computers that run artificial intelligence. They're also looking to see if the spaces can be modified to fit robotics. Poblete described it as essentially putting small data centers into laboratory spaces. Of course, they also need to see if the building structure can take the weight of all the new systems. Newer buildings, for the most part, can, but older ones are in question. The spaces are being redesigned for the machines, but there still needs to be some kind of creative lab environment where scientists can validate what the machines are doing. That involves deep focus, Poblete said, which requires quiet areas, not the open, often noisier workspaces that are more popular in today's newer offices. Then there is the collaborative process. Scientists are no longer working entirely alone. They're working with AI researchers, engineers and process designers. "Those people all work together with them now and not separately, and that's been a big change for the industry, not just from a life science perspective, but from a chemistry perspective," said Poblete. "They used to all think of themselves as like this, the hero scientists, in a way. Now that whole interdisciplinary science movement is — it's an essential need for you to work with these partners to create real future endeavors." Poblete pointed to Genentech as an example. The company is undergoing a major, multiyear buildout of its global headquarters campus in Basel, Switzerland. It is investing more than 3 billion Swiss francs (US$3.82 billion) in site development, including a new 72-meter research building scheduled for completion in 2029, according to its parent company, Roche , which says the development aims to modernize research facilities and consolidate R & D functions.