The US life sciences real estate market is moving from correction into stabilization, according to Cushman & Wakefield's latest analysis. Asking rents have declined, vacancy has risen to historically high levels, and the development pipeline has collapsed. But the direction of travel is shifting.
US life sciences facilities averaged $64.17 per square foot in Q2 2026, a 5.3 percent year-over-year decline. Vacancy climbed nearly 200 basis points to 24.3 percent. Those figures are uncomfortable. But they need to be read alongside what has happened to supply.
The Supply Correction
Total inventory reached 239 million square feet in 2026, up from 171 million square feet five years earlier. That construction surge created the vacancy problem—speculative development delivered space faster than tenant demand absorbed it.
The correction has been sharp. The construction pipeline now represents just 2 percent of existing inventory, down from 17 percent at its mid-2023 peak. Through the first half of 2026, only 1.2 million square feet was delivered—an 82 percent decline from the same period in 2025. Development has effectively shut off.
Future construction is increasingly concentrated in pre-leased and build-to-suit projects. Developers aren't breaking ground without tenants signed. That's a healthy signal: the market is self-correcting rather than waiting for demand to catch up with excess supply.
Capital Markets Thaw
The investment side is responding to improved funding conditions. Over the twelve months through June, R&D sector sales surpassed $9.3 billion, marking a 4 percent rise compared with the preceding year period. Transaction volume climbed 9 percent to 292 deals, outpacing the prior decade's average, though average deal size slipped 5 percent.
Venture funding in life sciences climbed to $29.9 billion globally during the first six months of 2026, a 30 percent jump from the same span last year and the most solid first-half showing since 2022. North American VC accounted for $17.9 billion, up 35 percent. IPO activity nearly tripled to $6.8 billion, while global M&A reached $97.2 billion, nearly three times its level a year earlier.
That capital flowing into the underlying industry will eventually translate into occupier demand for space. The lag between funding rounds and headcount growth, and between headcount growth and space requirements, means the property impact won't be immediate. But the direction is clear.
Our Analysis
Life sciences property occupies an unusual position in the commercial real estate landscape. It's highly specialized—facilities designed for laboratory and research use aren't easily converted to other purposes—and it's tightly linked to a sector that moves on clinical trial results, regulatory approvals, and funding cycles rather than conventional economic indicators.
The current situation has a positive long-term framing: the supply correction happened faster than many expected, and the development pipeline is now minimal. When venture funding recovers and companies begin expanding headcount, they'll be competing for space in a market where speculative construction is effectively paused. That supports rent stabilization over an 18- to 24-month horizon, which is Cushman & Wakefield's base case.
San Diego illustrates the nuance. It's one of North America's largest life sciences clusters, with 26.6 million square feet of inventory and asking rents averaging $67.09 per square foot. Vacancy sits at 26.9 percent after a heavy development surge. But 70 percent of the 1.3 million square feet still under construction is pre-leased, which means the pipeline is tenant-committed rather than speculative.
Los Angeles and Orange County present a different profile: only 3.6 percent vacancy and asking rents of $33.32 per square foot. That's a tight market with limited existing inventory, but aging industrial and flex space that could be converted as demand warrants.
Practical Takeaway
Say you are evaluating a life sciences property in a major hub for acquisition. Vacancy is above 20 percent. Rents have declined. The headline numbers look challenging. But the construction pipeline is nearly dry, and venture funding into the tenant base is recovering. The question isn't whether the market is broken—it's whether current pricing reflects the stabilization that is underway or the correction that has already passed.
Underwriting that leans on broad sector optimism will overstate returns. Underwriting that focuses on tenant credit quality, lease term, and existing occupancy will be more accurate. The market is sorting, not uniformly recovering.
What to Watch Next
Watch for absorption in San Diego and Boston over the next two quarters. Both markets have high vacancy but committed construction. If pre-leased space delivers and vacancy drops without a corresponding spike in new starts, stabilization will be confirmed.
Also watch venture funding trends. The 30 percent year-over-year increase in global VC investment is the key leading indicator for eventual space demand. Continued growth would support the Cushman & Wakefield timeline for rent stabilization.
Key takeaways
- The construction pipeline collapse is the most bullish signal for the sector's medium-term supply-demand balance
- Capital markets are reopening for life sciences property, but underwriting requires tenant-level discipline rather than sector-level optimism
- Major hub markets like San Diego remain elevated but are showing signs of stabilization
- VC funding recovery is the key leading indicator for future occupier demand
Frequently asked questions
Why has the life sciences construction pipeline collapsed?
Developers stopped starting speculative projects when vacancy rose and pre-leasing dried up. The 2 percent pipeline reflects virtually no new speculative construction.
How does life sciences vacancy compare to other commercial property sectors?
At 24.3 percent, it's higher than most other property types. But unlike office, which faces structural demand uncertainty, life sciences vacancy is primarily a supply-side correction.
What does the venture capital recovery mean for property?
VC-backed companies are the primary occupiers of life sciences space. More funding translates to more hiring, more lab space requirements, and eventually more demand for leases.
Are there conversion opportunities in the sector?
In tight submarkets like Los Angeles and Orange County, aging industrial and flex space could be converted to life sciences use. This is more limited in oversupplied markets where purpose-built space remains available.
Is now a good time to buy life sciences property?
In major hub markets with declining rents and minimal new supply, current pricing may represent an attractive entry point for long-term investors with the patience to wait for demand recovery.
