The life sciences sector remains one of the most innovation-driven industries in the U.S. economy. From therapeutics to advanced diagnostics and regenerative medicine, the pace of discovery continues to accelerate. While the long-term outlook for life sciences is strong, today’s market presents a variety of complications that require more deliberate planning.

Funding constraints, real estate imbalances, and talent shortages have reshaped the operating environment. At the same time, the sector remains full of promise, buoyed by demographic shifts and scientific breakthroughs. For companies considering a new facility or expanded footprint, site selection is highly nuanced. Success depends not just on available lab space or incentives but on alignment between a company’s stage of development, its capital strategy, its workforce profile, and the realities of the local market.

A Resilient Sector — With a Caveat

Life sciences has historically shown remarkable resilience across economic cycles. An aging population and the rising prevalence of chronic disease create durable demand. Personalized medicine and early-stage diagnostics are driving innovation, and new therapies continue to emerge in fields like oncology, neuroscience, and rare diseases.

On the other hand, volatility is increasing. While many of the world’s largest pharmaceutical firms are doubling down on research and development, mid-stage companies face capital constraints that stall or postpone facility plans. One failed clinical trial or a shift in policy can undermine years of progress. To navigate this environment, companies must acknowledge that sector-level resilience doesn’t guarantee project-level stability. Sound strategy begins with a clear-eyed understanding of where risk lives.

The Maturity Spectrum — Capital Access and the Two-Speed Market

Life sciences today operates on two parallel tracks. On one track, large, well-capitalized companies are investing heavily in new R&D centers, production facilities, and advanced analytics. On the other, earlier-stage companies are under pressure from reduced venture capital activity, rising interest rates, and cautious investors. While these early-stage firms may have promising science and market potential, they often lack the capital to scale beyond contract manufacturers or incubator space.

Companies entering or nearing the commercialization phase—typically Series C and beyond—are the most likely to initiate site selection. These firms are looking to internalize production, expand R&D, and establish supply chain control. This is where physical infrastructure becomes essential. Companies that haven’t reached that inflection point may not be ready for their own facility, regardless of demand or long-term planning.

Understanding where your company sits on this maturity spectrum is critical to building a real estate strategy that matches your risk profile, capital stack, and operational requirements.

Supply-Demand Mismatch in Lab Space

Between 2020 and 2022, life sciences companies sent a clear signal to the market: We need more space. Developers across the country responded with a construction boom, especially in traditional hubs like Boston, San Diego, and the San Francisco Bay Area, as well as in up-and-coming markets such as Houston and Atlanta. Today, that space has arrived—but the demand hasn’t kept pace.

Vacancy rates in key life science markets have climbed into double digits, yet lease rates have not declined significantly. That’s in part because many projects were underwritten at peak prices, and developers are reluctant to discount space built for highly specialized lab use.

More important than vacancy rates, however, is suitability. Much of the available space isn’t well-suited for companies that have moved beyond R&D and need scalable, Good Manufacturing Practice–compliant manufacturing facilities. Pre-commercial and commercial-stage companies often find themselves caught between ill-fitting space in Tier 1 markets and limited infrastructure in Tier 2 alternatives.

While greenfield development remains a common path, few companies want to start from scratch unless they have to. Having credible existing space options—or a plan to deliver them quickly—remains a key differentiator for communities hoping to attract these investments.

Talent Drives Decisions — But Only the Right Talent

Talent is the No. 1 driver of life sciences site selection. But not all talent is created equal, and broad biotech workforce statistics can obscure more than they reveal. Each life sciences subsector—from biologics and cell therapies to AI-enabled diagnostics and nuclear medicine—has unique talent needs. Companies must evaluate three hiring events when choosing a location: whether the region has the core technical talent to staff early operations; whether local universities and training institutions can backfill and sustain future growth; and whether executive and research leaders will relocate there.

For many companies, especially those outside the top pharmaceutical giants, individual decisions matter, particularly when the project scale is smaller or the hiring timeline is longer. A star immunologist returning to St. Louis, or a founding scientist wanting to be closer to family, can anchor a new R&D hub. These personal dynamics aren’t a substitute for sound planning, but they do shape real-world outcomes.

Ultimately, companies must assess not just whether a market has life sciences talent, but whether it has the right talent—and the ecosystem to support it over time.

Incentives Must Match the Business Model

Traditional incentive tools can sometimes be a poor fit for life sciences companies. Many firms, particularly in early commercialization phases, are pre-revenue and see little value from tax credits tied to corporate income liabilities. Above-the-line incentives—such as cash grants, workforce training funds, utility discounts, or infrastructure support—are typically more impactful. But these must be structured to reflect the volatility of the sector.

Clinical trials fail, regulatory pathways shift, and some projects will not reach scale. Communities offering incentives need to understand the potential volatility that comes with pursuing life sciences companies and structure programs that provide real value while maintaining protections for themselves.

Oftentimes, nonmonetary incentives such as fast permitting, transparent zoning, and coordinated economic development support can be just as important as the dollar value of the incentive package itself. Speed-to-market and policy predictability can be differentiators in a sector that prizes agility.

Segment the Sector Before You Site

Too often, companies and communities alike pursue a generic life sciences strategy. But the sector includes more than 50 distinct subsectors, each with different capital intensity, workforce needs, and market dynamics. A regenerative medicine company will not need the same infrastructure or labor pool as a firm focused on agricultural biotech or molecular diagnostics.

Effective site selection starts with segmentation. The real question is not “Where is the best life sciences market?” but rather, “Where is the best market for our specific subsector?”

This can also apply to location strategy. Instead of trying to replicate legacy life sciences hubs, companies should assess where their needs align with local capabilities. Sometimes, the right answer is a Tier 2 or emerging market with an aligned workforce, the right university partnership, lower costs, and a willingness to support long-term growth.

A New Playbook for Life Sciences Location Strategy

For companies planning expansion, it’s time to update the site selection playbook. The key elements include segmenting your subsector and workforce needs before scanning markets; matching company maturity level to facility type—startup, pre-commercial, commercial, or scaling; evaluating existing space for both current fit and future flexibility; ensuring communities can support all three hiring events, including specialist recruitment; treating incentives as a closing tool, not a primary driver; confirming regulatory and cultural alignment, especially for sensitive research areas; and planning for volatility—facilities must be adaptable, with exit strategies if needed.

The best markets are not always the biggest. They are the ones that match a company’s current reality and future goals.

Takeaways

Site selection in the life sciences sector requires a different mindset. It’s not just about incentives, square footage, or clustering. It’s about precision.

Understanding your company’s capital position, product maturity, workforce demands, and facility needs is the first step. Matching those to a region’s talent pipeline, policy climate, and infrastructure is the second. In a market defined by both resilience and volatility, the companies that plan with granularity will be the ones best positioned to grow.

The opportunities are still out there. But finding them requires a sharper, more specialized approach than ever before.