Philly Life Sciences Market Slated For Growth Following Years Of Uncertainty

Philadelphia’s life sciences market was more sluggish in 2024 than many had hoped, according to a year-end report from Colliers.

But there is still room for optimism in 2025 if the sector can resolve questions posed by cautious investors, high interest rates and the impact of President-elect Donald Trump's pending inauguration.

“We’re looking at it as overcoming the uncertainty of the last two years,” said Colliers Executive Vice President Joe Fetterman, a broker focused on the life sciences sector. “I think there’s a great desire in the market for certainty.”

One of the biggest developments underway in the sector is Spark Therapeutics’ 414K SF Gene Therapy Innovation Center in University City, which is expected to deliver sometime in 2026. The Colliers report also highlighted the University of Pennsylvania’s 115K SF lease for its RNA Innovation and Center for Precision Engineering for Health, which is also in University City.

But urban Philadelphia’s life sciences market still has a vacancy rate of 33.8%, roughly 1.5M SF.

The sector experienced a negative absorption rate in 2024 for the first time since the pandemic, according to the Colliers report. Vacancies outstripped new leases by 140K SF last year.

Meanwhile, the regionwide vacancy rate now sits at 8.8%, higher than at any point since 2019.

The amount of newly-constructed space entering the market also dropped dramatically year-over-year. Colliers tallied 200K SF at the end of 2024, down from 1M SF the year prior.

Those trends can be partly attributed to stubbornly high interest rates, Colliers reported. Many analysts expected cuts in early 2024, but the Federal Reserve ended up waiting until September.

“Much of the investment community… [is] sitting on the sidelines,” Fetterman said. “They want to see that excess space absorbed before they start pouring capital back into purpose-built lab space.

While venture capital and private equity funding hasn’t dried up completely, it’s been more focused on mature companies than startups, Fetterman said. These established firms often already have access to lab space and don’t need to sign new leases.

The prospect of a second Trump term also presented a roadblock for new investment last year. The president-elect has long had a contentious relationship with federal agencies like the National Institutes of Health and the Food and Drug Administration, which both lease a large number of lab spaces nationwide.

“Will funding remain at the level it has been? … I don’t think there’s any particular indication as to which way that’s going to go,” Fetterman said.

Still, Trump’s planned deregulation efforts could eliminate red tape at agencies like the FDA, which might make the pharmaceutical industry more appealing to investors, he added.

And now that the market is putting some uncertainty behind it, Colliers is predicting a massive turnaround for Philly life sciences in 2025. It expects 510K SF of absorption and more than 1.25M SF of projects completing and available in Q1 2025. That would surpass the construction metric for every year on record since 2019.

“The fact that we’ve got product in place means that we’ve got runway for the companies that I think are going to have a need for space,” Fetterman said.

He expects leasing figures to grow over the next two to three years.

“As we get out to 36 months, we may actually be in a position where we have demand for space,” Fetterman said. “I think the amount of demand will basically fill the supply.”

The report says investors shouldn’t expect the recovery to formulate as quickly as the expansion the market experienced between 2019 and 2021.

But Fetterman believes Philadelphia remains competitive. The Philadelphia region’s relatively low cost of living and educated workforce are big draws for national companies looking to expand, he said. The Colliers report dubbed it the fourth-largest life sciences market in the nation behind only San Francisco, Boston and San Diego.

“Our occupancy cost is approximately two-thirds of that in Boston,” he said.