Lab landlords trade rent now for a shot at 2027

The life sciences recovery is being financed in free rent, and the landlords who can afford to wait are already describing the terms in combat language. Two years of stalled leasing and tenant-friendly economics have CenterSquare Investment Management senior investment strategist Uma Moriarity telling Bisnow, “It’s hand-to-hand combat to retain your tenants and make sure that you’re backfilling any vacancies.” The concession math behind that language is stark: national lab rents are down nearly 18% since 2023 to $64 per square foot, and new leases now carry an average of one month of free rent for every year of lease term, according to a JLL report.

The first hints of recovery are coming from the public markets rather than the leasing market: biotech stocks have climbed back toward 2021 levels, Bisnow reports, but that rally has yet to show up in leasing demand, and operators caution any turn will be slow and uneven. The deals landlords strike in the meantime are marked by their sacrifices, as better equity prices pair with worse lease terms to define this cycle.

The largest visible example of those terms sits at BioMed Realty, where TransMedics — a firm that said earlier this year it would relocate its global headquarters to BioMed’s 188 Assembly Park Drive project in Somerville, Massachusetts — is getting nearly two years of free rent and a base price of roughly $3.50 per square foot per month, or $42 a square foot annually, according to lease terms reported by Bisnow. BioMed is making that trade in front of its own expiration wall: the company faces 1 million square feet of lease expirations in 2027, having leased 1.5 million square feet over the past 12 months, about 8% of its total portfolio.

A landlord’s willingness to hand out two years of free rent says less about the strength of demand than about the cost of waiting: empty space carries carrying costs, and a lease with a long rent holiday can still be preferable to a building with no income at all. The trade defers revenue into future years, so the landlord’s current income statement absorbs the cost of the recovery, and it works only if the building is still generating income after the holiday ends — which is why landlords are increasingly looking beyond the traditional tenant base.

Colliers Executive Vice President Joe Fetterman says developers and their investors are “broadening the funnel” of potential tenants significantly, a shift that began last year as owners looked beyond biotech, and Alexandria Real Estate Equities Chairman Joel Marcus called the broader industry “decoupled from demand on the ground” on his firm’s most recent earnings call, where the REIT noted lower rental rates and the difficulty of attracting traditional lab tenants. That decoupling means the market is being held up by landlords’ willingness to accept non-traditional users and longer concessions.

Longfellow Real Estate Partners, with a 16 million square foot lab portfolio, is living the same reality: its 323,000 square foot Bioterra development in San Diego opened in 2025 and remains without a tenant, according to Bisnow — a new, all-electric, unleased building that is the physical form of the hand-to-hand combat Moriarity describes. The longer it sits empty, the more carrying costs accumulate and the more of the developer’s equity is tied up in a building that produces nothing.

The recovery, when it comes, will not arrive as a uniform wave; it will arrive tenant by tenant, building by building, and it will be paid for by whichever landlord can hold on. The landlords who survive will not necessarily be the ones with the best science campuses, but the ones whose balance sheets can finance two years of free rent without giving ground on the buildings they need for the recovery — a capital markets story wearing a leasing costume. The biotech rally will eventually show up in lease comps, at which point the landlords who benefited will be the ones who treated free rent as an investment in occupancy, while those who could not afford the wait will already have been priced out. The first test of that divide arrives in 2027, when BioMed’s 1 million square feet of expirations come due.