Vacancy rates have even hit 23 percent in the life science industry’s home turf of Cambridge. iStock photo
It’s time to start worrying about the future of what has become a main pillar of the Bay State’s economy over the last two decades.
And that, of course, is the life sciences sector, which, per a new report by trade group MassBio, now employs more than 117,000 people across the state, up from around 41,000 in 2004.
The sector saw explosive growth during COVID amid investors desperate to capitalize on groundbreaking mRNA vaccine research, and other pump primers. It added roughly 30,000 jobs from 2020 to 2022, before settling back into steady – but slower – growth.
But the Bay State’s life sciences sector now faces the prospect of a potential retrenchment amid President Donald Trump’s cuts to research funding, drops in venture capital funding and a massive glut of empty office space.
Body Blows from All Sides
While the MassBio report only goes through the end of 2024, it does offer some strong hints at the blows the local industry is absorbing in 2025.
Overall employment in the Massachusetts biopharma workforce held steady in 2024, but with notable losses in R&D and biomanufacturing.
However, noting there is a six-month lag in federal jobs numbers, MassBio President and CEO Kendalle Burlin O’Connell wrote, “we almost certainly have lost even more since January.”
Meanwhile, the federal government has slashed National Institutes of Health (NIH) research funding, which supports basic research at hospitals and at a range of local institutions, while also attempting to yank billions in research and other funding that had been going to directly to Harvard and other academic powerhouses.
If the second half of 2025 follows a similar track to the first six months, Massachusetts health care and research institutions could see a more than $463 million drop in funding from the National Institutes of Health.
That would represent a 14 percent decline in 2025 in funding for the bedrock of Massachusetts biotechs’ early-stage R&D, according to MassBio, which represents more than 1,700 companies.
Total NIH funding in the state in 2024 stood at $3.4 billion.
Separately, cuts to research funding at Harvard University, alone, could total more than $2.2 billion, the industry group noted in a May report.
“The consequences of any reduction in federal funding going to Massachusetts institutions cannot be overstated,” Burlin O’Connell wrote in the group’s report. “Curious scientists in academic labs who make unexpected discoveries start new companies … Disruptions at one end of the scientific pipeline will be felt at the other.”
Tariffs could also result in higher costs for the local life sciences industry and ultimately higher drug costs.
Investors Pull Back
The Food and Drug Administration has also announced thousands of job cuts, with more than half the agency’s senior leadership having departed as of MassBio’s May report due to changes on the federal level.
Half of the respondents to a MassBio survey reported negative fallout from the cuts at the FDA, while two-thirds saying they are worried about delays in drug approvals.
“Uncertainty has replaced cautious optimism,” Burlin O’Connell wrote. “Upheaval at the federal level, including shakeups at FDA and NIH and the threat of price controls, has caused a freeze, rather than the expected thaw, across the biopharma landscape.”
If that weren’t enough to contend with, Massachusetts also saw a 17 percent drop in venture capital funding for life sciences companies in the state, per MassBio’s newest report. The drop was more pronounced for smaller biotech firms that, in normal times, would have the best potential to scale quickly.
Biotech Building Owners in Trouble
That leaves real estate firms that provide local biotechs with places to work without a lot of appealing options.
These companies were already struggling with a glut of lab space commissioned during the pandemic – and it’s set to keep growing.
There’s been 1.1 million square feet worth of new buildings opening last year, pushing the Boston lab vacancy rate past 38 percent and that in Cambridge – the industry’s heart – to nearly 23 percent, the MassBio report notes.
Scott Van Voorhis
All in all, Greater Boston’s lab market saw around 600,000 square feet of negative absorption during the first six months of the year, B&T reported last week, citing a second-quarter Colliers report.
A combination of companies ditching research space they not longer need and new lab buildings opening up without tenants accounted for the increase.
And another 3 million square feet of new lab buildings are in construction right now, meaning even more empty space is one the way.
All that said, MassBio still managed to strike a defiantly optimistic note in its annual industry snapshot.
In her remarks at the front of the report, Burlin O’Connell, the CEO, called Massachusetts “the place for biomedical miracles and sports comebacks.”
“I have full faith that when the dust settles, it is the Commonwealth of Massachusetts that will lead the way back. We’ve done it before. We’re trying like hell to do it again,” she wrote.
Scott Van Voorhis is Banker & Tradesman’s columnist and publisher of the Contrarian Boston newsletter; opinions expressed are his own. He may be reached at sbvanvoorhis@hotmail.com.
