Rising uncertainty is creating headwinds for the life sciences sector.
Potential policy changes expected to shape the industry in the next few years are beginning to impact short-term planning. Market volatility has increased, prompting venture capital (VC) investors to pause some capital allocation. VC funding totaled $6.2 billion in the first quarter of 2025, a 27% year-over-year (YOY) decline from the first quarter of 2024. This funding slowdown is problematic for companies seeking startup capital or advancing to the next round. As companies navigate the changing capital environment, understanding current leasing trends can help occupiers plan space strategies and guide investors in tracking market trajectories.
Shorter Lease Terms
Occupiers are increasingly being offered more flexibility in lease lengths as macro-economic and geopolitical volatility makes it harder for some to commit to longer terms.
- The average lease term for all life sciences leasing activity dropped from 83 months in 2021 to 69 months in the first quarter of 2025, a decline of 14 months. The availability of shorter-term, in-place renewals has increased occupier leasing options.
- However, the change in term is nuanced when we examine different lease sizes. The average term for larger leases—50,000 square feet (sf) and above—has increased over the past few years. In the first quarter of 2025, the average term for these was 125 months, six months longer than in 2021. Larger companies are taking advantage of the tenant-favorable market to secure longer terms.
- Lease terms for smaller spaces have trended downward, comprising 85% of market activity over the past four years. For leases 50,000 sf and below, the average term fell from 2021 levels to 61 months in the first quarter 2025, a 12-month drop. Smaller companies can leverage shorter lease terms as a tool to manage their upcoming renewals or new lease requirements.
Smaller Leases
The average lease size has trended down since 2021.
- The average lease size for all deals fell from 32,000 sf at year-end 2021 to 29,000 sf in the first quarter of 2025.
- For deals 50,000 sf and above, the average lease size rose significantly from 106,000 sf to 183,000 sf, as larger companies, like pharmaceutical occupiers, capitalize on market softness to secure larger spaces. These leases of over 50,000 sf represent a smaller share of deal activity, averaging 15% of total deals in the last four years.
- For smaller occupiers (50,000 sf or less), the average lease size fell from an average of 16,000 sf in 2021 to 13,000 sf in the first quarter of 2025. Smaller occupiers have had to focus on being financially conservative as they navigate the challenges of operating in an extended period of lower capital availability.
Greater Tenant Allowances
Tenant allowances in the life sciences sector have remained generous in recent years. Recently, increased market availability has supported tenant improvement (TI) packages that help occupiers manage their space-planning budgets effectively.
- Based on lease information tracked by Cushman & Wakefield Research, average TI packages in the top quartile of deals have shown stability, averaging $246 per square foot (psf) in 2021 to $255 psf in 2024. On the high end, TI packages peaked at $470 psf in 2021 and $400 in 2024.
- As of the first quarter of 2025, TI packages average closer to $300 psf, with the maximum TI package approaching the 2021 high of $470 psf.
- TI packages vary depending on the market and type of space. In the hub markets, TI packages range from $300 to $400 psf in Boston; $185 to $275 in Philadelphia; $300 to $350 in San Diego; and $200 to $250 in the San Francisco Bay Area.
With approximately 7 million square feet (msf) of new space due for completion by the end of this year and further increases in vacancy expected, TI packages are projected to remain competitive, providing occupiers with more flexibility and opportunity.
The dynamic leasing landscape in 2025 presents myriad options for tenants. By understanding the trends in the leasing sector, occupiers can leverage these insights to improve the efficiency of their operations in both the short and long term.
