Free rent, few takers: Despite incentives, labs aren't taking space in San Diego

Noelle Harff, The San Diego Union-Tribune on Jan 28, 2026

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SAN DIEGO — Life science space is dead.

While asking rents have decreased for 14 consecutive quarters, landlords have given huge concessions — from tenant improvement subsidies to a year of free rent.

Still, biotechs aren’t biting.

Across 22 deals, just under 300,000 square feet of space was leased in the last three months of 2025, down a third from the same time last year, according to a report from commercial real estate firm Jones Lang LaSalle.

Now, as vacancy rates in the life science sector sit just under 30%, landlords are making concessions.

“There are some interesting deals being done,” said Fred Grier, senior associate at JLL, specializing in tenant representation in the Tech & Life Science Advisory Group. “I heard about one deal that offered a year of free rent.”

Average asking prices for rent fell to $5.64 per square foot, the lowest since 2020. At the same time, landlords are also marketing amenities and subsidizing tenant improvement costs.

These concessions are a symptom of a COVID-era capital hangover.

During 2021, life science investment peaked and speculative developers went on a building spree, but today much of that space sits empty.

“I’m hearing that it will take five years for supply to get swallowed up,” Grier said.

He pointed to the Pacific Center: The new $650 million life science campus in Sorrento Mesa, which was completed last spring, has over 500,000 square feet for rent.

Today, the development houses a single coffee shop.

Despite decreasing rental rates and across-the-board concessions, life science companies aren’t inking deals — largely because they don’t have the money.

San Diego County startups raised $897 million in the past three months, down 36% from a year ago — and this was the best quarter of 2025.

As venture capital dries up, firms are opting to save money by signing smaller spaces outside of the core tech cluster.

The average lease over the past three months was for spaces around 12,000 square feet — that’s a fifth the size of a football field.

Many of these smaller spaces are also short term. “They don’t want to get hooked on a 10-year lease when they don’t know how much runway they have,” Grier explained.

Those that can afford to sign a space have been increasingly signing with incubators, Grier explained.

Instead of building out their own space, startups are signing with pharma giants. Novartis and Eli Lilly both have local incubators.

Another option is to go north; properties in Carlsbad were hot this quarter. North County leased the most square footage in the past three months — 165,000 square feet, according to the JLL report.

While capital cutbacks have become tangible in the past year, sentiment in the sector isn’t all bad.

“Experts say the market has bottomed out,” Grier said, noting that the fourth quarter had substantial capital inflows that may be realized in the real estate market in 12 to 18 months.

“It’s a good sign,” he said.