Dive Brief:

• Building operators that can position their space to attract life science and tech companies looking for top amenities can latch onto the market recovery for lab space, says a JLL report released June 9.
• Accepting a break on the rental rate or aligning the rate to the tenant’s funding cycle is also important, says the 2026 U.S. Lab Property Report. Much of the demand is coming from early-stage companies, and they’re looking for space in a market that’s never been more tenant-favorable, the report says. 
• Operators in the technology and research hubs, like San Francisco, Boston and Raleigh-Durham, will face the toughest competition, because property owners there are establishing higher leasing baselines.

Dive Insight:

The market for lab space has been in a multi-year downturn but it started improving last summer, the report says. 

After unused space across the country reached 40 million square feet last year, the market saw a reduction beginning in the summer when companies leased 2 million square feet. 

In addition, more than 6 million square feet of properties transitioned to other uses, further shrinking supply. 

The bulk of the market improvement stems from tech companies that need to accommodate dry labs taking space in the San Francisco Bay Area, and biomanufacturing companies that need wet labs taking space in the Raleigh-Durham area, the report says. 

Areas outside the tech and research hubs are seeing less activity. But with broader fundamentals in biotech strong, lots of public financings and dealmaking and picked-up reshoring, these secondary markets are nevertheless participating in the recovery, according to the report. “Nearly every market [is] participating,” JLL says.    

Still, it remains early days: The supply-to-demand ratio is 6:1. “The path back to a normalized market will be a long one,” the report says. “The next 12 months hold promise of incremental — not material — growth.” 

Properties that are pulling in tenants are the kind that tech companies will want to trade up into, the report says. “Lab tenants today have options, and they are choosing building quality,” it says. 

Newer buildings have seen their availability rate drop 6 percentage points in the last 12 months, with new builds shedding 2.6 million square feet since the second quarter of last year. 

“Expect lab tenants to continue choosing new, well-amenitized buildings over well-located but dated assets,” JLL says.  

To compete, building operators have been delivering move-in-ready space and absorbing compression in first-year rents. Some have been offering free rent within the lease term. 

This kind of flexibility can attract the early-stage companies that are looking for space and see the favorable terms as a way to align their leases with funding cycles, the report says. 

Expect these market conditions to persist, even as the market improves. “These pressures will not ease over the next few years,” the report says. Building operators “will need to compete aggressively for every deal for the foreseeable future.”