Thursday, June 11, 2026
JLL: San Diego lab market shows signs of recovery
The U.S. life sciences real estate market may have reached a turning point after years of decline, according to a new JLL report. But in San Diego, where lab availability remains near 30%, excess supply is expected to keep landlords competing aggressively
The U.S. laboratory real estate market may be emerging from one of the deepest downturns in its history, but a prolonged oversupply of space continues to weigh on rents and leasing activity, according to a new report from the commercial real estate brokerage JLL.
The report found vacancy rates across the nation's largest life sciences hubs remain elevated after a pandemic-era construction boom outpaced demand.
In San Diego, total lab availability stood at 29% in the first quarter, compared with 32% in the Boston and Bay Area markets. New York City's availability rate was the highest among the major markets at 36.6%.
JLL said the sector appears to have reached an inflection point after four years of declining market conditions.
"Nearly every indicator suggests the market has bottomed out and has begun to recover," the report stated, citing renewed tenant activity, improving access to capital for biotechnology companies and a slowdown in the growth of available space.
Nationally, lab availability has declined by about 2 million square feet over the past nine months after increasing by roughly 40 million square feet during the previous five years. JLL said the reduction suggests the market peaked in mid-2025.
In San Diego, however, the supply-demand imbalance remains pronounced. The region recorded a 12.3% year-over-year increase in total available lab space in the first quarter despite posting positive net absorption of 234,342 square feet - meaning more space was leased than vacated during the period.
The report said San Diego's direct vacancy rate stood at 25%, while the average asking rent for lab space fell 6.3% year-over-year to $64.30 per square foot.
The market's challenges stem largely from a wave of new construction that coincided with a pullback in demand from biotechnology firms after the pandemic-driven expansion of the early 2020s. JLL said the industry's primary obstacle is no longer a lack of tenant demand but rather an abundance of available space.
As a result, landlords are increasingly competing for tenants by offering shorter lease terms, free rent periods and move-in-ready laboratory spaces. Average lease lengths have shortened significantly compared with pre-pandemic norms, according to the report.
Despite those headwinds, JLL said demand fundamentals have improved in leading life sciences markets, including Boston, San Diego, the Bay Area and the Raleigh-Durham area in North Carolina. Collectively, those regions saw tenant demand increase 44% from a year earlier to nearly 8 million square feet.
San Diego remains one of the nation's largest life sciences markets, with nearly 27.7 million square feet of lab inventory. The region currently has approximately 894,000 square feet under development, according to the report.
JLL also said a broader range of tenants is beginning to occupy laboratory properties. Companies involved in artificial intelligence, robotics, medical technology, aerospace and defense increasingly are leasing "dry lab" space to support research and product development, helping diversify demand beyond traditional biotechnology users.
While the report characterized the market's recent improvement as encouraging, it cautioned that a return to more balanced conditions is likely to take years.
"The next 12 months hold promise of incremental -- not material -- growth," the report stated. "The market's defining challenge is no longer demand. It is supply."
The report found vacancy rates across the nation's largest life sciences hubs remain elevated after a pandemic-era construction boom outpaced demand.
In San Diego, total lab availability stood at 29% in the first quarter, compared with 32% in the Boston and Bay Area markets. New York City's availability rate was the highest among the major markets at 36.6%.
JLL said the sector appears to have reached an inflection point after four years of declining market conditions.
"Nearly every indicator suggests the market has bottomed out and has begun to recover," the report stated, citing renewed tenant activity, improving access to capital for biotechnology companies and a slowdown in the growth of available space.
Nationally, lab availability has declined by about 2 million square feet over the past nine months after increasing by roughly 40 million square feet during the previous five years. JLL said the reduction suggests the market peaked in mid-2025.
In San Diego, however, the supply-demand imbalance remains pronounced. The region recorded a 12.3% year-over-year increase in total available lab space in the first quarter despite posting positive net absorption of 234,342 square feet - meaning more space was leased than vacated during the period.
The report said San Diego's direct vacancy rate stood at 25%, while the average asking rent for lab space fell 6.3% year-over-year to $64.30 per square foot.
The market's challenges stem largely from a wave of new construction that coincided with a pullback in demand from biotechnology firms after the pandemic-driven expansion of the early 2020s. JLL said the industry's primary obstacle is no longer a lack of tenant demand but rather an abundance of available space.
As a result, landlords are increasingly competing for tenants by offering shorter lease terms, free rent periods and move-in-ready laboratory spaces. Average lease lengths have shortened significantly compared with pre-pandemic norms, according to the report.
Despite those headwinds, JLL said demand fundamentals have improved in leading life sciences markets, including Boston, San Diego, the Bay Area and the Raleigh-Durham area in North Carolina. Collectively, those regions saw tenant demand increase 44% from a year earlier to nearly 8 million square feet.
San Diego remains one of the nation's largest life sciences markets, with nearly 27.7 million square feet of lab inventory. The region currently has approximately 894,000 square feet under development, according to the report.
JLL also said a broader range of tenants is beginning to occupy laboratory properties. Companies involved in artificial intelligence, robotics, medical technology, aerospace and defense increasingly are leasing "dry lab" space to support research and product development, helping diversify demand beyond traditional biotechnology users.
While the report characterized the market's recent improvement as encouraging, it cautioned that a return to more balanced conditions is likely to take years.
"The next 12 months hold promise of incremental -- not material -- growth," the report stated. "The market's defining challenge is no longer demand. It is supply."
