According to a new report from CBRE, the U.S. life sciences real estate market showed signs of normalizing in this year's third quarter after setting records in 2021. Still, the market's latest measures handily exceed those from before the pandemic.
The average lab vacancy rate across the top 12 U.S. life sciences hubs increased to 5.3 percent in the third quarter, up 30 basis points from the second quarter. In comparison, the vacancy rate in the first quarter of 2020 before the COVID-19 pandemic struck was 6.2 percent.
The vacancy rate rose partly because developers completed 2.1 million sq. ft. of space last quarter in the 12 markets, outpacing new absorption of 363,047 sq. ft. Labs under construction now total 37.4 million sq. ft., of which more than a quarter is under lease.
"We're seeing a normalization of the market after multiple quarters of breakneck growth," said Matt Gardner, CBRE Americas Life Sciences Leader. "It's important to keep in mind that the pandemic set a new floor for the life sciences industry. Funding remains at high levels, and job growth continues. Life sciences real estate is a valuable asset."
U.S. life sciences employment increased by 5.4 percent in the third quarter from a year earlier. Venture capital funding declined by 29 percent in the third quarter from the second, though funding volume remains on course for the third-highest annual total on record after 2021 and 2020.