Life Sciences Market Rebound: Slowing Construction, Rising Capital Flows Set the Stage

The life sciences sector is poised for a rebound in 2025, driven by a slowdown in construction activity and rising capital flows, particularly venture capital (VC) funding. According to a report by CBRE, a Dallas-based commercial real estate services firm, life sciences construction deliveries reached a record in 2024, but sluggish capital markets, high interest rates, and slowing economic growth will halt the momentum in 2025. This shift in market dynamics presents both challenges and opportunities for investors in the life sciences real estate market.



The construction boom in the life sciences sector appears to be cooling off, with a significant slowdown in new construction activity expected in 2025. This slowdown is likely to impact market dynamics by creating a potential oversupply issue in key markets such as Boston, the San Francisco Bay Area, and San Diego. The CBRE report highlights that a booming 38 million square feet of new lab space is currently under construction, which is likely to outpace demand. This oversupply issue could lead to increased competition among landlords, potentially driving down rental rates and making it more challenging for developers to secure tenants for their new facilities.

However, this slowdown in construction activity also presents opportunities for investors who can navigate the market effectively. Strategic acquisitions, value-added strategies, diversification, and partnerships or joint ventures are some potential opportunities that investors can explore to capitalize on the long-term growth of the life sciences sector while mitigating the risks associated with the oversupply issue.

Rising capital flows, particularly vc funding, are expected to play a significant role in shaping the life sciences market in 2025. The CBRE report indicates that the top three life sciences construction markets—Boston, the San Francisco Bay Area, and San Diego—experienced a faster inflow of venture capital funding between 2019 and 2021, which led to this recent surge in new construction. This influx of capital has contributed to the construction boom but may also contribute to the slowdown in 2025 as capital markets become more sluggish and interest rates rise.

As capital flows increase, dealmaking and investment strategies in the life sciences market are likely to be influenced in several ways. Increased competition for assets, greater focus on innovation, portfolio diversification, and strategic partnerships are some factors that could shape the life sciences market in 2025. Investors should be prepared to adapt their strategies to capitalize on these trends and navigate the changing market dynamics.

In conclusion, the slowing construction activity and rising capital flows set the stage for a life sciences market rebound in 2025. While the oversupply issue in key markets presents challenges for investors, the sector's long-term growth potential remains strong. By understanding the market dynamics and employing strategic investment strategies, investors can position themselves to capitalize on the opportunities presented by the life sciences market in 2025.