Alexandria Posts $1B Loss as Lab Glut Deepens, Sales Loom

Alexandria Real Estate Equities’ rough ride through the life sciences downturn isn’t over yet.

The country’s largest lab landlord reported on Tuesday a nearly $1.1 billion operating loss in the fourth quarter, even as leasing volume hit its strongest mark of the year, Bisnow reported. Executives struck a cautious tone on an earnings call, warning that tenant conservatism, falling rents and swelling vacancies will continue to pressure results this year.

Leasing totaled 1.2 million square feet in the quarter, but the activity came at a cost. Renewal rents fell nearly 10 percent, re-leasing spreads dropped more than 5 percent and same-property net operating income slid 6 percent for the quarter and 3.5 percent year over year.

The results landed within guidance, helping to blunt the market reaction. Shares closed up slightly on the day, though the stock remains down roughly 40 percent since last January, a sign that investors had largely priced in the pain.

Alexandria’s losses were exacerbated by $1.7 billion in impairments, more than double the REIT’s expectations, largely tied to land and development projects in the Bay Area.

Chair Joel Marcus described the moment as a reckoning for the sector, saying the company is adjusting to a “new reality” in a fast-changing industry landscape.

That reality includes aggressive belt-tightening. Alexandria plans to sell about $3 billion of assets this year as it looks to recycle capital and trim exposure. In the fourth quarter alone, the REIT closed $1.5 billion in dispositions across 26 deals, skewing heavily toward non-stabilized properties and land.

Leasing headwinds are expected to persist. Management forecasts a potential 2 percent drop in leasing volume this year, projecting occupancy to end the year between roughly 88 and 89 percent. Executives flagged the risk of tenant wind-downs and extended downtime, particularly as biotech startups struggle to access public markets and secondary funding.

While venture capital totals for life sciences remain elevated, those dollars aren’t flowing to smaller companies that typically drive lab demand, executives said. Tours are up, but decision-making is slow and expansion plans remain cautious.

The softness is most acute in Alexandria’s core markets. Lab vacancy hovers near 33 percent in San Francisco, around 28 percent in Boston and above that level in San Diego, where a wave of new supply has collided with muted demand.

Tenant-friendly terms are filling the availability gap. Free rent and increased improvement allowances are increasingly necessary to land deals, a dynamic unlikely to shift until availability tightens.

Still, Alexandria is holding its longer-term earnings outlook steady, betting that asset sales and a gradual recovery in biotech financing will stabilize the portfolio by later this year.

— Holden Walter-Warner