The Los Angeles life sciences sector is standing out as a bright spot in a challenging national market. In 2024, tight supply and robust tenant demand have driven rental growth in the region, bucking the downward trend seen in other major U.S. life science clusters.
Market Performance Overview
According to JLL’s Life Sciences Real Estate Perspective and Cluster Analysis report, rents in the Los Angeles and Orange County markets grew by 6% in the first half of 2024. This performance contrasts sharply with the national landscape, where rents have declined by 9%, led by downturns in established hubs like Boston (-8.2%), San Diego (-4.7%), and San Francisco (-1.9%).
Patrick Church, managing director of JLL and head of the Los Angeles life sciences practice group, attributes this growth to a significant supply-demand imbalance. “Other markets have had their challenges. We’re the exact opposite because we have a significant supply imbalance. We’re working to bring developers into the city to address this gap,” Church said.
Supply and Demand Dynamics
The greater Los Angeles region, including Orange County, has an availability rate of just 3% for life sciences space, equating to approximately 306,000 square feet. This is a stark contrast to availability rates exceeding 30% in Boston and San Francisco and 26% in San Diego.
Tenant demand remains high in Los Angeles, with over 1 million square feet of active requirements from life science firms. Smaller firms, seeking spaces between 5,000 and 15,000 square feet, are particularly driving this demand.
Despite national headwinds such as reduced venture funding and higher interest rates, the Los Angeles market has demonstrated resilience. While tenants returned 158,000 square feet more than they leased in the first half of 2024, the region still recorded 300,000 square feet of leasing activity during this period.
Lack of New Construction
Los Angeles and Orange County currently have 12 million square feet of life sciences inventory, with no new construction underway. In comparison, Boston’s 49.5 million square feet represents six times its current demand, underscoring the supply pressure in Los Angeles.
One notable project on the horizon is UCLA’s conversion of the former Westside Pavilion mall into a 700,000-square-foot research hub. Scheduled to open in 2027, the facility will house the California Institute for Immunology and Immunotherapy, further enhancing the region’s research capabilities.
National Trends and Industry Insights
Across the U.S., life sciences landlords are grappling with elevated vacancy rates due to slowing demand, high interest rates, and a shift in research funding priorities post-pandemic. Availability rates have soared to 24% in San Francisco, 27% in Boston, and 17% in San Diego.
Landlords like Alexandria Real Estate Equities are responding by pivoting toward modern, amenity-rich campuses to attract tenants. These properties, which account for 70% of Alexandria’s annual rental revenue, are increasingly favored by life sciences firms.
Despite these challenges, the life sciences sector is poised for long-term growth. FDA approvals reached an all-time high last year, and biotechnology patent innovation increased by 22% compared to a decade ago. JLL predicts that potential interest rate reductions and increasing venture capital investments will bolster the market heading into 2025.
Conclusion
The Los Angeles life sciences market is defying national trends by capitalizing on tight supply, high demand, and strategic tenant engagement. While other markets contend with oversupply and falling rents, Los Angeles is leveraging its unique advantages to maintain growth and position itself as a key player in the life sciences landscape. As the region addresses its supply constraints, its prominence in the industry is likely to strengthen further.