Life Sciences Sector Faces Crisis of Confidence

Oversupply and weakening demand in the life sciences sector have prompted some developers to market their planned properties as office space, according to a life sciences update by Savills.

“Developer confidence in the market has diminished significantly, resulting in the sale of underperforming new developments,” Savills said. The firm pointed to KKR & Co’s sale of its vacant 213,232-square-foot life sciences property in Seattle as a notable example. The property was delivered during the first quarter of 2023.

Meanwhile, venture capital funding has increased in the sector compared with last year despite fewer completed deals in 2024. Savills said this signals that the deals that are being made are more significant. Nearly 2,900 VC transactions were closed by the third quarter of this year, compared with nearly 3,300 completed between Q1 and Q3 2023, according to the report. The largest funding in 2024 went to Xaira Therapeutics, which secured $1 billion in Series A funding for AI-generated drug discovery.

M&A activity surged by 92.6% from Q3 2023 to Q3 2024 across the sector, with acquisitions occurring among both large pharmaceutical companies and startups. One of the largest acquisitions was Bristol-Myers Squibb’s $13.8 billion purchase of Karuna Therapeutics, a biopharmaceutical company founded in 2009 that specializes in treatments for psychiatric and neurological disorders, the report said.

The San Diego life sciences market logged 207 VC funding deals during the third quarter totaling $4.6 billion. Scripps Research opened a new 83,000-square-foot lab on its La Jolla campus, which will house approximately 200 employees. Also, the University of California approved a new multidisciplinary life sciences building at UC San Diego that is set for completion in 2027.

In Boston, Integra LifeSciences plans to resume manufacturing two products, PriMatrix and SurgiMend, at its new facility in Braintree. In addition, Vertex Pharmaceuticals renewed its 1.1 million square foot headquarters lease.

In New York, Alexandria Real Estate launched a $50 million lawsuit against New York City, claiming that the metro area obstructed its efforts to build a third tower to finalize its life sciences campus. Meanwhile, the City of New York has approved a rezoning initiative in the Bronx designed to enhance ambulatory care and promote life sciences research along a corridor of commuter line stations.

In Philadelphia, construction is set to begin next quarter on a one-million-square-foot campus offering R&D and laboratory space within the Advanced Therapies Park in King of Prussia. And Comcast Spectacor is considering transforming part of the Fashion District mall into a life sciences hub, alongside the Philadelphia 76ers’ proposed plan to build a new arena in Center City.