Federal Funding Cuts Pose Challenges For Life Sciences Real Estate

Proposed cuts to National Institutes of Health (NIH) funding could significantly impact demand for life sciences real estate, according to Savills Research and Data Services’ Q1 U.S. Life Sciences Market Overview.

A suggested 15% cap on indirect costs would limit support for facilities and administrative expenses, potentially forcing research institutions to downsize and startups to halt or slow operations. This reduction in funding could also shrink available resources for research institutions and universities to meet occupancy needs. New York State—one of the NIH’s top funding recipients—stands to lose approximately $880 million. In New York City alone, more than 100,000 square feet of life sciences space has already been lost or delayed. However, demand remains strong for smaller spaces under 15,000 square feet.

At the same time, challenges around drug pricing and access are prompting pharmaceutical companies to ramp up R&D and pursue acquisitions to cut costs and broaden access. One example: AstraZeneca’s $425 million acquisition of EsoBiotic to grow its cell therapy portfolio and improve affordability.

Despite global economic uncertainty, venture capital funding in life sciences has held steady, though investors are largely focusing on early- and late-stage companies with proven potential. The largest funding round of Q1 was Eikon Therapeutics’ $350.7 million Series D, aimed at treatments for life-threatening diseases.

Overall, both deal volume and total capital investment declined across all markets Savills tracked. The San Francisco Bay Area led in both metrics, reporting 87 deals worth $2.5 billion. Notably, Sutter Health is planning a $1 billion, 1.3 million-square-foot flagship medical campus in Emeryville, following its $450 million purchase of the 12-acre Emery Yards site from BioMed Realty.

Boston saw $1.9 billion invested across 69 deals. Biogen announced plans to move its headquarters to a new 580,000-square-foot tower in MIT’s Kendall Common project, with a 15-year lease beginning in 2028. Meanwhile, The Davis Companies acquired a 309,000-square-foot life sciences and office facility in Andover.

In the Denver-Boulder region, CU Boulder set a new record with 35 startups launched between 2023 and 2024, driven by innovations in clean energy and biotech. Alongside Colorado State University and Colorado School of Mines, the university is also launching a 13,000-square-foot Quantum Incubator in Boulder with Elevate Quantum, providing startups access to advanced equipment and office space.

Northern New Jersey also saw growth, with BeiGene opening a 400,000-square-foot cancer drug R&D and manufacturing facility at the Princeton West Innovation Campus, formerly occupied by Bristol Myers Squibb.

Source: GlobeSt