Q1 Life Sciences Market Update: Steady Vacancy, Increasing Concessions

The life sciences market in Greater Boston remains healthy and active despite vacancy continuing to climb. Q1 2024 marked the ninth consecutive quarter with increases in vacancy, which currently sits near 27%. Though occupiers are still waiting for landlords to lower direct rents in response, other, more subtle shifts are signaling a softer market.

Commitment Issues

Many life sciences companies have expanded their due diligence exercises, bringing in more stakeholders and extending real estate timelines in order to minimize risks in decision making. Toward the same end, most occupiers are prioritizing flexibility, and as a result, smaller spaces and shorter lease terms have become the norm. Given this new dynamic, landlords are offering significant concessions to secure long-term commitments.

Not Fleeing the Nest

For early-stage life sciences companies in incubator spaces, receiving funding used to mean leaving the incubator to establish an independent lab/office. Now, it’s more common for companies to extend their time in the incubator and put that funding into other areas of the business in order to avoid the risks associated with real estate and market uncertainty. In a market already struggling with oversupply, this shift has disrupted the life sciences real estate lifecycle.

As we wait for inflation to cool further and interest rates to drop, all eyes are on rents, which we can expect to lower slowly. With supply/demand dynamics on their side, occupiers are in a strong position to secure favorable terms in upcoming real estate endeavors.

For more of the latest life sciences data, insights, and predictions, see Cresa’s Q1 Life Sciences Market Update.