Greater Boston Lab Market


Lab vacancies across Greater Boston expanded again in Q3 2023, with net absorption negative by almost 200,000 SF. Vacancies finished the quarter at 5.6%, a more than 400 basis point expansion over the last year. Vacancies have been on an upward trajectory for several quarters, but this was typically a function of positive demand not keeping pace with the large supply wave. Last quarter was the first since 2020 where demand was a net negative. Sublet rates also increased from 5% to 5.8% last quarter, as tenants explore downsizing options. High interest rates continue to impact the life sciences industry, which is highly dependent on VC investment to drive innovation and growth. Active tenant demand has reportedly dropped from about 6 million SF to closer to 1 million SF over roughly the last two years.

The market is still generating plenty of leasing activity, particularly in new construction, although demand is decelerating. 12-month net absorption almost reached 2 million SF in Q3 2023, compared with nearly 4 million SF in Q3 2022. Most leasing volume has come at new construction, as just a few quarters ago available space in existing inventory was close to nonexistent. Developers met this dearth of availability with a large supply wave, and demand has struggled to keep pace amid the macroeconomic difficulties. Roughly 35% of the 4.5 million SF delivered over the last 12 months is still on the market. While a handful of development projects have stalled or been cancelled amidst the market’s recent setbacks, the supply pipeline is still near a peak, with nearly 18 million SF under construction. Sales activity has cooled in recent quarters, and no institutional trades occurred in Q3 2023.


The Boston biotech market remains one of the premier hubs of innovation in the world, but its growth is largely dependent on macroeconomic factors and venture capital funding. From 2020 through the first quarter of 2022 VC funding and IPO activity ballooned to record levels, driving a surge in lab demand and occupancies. Since then, the climate of high interest rates has hindered VC investment and lab demand. Boston-are biotech companies have laid off thousands of employees and vacancies have increased for four consecutive quarters. Until the Fed starts lowering interest rates, life science companies may continue to be in cost-cutting mode, particularly startup and medium-sized firms. Big Pharma has stepped up amid the funding vacuum, with 37 biotech M&A deals closing over the last 12 months, worth a combined $120 billion. Big Pharma’s cash reserves should continue to play an important role in the lab market until the lending atmosphere improves.