Life Sciences Market Trends Q2 2025

2025 started out with unprecedented waves of federal funding cuts, tariff threats and U.S. manufacturing investment announcements. While fear of the unknown exists and we cannot predict the long-term impacts of these moves, one thing is clear—the life sciences industry is poised to make history.

Federal funding reductions pose a significant challenge for drug discovery and development—spanning across universities, hospitals, government agencies and private industry—all benefiting from taxpayer dollars. Near term impacts range from extended drug approval cycles to reduced capital investment with potential longer-term impact to drug innovation and discovery. No one can predict the future, but most agree the cuts will have a lasting impact on the life sciences industry.

Regarding the R&D construction market, increased pressures on government funded research facilities, in a stalled R&D real estate market fueled by high vacancy rates, are slowing new project starts. The industry is already experiencing delayed or canceled construction of federally funded programs across multiple research institutions. The silver lining is that several of the recent U.S. based manufacturing investment announcements suggest there will be R&D components of these new programs. It should be noted that the slowdown of federal funding of projects may provide future opportunities for the funding of projects by private venture capital, but current opportunities seem limited.

The activity we’ve seen in the last five months has created feelings of excitement and fear as it relates to U.S. biopharmaceutical manufacturing. The recent publicly available announcements for investment in U.S. based manufacturing has breached the $300+ billion mark, forecasted over the next five years. While exciting, much of it is in direct response to existing and proposed tariffs. The increase in the cost of goods, disrupted global supply chains and general uncertainty will impact the market over the next few years. We forecast the investments will further compound the disparity between mega and small/medium sized construction projects driven by large scale Bulk Biologics, API and Fill Finish investment. In addition, while regional investment remains depressed in the NW and SW regions, opportunities continue to increase for large scale investment in the SE, Midwest and NE.

As reported in previous market condition reports, labor remains a priority within the construction industry.

• Labor competition between emerging tech and life sciences markets, each requiring highly technical resources from limited trade pools.
• Large projects, specifically in manufacturing, are outpacing the growth of resources needed to design, construct and operate these facilities.
• Where are the trades going? In certain geographic markets many trade partners are challenged in selecting more short-term lucrative work vs more diverse work in their portfolios.
• Aging workforce and decreased attraction of talent in the construction industry.
• Over-saturation in established markets, new remote regions and emerging markets are either overwhelmed with work or do not have the local trade expertise (trades: Process, Mechanical, and Electrical). Resource limitations continue around power supply, water, etc.