Market Trends

The Bay Area life science market demonstrated robust growth in 2024, with a 34.3% year-over-year (YoY) increase in completed transactions. This upward trend was driven by a balanced rise in both new deals and renewal/extensions, signaling a positive outlook for the market as we move into 2025.

Notably, the most significant transaction growth occurred in two key segments: spaces of 10,000 square feet and less, and spaces of 50,000 square feet and above. These segments saw remarkable increases of 61.1% and 100.0%, respectively, highlighting diverse demand across the market.

Venture capital funding, a critical driver of physical space requirements, also saw a 9.9% YoY increase. This growth was largely fueled by a surge in later-stage funding for well-established companies, further solidifying the industry’s momentum as we look ahead to 2025.

Historical Rent & Vacancy

Market Movement

Tenant’s Perspective

Tenants entering the market with confidence should prepare for heightened competition, particularly for second-generation spaces and spec labs. Despite a rise in vacancies due to the delivery of 3.5 million square feet of new construction in 2024, many tenants are prioritizing the faster occupancy timelines offered by pre-built lab spaces to minimize upfront capital costs.

As we look toward 2025, tenants can expect to hold stronger negotiating power in a market that increasingly favors them, driven by rising vacancies from ongoing new construction. While new developments aim to sustain high rental rates, they will face pressure from tenants demanding significant concession packages. Meanwhile, second-generation facilities, despite their abundance, will remain in high demand due to their appeal and cost-effectiveness.

Notable Lease Transactions

Lab by the Numbers

Total Employment, Life Sciences

May 2023 stats were published in April of 2024.

Over the last 5 years (2019-2023), the compound annual growth rate (CAGR) for life science employment has averaged an increase of 3.6% per year. From 2022-2023, however, employment in the sector remained stagnant, recording a decrease of 0.8%, year-over-year.

Life Science Funding ($)

Venture capital funding in 2024 exceeded the total invested in 2023 by 9.9%, signaling a positive trend heading into 2025. Venture capital remains a key driver for physical lab space demand. As average quarterly investments in the Bay Area continue to rise, we expect leasing activity to increase in 2025 as well.
Total Funding
2024 VC funding total YTD.

These trends underscore the Bay Area’s continued resilience and expansion in the life science sector, positioning it for sustained growth and opportunity in the coming year.

Market Highlights

• Woodstock Development is set to transform a three-building office and R&D campus at 600 Bancroft Way into a 247,647-square-foot (sf) life sciences hub, with completion expected to extend into 2025.
• The 103,295-sf Newark Science Center, a two-building campus at 8000-8100 Jarvis Ave., is currently on the market for sale. Buchanan Street Partners has invested $20.0 million in upgrades since its purchase, positioning it as a prime opportunity for life sciences tenants and investors looking ahead into 2025.
• Venture capital funding in the San Francisco Bay Area saw a significant boost, rising nearly 15.0% from the end of 2023 to the end of 2024. Nuvig Therapeutics led the charge in Q4 2024, raising $161.0 million in Series B funding, signaling strong investor confidence in the region’s life sciences sector as we move into 2025.

Major Developments Under Construction

Life Sciences Related VC Funding

This report reflects the continued growth and transformation of the San Francisco Bay Area life sciences market, with key developments and investments paving the way for a dynamic 2025.

The Bay Area’s life science sector is showing strong signs of recovery, with a notable surge in leasing activity pointing to renewed confidence in the market. According to recent reports, the region is experiencing a significant uptick in demand for lab and research space, driven by a combination of factors including increased venture capital funding, a robust pipeline of innovation, and the resilience of the biotech and pharmaceutical industries.

Key Drivers of the Leasing Surge

1. Venture Capital Investment: Despite economic uncertainties, venture capital funding for life science companies has remained steady, providing the necessary capital for startups and established firms to expand their operations. This has directly translated into higher demand for lab space.
2. Innovation Pipeline: The Bay Area continues to be a global hub for cutting-edge research and development. With breakthroughs in areas such as gene therapy, artificial intelligence-driven drug discovery, and personalized medicine, companies are actively seeking space to scale their operations.
3. Market Resilience: The life science sector has demonstrated remarkable resilience compared to other commercial real estate segments. The essential nature of healthcare and biotech innovation has insulated the industry from broader economic downturns.

Hotspots for Life Science Growth

While the entire Bay Area is benefiting from this rebound, certain submarkets are emerging as hotspots for life science activity. Cities like South San Francisco, San Francisco’s Mission Bay, and the East Bay are seeing particularly strong demand. These areas offer a combination of state-of-the-art facilities, proximity to leading research institutions, and a highly skilled talent pool.

Challenges and Opportunities

Despite the positive trends, challenges remain. The high cost of real estate and limited availability of suitable lab space continue to be barriers for some companies. However, this has also created opportunities for developers and investors to repurpose underutilized commercial properties into life science facilities, meeting the growing demand.

Looking Ahead

The surge in leasing activity is a clear indicator that the Bay Area’s life science sector is poised for sustained growth. As companies continue to innovate and expand, the demand for high-quality lab space is expected to remain strong. For businesses and investors alike, now is the time to capitalize on the opportunities presented by this dynamic market.

At Bay Area Lab Space, we are committed to helping life science companies find the perfect space to grow and thrive. Whether you’re a startup looking for your first lab or an established firm planning an expansion, our team is here to support your needs.

Stay tuned for more updates on the Bay Area life science market, and contact us today to explore available opportunities!