Life sciences rebalancing starts with the construction pipeline

U.S. life sciences real estate is rebalancing the slow way, with vacancy still climbing and rents still falling even as the construction industry quietly does the one thing that can actually fix it. Cushman & Wakefield’s second-quarter read, reported by IREI, puts asking rents at $64.17 a square foot — down 2.2 percent from the prior quarter and 5.3 percent from a year earlier — while overall vacancy moved from 23.4 percent at the end of 2025 to 24.3 percent. On their face those are deterioration numbers, and the market’s defenders are not pretending otherwise.

Look closer, though, and the deterioration is running out of fuel: life sciences rents still run 37 percent above traditional office rents across the 12 major markets Cushman & Wakefield tracks, a premium that gives owners real holding power, and sublease vacancy — the first place stress usually shows up — edged down to 3.4 percent. Chicago and Raleigh-Durham recorded meaningful declines in overall vacancy as absorption finally caught up with space those markets delivered in earlier cycles. None of that makes a recovering market yet, but it makes a stabilizing one.

Sandy Romero, Cushman & Wakefield’s head of office and alternative insights, described the moment as a necessary period of adjustment while the market absorbs significant space delivered in recent years, with the construction slowdown an important step toward bringing supply and demand back into balance. The vacancy rate lagging the construction pipeline is the normal sequence of a correction: developers stop first, vacancy peaks later, rents inflect last.

This publication has argued that the property recovery runs on supply, not silicon, and life sciences is the cleanest test of that thesis. Office, industrial, and apartment markets have each found their footing as construction collapsed; labs have the same dynamic in motion, but with a longer fuse. The Hines bet that a global construction freeze creates a scarcity advantage acquisitions can’t match translates directly to life sciences, where the development pipeline takes years to turn and the cost of carrying speculative shell space is punishing.

The sector has always been prone to its own boom-and-build cycle, and the demand story — an aging population, a drug pipeline that keeps needing lab capacity, a public-health system that keeps finding new targets — is real enough that every cycle produces a wave of speculative construction, with the current vacancy largely the residue of that wave. What is different this time is the speed of the supply response: developers are not waiting for occupancy to recover before they stop building, and the reduced construction pipeline is already visible, per Cushman & Wakefield, even while the vacancy rate is still climbing.

The 37 percent rent premium over office is the cushion that makes the wait possible: office landlords in the lower half of their market are accepting clearing trades at discounts to replacement cost, while life sciences owners are not being forced into that position yet because the shortage of lab space remains the long-term anchor for pricing.

Cushman & Wakefield also sees investment sales recovering and funding conditions strengthening, which suggests capital is beginning to look past the vacancy hump, and the buyers who commit while vacancy is still rising are underwriting the end of the construction cycle, not the current absorption print. That is a coherent trade only because the supply side is now bending — the same dynamic that has been driving the narrow office recovery this year, where trophy buildings with tenant demand are clearing first and the rest of the stack waits for the supply math to catch up.

The risk is timing: if the next hard-maturity cohort of debt hits before absorption closes the vacancy gap, some owners will be forced to sell into the recovery rather than finance their way through it, and that is how a rebalancing becomes a repricing. But for now, construction starts are falling, sublease space is being absorbed, and the markets that overbuilt earliest — Chicago and Raleigh-Durham — are the ones already posting absorption.

The second-quarter average will keep drifting down until more markets join them, and the vacancy peak is being set right now in the data Cushman & Wakefield just published. The question is not whether supply and demand rebalance, but who is still standing — and still owning — when they do. Watch the construction pipeline.