Lab construction has slowed over the past two years due to the end of the pandemic and economic challenges, with a CBRE report predicting a return to pre-pandemic construction levels by 2026. While lab building costs have risen by at least 20%, largely driven by inflation, material costs, and longer equipment lead times, there is currently an oversupply of lab spaces, especially in major life sciences markets like Boston-Cambridge, San Francisco, and San Diego. Building owners in these areas face record-high vacancies, sparking increased competition to attract tenants.
During the pandemic, lab construction surged to meet demand in Covid-19-related R&D, leading to nearly 40 million square feet under construction at its peak in 2023 across the top 13 U.S. life sciences markets. However, the current slowdown in life sciences funding and market shifts have led to decreased construction and more available space. In the Bay Area, for example, negative net absorption has reached nearly 2 million square feet in the past year, although opportunities exist for adapting some of this vacant lab space to industries like cleantech.
Lab conversions to other uses, such as office spaces, have also slowed, as more new, unleased lab spaces enter the market. Despite this shift, markets like San Diego and New Jersey have seen significant increases in lab construction over the past five years, but not enough to create an oversupply.
To stay competitive, lab owners are increasingly offering tenant-improvement allowances to help tenants customize their spaces. Since 2021, these allowances have grown by an average of 38% in top markets, reflecting landlords’ response to rising competition and the high costs associated with building out highly specialized spaces, like vivariums and clean rooms.
For companies navigating this evolving lab market, SanDiegoLabSpaces.com provides invaluable expertise. With a deep understanding of the San Diego market and connections across the industry, the agents at SanDiegoLabSpaces.com help clients identify and secure lab spaces that meet their specific needs, whether they’re looking for cost-effective solutions or highly specialized facilities. As landlords adapt to pre-2021 development approaches and more lab space options become available, SanDiegoLabSpaces.com can guide clients through these changes, ensuring they find optimal spaces that align with their operational goals. In this competitive market, SanDiegoLabSpaces.com empowers life sciences companies to make strategic, informed decisions about their lab spaces, helping them succeed in a rapidly shifting landscape.
