Leasing Market Fundamentals
Current Overall Asking Rents
* Rents adjusted to reflect occupier costs of office to lab conversionSource: Cushman & Wakefield Research
With nearly 12 million square feet (msf)—or 6% of inventory—of new space completed in 2023, asking rents edged higher across most markets.
Asking rents for lab and cGMP space have steadily increased over the last three years, growing an average of 37% across these 16 markets.
On a year-over-year (YOY) basis, rent growth has decelerated, growing an average of 11%.
Although growth slowed, nine of the 16 markets continued to experience double-digit rent growth YOY, including London (+30%), suburban Maryland (+25%) and New Jersey (+20%) .
Rents declined in three of the 16 markets: Seattle (-18%), Los Angeles-Orange County (-3%) and Philadelphia (-1%).
Key Takeaway: As new product comes online, and with nearly 16 msf of new inventory expected to be completed in 2024, rents will rise with high-quality space and steady demand.
Total Vacancy Rates by Components
Source: Cushman & Wakefield Research
Vacant space has steadily increased over the last 12 months. Overall vacant space averaged 8.8% during the pandemic period of 2020 to 2021; it now averages 14.4% across Cushman & Wakefield markets, well below the overall U.S. office space vacancy rate of 19.7%.
The increase in vacant sublease space has also applied upward pressure to the vacancy rate. On a YOY basis, total vacant sublease space grew from 2.9 to 6.3 msf.
A robust construction pipeline may contribute to the market’s vacant inventory, as much of the current pipeline is expected to deliver vacant.
Net absorption turned negative in several markets. Five of the 12 U.S. markets posted positive absorption in 2023.
Key Takeaway: The increase in available vacant space contrasts with the lows of 2021 when tenants faced significant challenges in finding space. Today, more options and opportunities exist for tenants.
Not important
Somewhat important
Very important
A critical deciding factor
Planning to decrease leased space
Will remain the same
Planning to lease additional space
US Life Sciences Job and Inventory Growth
Life sciences employment has grown 3.3% annually, on average, since 2015. Inventory has grown at a faster pace, growing 5.1% annually over the same period.
With the addition of almost 16 msf of new space expected to be delivered this year, U.S. inventory will grow to nearly 227 msf in hub and secondary markets.
Based on Lightcast forecasts, life sciences job growth will tick up an additional 3.2% in 2024.
Key Takeaway: Closely aligned with demand from employment growth, inventory growth will temper in the near-term as fundamentals rebalance in the markets.
Current Inventory and Under Construction
*London U/C off chart at 186%
Source: Lightcast, Cushman & Wakefield Research
Life sciences inventory raced to keep pace with demand over the last three years, growing 30% since 2020.
Likewise, the construction pipeline has nearly doubled since 2020, growing from 16 msf to its current 29 msf under construction.
Among the 16 markets, Boston has the most robust construction pipeline, with nearly 9 msf of projects under construction. With the pipeline accounting for 20% of current inventory, Boston’s total inventory will grow significantly as projects are completed in the next few years.
Currently, the largest market by square footage is the San Francisco Bay Area. Inventory is expected to grow an additional 13%, with current projects under construction totaling nearly 6 msf.
Key Takeaway: Inventory growth has been a direct response to employment-fueled growth, as markets raced to provide occupiers with space. A recalibration is currently underway as market fundamentals rebalance.
Expected Construction Completions: US Markets 2024
Nearly 12 msf of new inventory was added to the market in 2023. Expected completions for 2024 will exceed that figure by approximately 35%. Nearly 16 msf of new space is expected to be completed by year-end 2024.
Of these expected construction completions, approximately 39% is currently preleased. The remaining 61% will either deliver vacant or be absorbed by current tenants in the market (TIM).
Boston is expected to add the greatest amount of new space in 2024 with deliveries expected to total just over 5 msf, representing nearly 60% of its total construction pipeline.
Key Takeaway: An influx of new, state-of-the-art space will provide unique opportunities for occupiers in many markets.
Inventory Under Construction
Quarterly construction activity in the U.S. saw a two-quarter slowdown in the second half of 2023, reversing the nearly three-year trend of rising pipelines.
Construction activity rose to a high of 17% of total inventory in Q2 2023 and slowed to 13% at year-end.
Increased vacancy rates and expectations of additional space delivering vacant in 2024 have tempered the construction pipeline.
Key Takeaway: A slowdown in the construction pipeline should give the markets some time to absorb new space delivering this year.
