A decline in venture capital funding for Bay Area life sciences mirrors a rising vacancy level in the sector, Avison Young said Tuesday. VC funding barely surpassed $500 million for the fourth quarter of 2023, in contrast to the life science boom of 2020 to mid-2022, when quarterly funding regularly exceeded $2 billion.

“As we navigate the post-pandemic landscape and enter a higher-interest environment, the allure of volatile biopharmaceutical investments has waned,” according to Avison Young. “Coupled with the surge in the headline-making AI industry, it comes as no surprise that investors are currently diverted from the life science sector.”

Accordingly, an increasing number of life science companies are opting to sublease their spaces, contributing to a steady rise in the vacancy of life science spaces since 2022, said Avison Young. With more than seven million square feet currently under construction, much of it due in 2024-2025, “the life science market will likely face a vacancy issue.”