Life sciences real estate in the Bay Area started the year with several setbacks, mirroring a national trend in which biotech firms themselves are seeing bright spots, but the effect of those positive indicators hasn’t yet trickled into real estate.
Net absorption of lab space in the Bay Area turned negative in the first quarter, with 453K SF of occupancy losses, according to Newmark. Availability increased to 32.3% as tenants reversed course from a small surge of leasing at the end of 2025.
Sublease space in biotech-heavy South San Francisco totaled 630K SF in the first quarter, with a total of 2.1M SF of sublease space available throughout the Bay Area.
While South San Francisco’s sublease availability is marginally improved from the 921K SF available in Q1 2025, it is still a tenant-friendly market, and existing tenants are offering space at rates far lower than they are paying to capture tenants, said Eric Bluestein, executive managing director for Newmark’s Palo Alto office.
“Sublandlords have gotten very aggressive to try and capture tenants who may be smaller than their available space,” Bluestein said. “There just are not a lot of 100K SF users, so they will lease all of it at a substantial discount to hopefully get the space off their books.”
Landlords, meanwhile, are pushing occupancy to generate cash flow, with the hope that the market shifts and deals done today can be rolled to higher lease rates down the road, Bluestein said.
“It is amazing what we have achieved for tenants recently, whether it is rents, rental concessions or even TI dollars,” he said. “It is unprecedented.”
Newmark’s report doesn’t track concessions for life sciences space, but base asking rents declined by 9% year-over-year to $5.57 per SF in Q1, the third quarter in a row of sliding asking rents.
Marketwide, life sciences vacancy ticked up to 29% in Q1, up from 28% in the same period of 2025, according to Newmark.
However, positive signals in the life sciences industry at the end of last year could translate to additional leasing and lower vacancy across the Bay Area later in 2026, Bluestein said.
“Public companies were finding it easier to raise money, and generally, when those fundamentals come about, it’s about a nine-month horizon to where it really starts to translate to real estate leasing transactions,” he said.
That should translate to a jump in touring activity in September or October, which could lead to a surge in leasing to start 2027, Bluestein said.
There were some bright spots in the first quarter as well. Leases by Gladstone Institutes in San Francisco’s Mission Bay neighborhood and Mammoth Biosciences in Brisbane totaled 179,900 SF.
Additional leases inked in the quarter include Natera for nearly 63K SF in San Carlos and Kyverna Therapeutics for 44,700 SF in Emeryville, according to Newmark. Overall, there were 38 leases signed in the first quarter at an average size of about 20K SF.
But Pfizer also said in March that it would close its research facilities in South San Francisco and cease operations in the area.
The construction pipeline for labs in the Bay Area remains at zero, according to Newmark. After the rush of new development in 2022 and 2023, deliveries have trailed off as the market tries to work through the glut of space. At the peak in the second quarter of 2023, 8M SF of labs were under construction in the Bay Area.
Bluestein said that at the close of Q1, Newmark was tracking about 14.1M SF of available lab space in the Bay Area. About 2M SF is spec lab space that was delivered between 2022 and 2025 through new construction and conversions. The abundance of new and move-in-ready lab space provides ample opportunity for life sciences companies to upgrade, Bluestein said.
“There are many really nice projects already built … and most of them have amenities like fitness and break areas and conference centers,” he said. “Most of the new projects, that is what owners knew they needed to do to attract tenants.”
