Despite a turbulent 2024 marked by high vacancy rates and tightened capital markets, the life sciences sector remains an attractive long-term investment, according to Colliers’ newly released 2025 National Life Sciences Report.
The comprehensive analysis paints a nuanced picture of a market currently recalibrating after years of rapid growth, but still buoyed by strong fundamentals and renewed investor interest.
Colliers reports that Greater Boston life sciences commercial real estate (CRE) has grown by 19 million square feet over the past decade, representing an 84% increase. This expansion underscores the sector’s remarkable rise, even amid recent headwinds. The report emphasizes that leading markets such as Boston continue to dominate, maintaining the top spot for National Institutes of Health (NIH) funding and ranking among the highest for venture capital (VC) investment.
Investment Momentum, Despite Market Cooling
While macroeconomic factors have tempered enthusiasm in the short term—most notably, reduced company valuations and a cooling IPO market—Colliers highlights that venture capital funding in 2024 still outpaced 2023 by $5.6 billion, making it the fourth-best year on record.
Although early-stage companies have struggled to secure financing at the breakneck pace seen in the boom years, institutional CRE investors are showing increased interest. Colliers notes that life sciences properties now make up a share of the NCREIF NPI that is eight times higher than in 2016, a striking indicator of the asset class’s maturation and growing desirability.
Rethinking Real Estate: Conversions and Core Hubs
One of the more adaptive trends identified in the Colliers report is the conversion of traditional office space into lab environments, as developers seek to anticipate and meet future demand. This approach, paired with the continued expansion of established life sciences hubs, suggests that while immediate demand may have softened, confidence in long-term growth remains high.
In 2024, however, the industry gave back nearly two million square feet of occupied space, a 1% decline, as companies retrenched and reassessed space needs. Colliers found that nearly half of the U.S. life sciences CRE markets tracked experienced negative net absorption—a signal of the market correction currently underway.
A Resilient Workforce and Promising Pipeline
Despite the retrenchment, employment in the sector is on the rise. The biotechnology R&D workforce, after dipping early last year, climbed more than 3% in 2024, reaching an all-time high in the fourth quarter. Pharmaceutical and medicine manufacturing employment also grew by nearly 2%.
This hiring trend reflects broader industry optimism, reinforced by themes emerging from the January 2025 JPM Health Care Conference, where discussions centered on M&A activity, the increasing integration of AI in drug development, and licensing deals with Chinese biopharma companies.
Policy Concerns and the Path Ahead
While the long-term outlook remains bullish, the Colliers report also sounds a note of caution. Leaders from research institutions and advocacy organizations have raised concerns about new policies out of Washington, D.C., which could stifle industry innovation and growth. Additionally, uncertainty around Federal Reserve interest rate cuts could weigh on financing and expansion efforts.
Nevertheless, Colliers’ analysis concludes that the life sciences sector is fundamentally sound. The industry is fueled by a robust pipeline of treatments under investigation, high global spending on pharmaceuticals, and increasing institutional support—all signs that this temporary slowdown may simply be a pause before the next phase of growth.
“The life sciences sector is weathering a market recalibration, not a collapse,” Colliers writes. “The underlying drivers—innovation, talent, and capital—remain firmly in place.”
As developers adapt and investors reposition, the message from Colliers is clear: life sciences real estate may be down—but it’s certainly not out.
