Capital Poised to Reenter Bay Area Life Sciences as Fundamentals Improve
Life sciences in the San Francisco Bay Area showed clear signs of improving fundamentals in Q4 2025, even as the sector continued to operate in a constrained macroeconomic environment, shaped by limited NIH funding and ongoing pharmaceutical tariffs, according to CBRE.
The region closed the year with 44.1 million sq. ft. of inventory and an average asking rate of $5.78 NNN, while elevated sublease availability reflected strategic recalibration among mid-cap firms.
The standout story of the quarter was the San Francisco Peninsula, the Bay Area's largest submarket, which posted meaningful gains. Vacancy fell to 35.2%—a 270-basispoint improvement from Q3—supported by strong leasing momentum. The Peninsula recorded 808,000 square feet of net absorption in Q4, pushing annual absorption into positive territory at 716,000 square feet.
Quarterly leasing activity reached 1.2 million square feet, surpassing the five-year average and accounting for 87% of all regional leasing. Three transactions over 100,000 square feet highlighted tenants' willingness to secure high-quality space at competitive terms.
Demand remained steady, with 2.6 million square feet of active requirements across 36 mandates, consistent with both quarterly and annual benchmarks. This stability reflects ongoing investment in next-generation therapies, platform technologies, and biomanufacturing.
On the supply side, IQHQ's Elco Yards property, The Shop, delivered 226,000 square feet in Q4, fully preleased prior to completion. Only two office-to-life science conversions remain underway at Genesis Skyway, signaling an end to speculative development, for now.
Looking ahead, substantial dry powder is expected to re-enter the market, targeting opportunities in precision medicine, cell and gene therapies, and AI-enabled drug discovery. Combined with the region's deep academic and research ecosystem—anchored by UC Berkeley, UCSF, and Stanford—the Bay Area remains a leading hub for life sciences innovation.
Demand Increasing for Purpose-Built Life Science Space
"We have seen significant improvements and growth in the [Bay Area] life science sector, and we are encouraged by strong fundamentals supporting continued growth, including biotech M&A activity and rapid advancements in AI," Rob Paratte, Executive Vice President, Kilroy Realty Corp., told GlobeSt.com.
The Kilroy Realty portfolio owns four life science assets in the Bay Area: Kilroy Oyster Point, Menlo Corporate Center, Oyster Point Tech Center, and Page Mill/Porter—totaling 1.8 million square feet, with an additional 2 million square feet of future product planned.
"The demand for purpose-built life science space has increased 20% as of Q3 2025, and the robust leasing activity we have seen is poised to continue into 2026," Paratte said. "Kilroy Oyster Point is resonating with a growing number of prospects in the market, as emphasized by our 384,000 square feet of executed leases in 2025."
Paratte said this underscores the importance of high-quality modern construction and proximity to one of the nation's largest biotech clusters and research ecosystems, creating unmatched advantages.
"UCSF's decision to consolidate its life science footprint of pharmacy, clinical laboratory, pathology, and genetics operations at Kilroy Oyster Point exemplifies how these assets enable institutional research opportunities," he said.
Source: GlobeSt/ALM