Strange Brew: Capital Returns as Life Sciences Real Estate Market Bottoms Out

The lab boom went quiet, but the science is healing.

Life sciences real estate is still under major pressure. Behind rows of unused microscopes, falling rents and anxious landlords, the biotech engine is recovering before the lab market. Not so much a rebound, investors are seeing signs of a healthy reset.

Significant capital is returning, albeit selectively, from significant sources, showing institutional capital still has long-term conviction in the life sciences sector. Blackstone — the No. 1 firm on Commercial Observer’s Power 100 list in 2026, and the world’s largest alternative asset manager — closed a record $6.3 billion life sciences fund in March this year. Blackstone said it’s 40 percent larger than its previous life sciences fund.

Also, Congress in February 2026 reversed the White House’s proposed 40 percent cut to the $48.7 billion budget for the National Institutes of Health. The proposed reductions would have reduced facilities and administration funding by $4 billion. 

Brokers and researchers also say the market is moving toward normalization, not collapse. CBRE reported biotech R&D employment hit a record after five straight months of growth. Venture capital funding, too, in the first quarter of 2026 reached $7.5 billion, which is 12 percent higher year-over-year.

Meanwhile, Colliers reported public life sciences valuations improved from 60 percent below peak in April 2025 to 26 percent below peak 12 months later, while new construction dropped sharply after the record 50 million-square-foot flood in supply the previous few years.

Lab vacancy nationwide is high at 23 percent while rents fell again in the first quarter, and concessions are still sky high as landlords compete for tenants. But leasing declines finally show signs of bottoming. For one example, organ transplant tech company TransMedics signed for 498,000 square feet in Greater Boston, propelling that market to 1.1 million square feet of leasing in the first quarter of 2026, which is more than all of its leasing activity from the second half of 2025. Also, biopharmaceutical giant Pfizer is moving into another 230,000 square feet across two buildings in San Diego owned by Tishman Speyer-backed Breakthrough Properties.

The leasing helps the debt side come out from hiding, in some cases. For example, J.P. Morgan Chase, Deutsche Bank and Goldman Sachs provided $465 million to refinance a Breakthrough Properties campus in San Diego that is nearly 90 percent leased.

Key developments are also underway, demonstrating the level of investment going into life sciences. For example, Eli Lilly is building a $6.5 billion manufacturing facility in Greater Houston; Merck is building a $1 billion facility spanning just 225,000 square feet in Wilmington, Del.; and Texas Medical Center is developing a 37-acre research campus with 5 million square feet of collaborative space.

Life sciences real estate is not suddenly cured. After too much space was built, too many landlords are still cutting deals, and too many labs remain dark. But the science underneath the real estate is moving again.

Greg Cornfield can be reached at gcornfield@commercialobserver.com.