Has the Lab Market Hit Bottom? Three Q3 Reports are split

Life sciences real estate may be nearing a turning point. However, the firms discussing Q3 metrics don’t agree on when, or whether, it has arrived. Though write-ups from CBRE, Cushman & Wakefield and Newmark note more robust leasing and a shrinking construction pipeline, they’re split on the vacancy rates.

Two Down, One Up

Cushman & Wakefield reported that the lab vacancy rate fell 20 basis points (bps) from Q2 to 23.9%, representing the first quarterly decline in four years. The company said that the vacancy “has likely peaked,” even amid short-term volatility.

CBRE noted a 10 bps drop to 23.4%, the second quarterly decline since late 2022. However, the vacancy rate remains 60 bps higher, year over year.

But Newmark analysts saw things differently, with its all-markets vacancy rate increasing to 27%, higher than the 26.5% reported in Q2. In fact, Newmark said most of the markets it tracked showed higher vacancy rates.

The firms use different inventories and market lists for their analyses. Even so, the split suggests that any recovery is fragile and uneven by market.

Where The Firms Agree

The reports did agree on some of the following trends and metrics.

Demand Increases

CBRE counted 569,257 square feet of positive net absorption following two straight quarters in negative territory. Meanwhile, Cushman & Wakefield report a net absorption of about 484,000 square feet.

Leasing increased, too, with CBRE putting Q3 volume at 2.7 million square feet, a 12.7% year-over-year increase, though the report noted that the pace is “not enough to rapidly reduce available space.” Cushman & Wakefield reported an 11% leasing increase from the second quarter.

Regionally, Newmark said active tenant requirements in Boston, the San Francisco Bay Area, San Diego and Seattle rose 62.6% from their second-quarter 2025 lows. The Bay Area leads with about 484,000 square feet of positive net absorption so far this year, helped by AI-related demand. Denver-Boulder, Philadelphia and San Diego continue to lose occupancy. Newmark said companies in AI, quantum science, robotics and other “tough tech” fields are increasingly leasing lab space.

Shrinking Pipelines

Another thing on which the reports concurred was a decline in supply.

Cushman & Wakefield reported about 5.2 million square feet under construction, a 40% year-over-year decline. Additionally, 73% of the current supply represents build-to-suit.

CBRE said that 3 million square feet was delivered over the past year, the lowest annual total since 2017, while Newmark noted that 2 million square feet is in the pipeline across its four core markets, with the bulk of the space already claimed.

Sliding Rents

Landlords continued to cut rents, with Cushman & Wakefield reporting the national average at $62.85 per square foot, a 5.6% decline from the year before. CBRE said asking rents fell 7.2% year over year, bringing them to their lowest level since mid-2023. At the same time, Newmark noted that positive rent growth took place in two of the 13 markets it tracks.

Circling Capital

On the surface, capital markets appeared healthier. But digging deeper, the sales numbers depended on who was counting.

Cushman & Wakefield reported $3 billion in R&D property sales in Q3, a 50% increase from a year ago, while Newmark indicated a deal volume of $3.5 billion. CBRE, which tracks only seven core markets, said sales through the third quarter totaled $757 million, the lowest in more than six years and 94% below the 2022 peak.

Funding for life science companies themselves is improving, with Newmark noting that d M&A activity is the strongest since 2021, and Cushman & Wakefield pointing out that IPO volume so far this year totals $7.3 billion. At the same time, Newmark said that life science property values remain 38.4% below their peak, and that owner-users account for 29.5% of acquisition volume.

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