After four years of unprecedented market turbulence, U.S. life sciences real estate sector supply is finally contracting with demand growing across top markets. JLL’s 2026 U.S. Lab Property Report reveals that lab availability has dropped by about 2 million square feet since mid-2025, which included the largest quarterly decline in a decade, signaling the market has bottomed out and begun its recovery. However, the path forward remains long, with substantial oversupply persisting and rental rates facing continued downward pressure through the end of the decade.
The report highlights a fundamental reshuffling underway: Tenants are aggressively trading up to newer, higher-quality buildings while older assets face mounting headwinds. Buildings completed since the beginning of 2020 have shed 2.6 million square feet of availability over the last nine months, while pre-2000 inventory has added 700,000 square feet back to the market. Meanwhile, a surprising new trend is emerging as AI, robotics and “tough tech” companies increasingly occupy lab buildings. For example, these alternative users now account for 30% of Boston lab leases in 2025, triple the share from four years earlier.
“After years of oversupply weighing on the sector, we’re finally seeing clear signs that the worst is behind us,” said Travis McCready, Head of Life Sciences, Americas Markets and Chair of JLL’s Global Life Sciences Advisory Board. “The fundamentals are improving; equity markets are receptive to biotech, capital is flowing back into the sector and tenant activity is translating into real momentum. Additionally, regulatory concerns have eased considerably since this time last year. The market’s defining challenge is no longer demand – it is supply.”
A tale of two markets: Top four thrive while secondary markets struggle
The recovery is proving highly uneven across geographies. Boston, the Bay Area, San Diego and Raleigh-Durham have seen combined demand surge 44% year-over-year to nearly 8 million square feet in Q1 2026, driven by improved biotech funding conditions and biomanufacturing reshoring. The Bay Area’s AI boom and Raleigh-Durham’s biomanufacturing expansion together account for 1.9 million square feet of space leaving the market since July 2025.
However, secondary markets continue to weaken. Demand in these locations has fallen by nearly 3 million square feet over the past three years while available space has increased by 4.4 million square feet, creating a stark divide in market performance.
“The top three markets have established a new, higher leasing baseline that’s 35% above pre-pandemic levels, averaging 75 deals per quarter over the past two years,” said Mark Bruso, Senior Director of Boston and National Life Sciences Research at JLL. “As early-stage companies continue activating their real estate strategies, we expect this floor to rise even higher. The winners in this cycle will be the highest-quality assets in the strong locations while everything else could face headwinds over the next two years.”
Lab market performance varies across regions
The dynamics of lab leasing have fundamentally shifted. With vacancy across Boston, San Diego and the San Francisco Bay Area collectively reaching 32%, tenants hold unprecedented negotiating power. Average lease terms for direct relocations have compressed to 62 months, which is 30% shorter than at market peak, while landlords are delivering record amounts of free rent and move-in-ready space to compete for every deal.
“Landlords in nearly every market must continue reductions in first-year rents and offer unprecedented concessions within the lease term,” said Maddie Holmes, Senior Analyst for Life Sciences Industry Research and Advisory at JLL. “The market has never been more tenant-favorable, and these pressures won’t ease for several years. It would take three times the space uptake we saw annually during the last cycle’s peak to return to equilibrium.”
Supply dislocation continues as over 6 million square feet exits inventory
Over 6.2 million square feet of lab space has already transitioned out of inventory and into other asset classes, with more distress anticipated as the market works through its oversupply. Currently totaling more than 200 million square feet, the U.S. lab market faces a supply-to-demand ratio near 6:1, ensuring rental rates will face downward pressure for the foreseeable future.
The path forward
While the life sciences real estate sector faces several more years of adjustment, the signs of recovery are evident. With availability contracting for the first time in years, early-stage companies activating real estate plans and capital flowing back into biotech, the foundation for the next growth cycle is taking shape. The sector’s evolution, including the emergence of tough tech tenants and the continued dominance of top-tier markets, signals a maturing industry adapting to new realities while maintaining its innovative core.
“Industry optimism is beginning to translate into real estate momentum, modestly, but unmistakably,” said Kevin Wayer, Division President, Global – Life Sciences for Work Dynamics at JLL. “Patient investors who can navigate current market conditions will find attractive opportunities to acquire and reposition high-potential lab spaces. The next 12 months hold promise of incremental growth. When the next growth cycle starts, those who remain will be exceptionally well positioned to ride the next wave of innovation.”
JLL’s vision is to reimagine the world of real estate, creating, finding, locating and operating safe and amazing spaces. JLL’s Life Sciences team of 3,000+ experienced professionals are a safe pair of hands to help biotechnology, pharmaceutical, medical devices organizations, investors and developers achieve their ambitions. JLL brings deep understanding of location analytics, project management, research advisory, financial incentives, transaction management, capital markets, real estate strategy and technology, facilities management, regulatory compliance and quality, and more. Our solutions help fuel innovation, enhance efficiency, improve financial performance and attract and retain top talent. Our team is trained and certified to operate within office and critical, regulated environments of lab and manufacturing space. To learn more, visit jll.com/en-us/industries/life-sciences.
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About JLL
JLL (NYSE:JLL) is a leading global commercial real estate services and investment management company with annual revenue of $26.1 billion, operations in over 80 countries and a global workforce of more than 113,000 as of March 31, 2026. For over 200 years, clients have trusted JLL, a Fortune 500® company, to help them confidently buy, build, occupy, manage and invest across a variety of industries and property types, including office, industrial, hotel, multi-family, retail and data center properties. Driven by our purpose to shape the future of real estate for a better world, we help our clients, people and communities SEE A BRIGHTER WAY. Powered by rich global datasets and leading technology capabilities, we provide coordinated, end-to-end delivery of real estate services for a broad range of global clients who represent a wide variety of industries. Through LaSalle Investment Management, we invest for clients on a global basis in both private assets and publicly traded real estate securities.
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