Chicago’s Life Sciences Sector Hits A Wall — Again — Amid Rising Costs, Swaths Of Available Space
Chicago’s life sciences market has posted vacancy numbers showing it is far weaker than its next closest major markets, with about 4 in 10 spaces sitting empty, according to new CBRE data.
The glut of available space was born out of developers rushing into the market when available properties were limited at the onset of the pandemic, combined with a tough capital market that has made it tricky for tenants to sign leases, life sciences insiders told Bisnow.
Meanwhile, the highly specialized nature of these buildings have driven up rents to the point where even willing tenants can’t afford them, said Steven Collens, CEO of healthcare incubator and innovation hub Matter, at Bisnow’s Life Sciences, Quantum Computing and Biotech event earlier this month.
Late last year, vacancy in the market hit 50% in the city proper.
Matter said there is enough top-shelf space still available for the amount of companies interested, but the market needs some more affordable options.
“We have some spaces now that are truly spectacular, and they’re also spectacularly expensive,” Collens said.
The vacancy rate for Chicago’s life sciences sector was 40.5% as of the fourth quarter of 2024, with about 2M SF of total inventory, according to CBRE’s Q4 national life sciences report. The next closest metro areas were the San Francisco Bay Area at 28.7% and Houston at 23.4%.
Chicago's sector saw about 100K SF of net absorption for the year, largely driven by Cour Pharmaceuticals’ 50K SF lease in the fourth quarter as well as leases signed by Cyclopure and Mattiq for about 17K SF each.
Current market conditions are a new challenge for Chicago’s life sciences market.
As recently as several years ago, only a few buildings were available for tenants to lease, said Max Zwolan, a vice president at JLL who helps lead the firm’s local life sciences practice group.
After the onset of the pandemic, developers placed a renewed focus on life sciences and building spaces for companies to grow into, he said.
Leasing space is already a slower process than real estate more broadly because of how long it takes to develop labs to users’ specifications and implement specialty manufacturing projects, Zwolan said.
In the interim, developers and users have also faced many of the same difficulties securing capital that have hamstrung other sectors. Navigating the uncertain landscape surrounding federal grants and other funding is an added stressor, he said.
Still, Zwolan is optimistic about the year ahead for the asset class.
“The science that's here is still really, really good, the management talent that's here, is still really, really good, and that's not going anywhere,” Zwolan said. “We're just waiting on the funding to catch up, and based on the activity that we're starting to see and have seen in other markets, I think we're set up for more transactions this year.”
Zwolan said the way each tenant approaches financing depends on the end user, which ranges significantly because there is a diverse mix of tenants in the city, from biotech firms to cleantech companies. The unifying challenge is figuring out their right valuations and how much they’re able to invest in real estate, he said.
Other sources of financing from the public sector, like city and state grants, could help tenants fill the financing gap that currently exists, said Rebecca Motley, director of life sciences and deep tech for World Business Chicago.
Local government’s investment into quantum technology is another boon for the life sciences industry because quantum computing is a tool it can use to grow, she said.
Additionally, the more key stakeholders invest in and talk about the Chicago region as a center of quantum innovation, the more other types of innovation pay attention to the area, Motley said.
“We need to be sure that we're telling the story as loud as possible, and make sure companies understand that the center of the country is the center of innovation,” Motley said.
