The life sciences market has experienced unprecedented growth in recent years, adding 33.5 million square feet of inventory since 2020. However, a recent CommercialCafe office report<\/a> found that with life sciences demand drying up, a considerable share of the space already delivered or underway is expected to remain vacant \u2014 contributing to already-high office vacancy rates.<\/p>\n Driven by advances in drug research, gene-editing technologies, and more, lab space demand was at an all-time high between 2020 and 2022. However, with a lot of the need for lab space now sated, there\u2019s now a glut of speculative developments, many of which were started in 2022 or earlier to take advantage of the low interest rates at the time.<\/p>\n The new supply since 2020 is mostly concentrated in established life sciences hubs, like Boston (10.1 million square feet, or 9.8% of previous stock); San Francisco (6.2 million square feet for 11.1% of stock) and San Diego (3.3 million square feet or 12.5% of stock). Moreover, the markets still have considerable pipelines underway: 8.2 million square feet is underway in Boston, while San Francisco has 4.6 million and San Diego 2.5 million. The result is a wave of new projects set to open with few or no tenants, such as IQHQ\u2019s $1.6 billion development in downtown San Diego. While absorption is still positive, some building owners have resorted to leasing life sciences space to general office tenants for lower rates to cover some overheads.<\/p>\n \u201cOversupply isn\u2019t a unique problem within the office sector, but there is currently too much space in life sciences due to recent deliveries,\u201d said Peter Kolaczynski, director of Yardi Research Data. \u201cUnlike traditional office space, the long-term fundamentals for life sciences remain solid. Still, it will take longer than originally anticipated for the space to be absorbed, as these projects are delivering into markets with more availabilities.\u201d<\/p>\n To that end, life sciences hubs have recorded some of the biggest jumps in office vacancies in the last year. Specifically, the Bay Area is up 550 basis points (bps) year-over-year (Y-o-Y) and San Francisco is up 440 bps to rest at 25.8%. Boston vacancies are also up 540 bps to 11.8% in August 2024, while San Diego recorded a vacancy hike of 310 bps.<\/p>\n Since the start of the year, 34.3 million square feet of office space has been delivered nationwide, putting 2024 on track to be the slowest year for office deliveries since 2013. The slowdown is due to a gradual decline of new construction starts. For instance, in 2023, new office project starts dropped to 30 million square feet, while that figure decreased further this year to just 8.4 million square feet breaking ground so far. Consequently, only 69.8 million square feet of office space is currently under construction nationwide, representing a meager 1% expansion of current stocks.<\/p>\n The report also highlights that several Sun Belt markets now have greatly expanded their office inventories in recent years. Namely, Austin, Texas, has experienced a 10.2% boost to its stock since 2021; Charlotte, N.C., added 9.8%; Raleigh-Durham, N.C., rose 9.2%; and Nashville, Tenn., is up 8.7%. With such robust expansions and considerable office stock still under construction, these markets may be exposed to oversupply issues in the future.<\/p>\n For more information and a complete analysis of the latest office data, check out CommercialCafe\u2019s office report<\/a>.<\/p>\n\nOffice Pipeline Dries Up, 2024 On Track to be Slowest Year for Office Development in Last Decade<\/h2>\n