Core Insights - The U.S. life sciences sector is experiencing a significant increase in vacancy rates, reaching 23.9% in the second quarter, which is a rise of 70 basis points quarter-over-quarter and 520 basis points year-over-year [2] - Asking rents are softening, with an average decline of 3.3% year-over-year, now at $67.88 per square foot, influenced by increased vacant sublease space [5][6] - The construction pipeline is contracting, with only 3% of inventory under construction, indicating a shift towards build-to-suit projects rather than speculative developments [3] Vacancy Rates and Market Dynamics - Vacancy rates in the life sciences sector have reached a new high, leading to increased concessions such as free rent and tenant improvements becoming standard [1] - The market is struggling with soft demand and a wave of new construction completions, contributing to the high vacancy rates [2] Rent Trends - Rent growth for lab and cGMP space is slowing, with an average increase of only 0.7% from the end of 2024 across 16 major markets, although rents are still 4.7% higher than at the end of 2023 [4] - Key markets like Boston, San Francisco Bay Area, Raleigh-Durham, and New Jersey have seen more pronounced rent declines, with New Jersey experiencing a drop of 5.3% [5] Sublease Space Impact - The increase in vacant sublease space, which is typically priced lower than direct available space, has contributed to the overall decline in average asking rents, with sublease space rising to 4.0% [6] - As the availability of sublease space decreases, its negative impact on rents is expected to lessen [6] Construction Activity and Future Outlook - Construction activity is at its lowest level since 2019, with just under 8 million square feet, allowing the market more time to absorb the vacant space delivered over the past two years [7] - This slowdown in construction is anticipated to help normalize high vacancy rates in some markets over the longer term [7]