March 2025 Life Sciences Update

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CONTENTS

Key Takeaways

Industry Trends To Watch • Questions abound as the sector faces pivotal trends that could shape its structure and trajectory. • Life sciences companies are embracing artificial intelligence (AI) to improve workflows, accelerate novel drug development and streamline clinical trials. • Uncertainty around drug pricing has grown with a new administration, with potential tariffs adding further pressure on pricing and manufacturing. • The global Contract Development and Manufacturing Organization (CDMO) sector is likely to be affected as the U.S. government continues to push for increased domestic pharmaceutical production through legislation and tariffs.

Leasing Market Fundamentals

• Supply continues to outpace demand, leading to some softness in asking rent growth and increased vacancy rates in many markets. • A deceleration in the construction pipeline is expected to help rebalance supply and demand in the sector. • In 2025, occupiers looking to expand or move into new space will have plenty of choices. • Sales volume rose in 2025 as the broader commercial real estate (CRE) investment market began to recover. • Capitalization (cap) rates remain higher as buyers evaluate income potential and debt opportunities in the market. • Total returns have taken a hit, turning negative for the last three years, aligning with trends across other property types. • Labor: While slack in the labor market has improved talent availability, some positions remain difficult to fill. • Clinical trials and approvals: After lagging in 2024, activity is expected to rise in 2025, driven by a robust pipeline of new drug development. • Funding: Overall funding picked up in 2024 but remains below recent cycle highs. With uncertainty around U.S. government funding, private sector investment is expected to gain momentum in 2025. U.S. Capital Markets Drivers

Emerging Markets • Growth in emerging markets continues to accelerate as they grow their life sciences inventory and offer unique opportunities.

Spotlight On Europe • The European life sciences market enters 2025 with greater confidence. While macro conditions remain uncertain, an improvement in debt markets and venture capital flows should support a further improvement in corporate activity and greater occupier confidence. • With increased investment in late-stage business models and the integration of AI to optimize R&D strategies and lab design, momentum in the market is set to pick up.

Cushman & Wakefield

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