Oct 22, 2025
The Life Science Reckoning Through the Lens of Bank OZK
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Through 2021, U.S. life sciences real estate looked untouchable. Venture capital was still flowing to biopharma; NIH appropriations were ratcheting up. The primary markets of Cambridge, South San Francisco and coastal San Diego were functionally full. Owners and lenders came to believe the sector's tenant pipeline would outrun any deliverable supply, and that conviction underwrote a surge of development — from speculative towers on the Embarcadero in San Diego to multi-building campuses in Somerville and South San Francisco.
By mid-2025 the market had flipped. Availability in Boston and the Bay Area now hovers near ~30%, San Diego sits ~ 25%, and Chicago's fledgling cluster is closer to 40%. Lease decisions are slower, first-generation TI has moved past $200/sq ft in several submarkets, and net effective rents have slipped once concessions are priced in. The result is a bifurcated landscape: a handful of credit-anchored assets proving resilient — and a very long tail of new buildings that are still searching for their first lab tenant.
Bank OZK sits at the center of our life science research largely because it did the one thing most banks would not: it leaned into large, ground-up life science construction — and then told the market exactly how those loans were appraised over time. The sheer size of OZK's lending and their own transparency made OZK a lightning rod when sentiment broke. On May 29, 2024, Citi's Ben Gerlinger issued a double-downgrade, flagging two outsized exposures — a $915M construction loan tied to IQHQ's life science campus on San Diego's waterfront, and Echo Street West, an Atlanta mixed-use ground-up build—as emblematic of rising risk. The stock fell ~14-16% that day as the downgrade ricocheted across financial media; the note cut the price target from $57 to $37 and argued that a glut of life science space and weak pre-leasing could force higher provisions. The stock however has proved resilient, rallying back to $50 ......
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