What to Know About Lab Lease Agreements

When you’re running a life science or biotech startup or scaling a research operation, signing a lab lease is one of the biggest—and riskiest—moves you’ll make.

Unlike office space, lab leases are a different beast: high build-out costs, specialized infrastructure, and a maze of regulatory and operational requirements that can trip up even experienced teams. Miss a key clause, and you could end up locked into real estate that doesn’t fit your science, stuck with unexpected costs, or tangled in a dispute over lab equipment and improvements when it’s time to move out.

This post breaks down what really matters in lab lease agreements: the terms, traps, and negotiation points that can make or break your next phase of growth. Whether you’re moving into your first dedicated lab or renegotiating space for a scaling team, you’ll get a clear-eyed look at what to watch for—and how to protect your interests from day one.

Key Terms and Clauses in Lab Lease Agreements

Lab lease agreements come with their own vocabulary—and missing the meaning behind a single term can have real financial and operational consequences. Here’s what you need to know about the most critical clauses:

• Base Rent and Escalation: Most lab leases start with a base rent, but pay close attention to annual escalation clauses. A 3%–4% annual bump is common, but compounding can turn a “reasonable” rate into a budget headache by year three.
• Term Length and Renewal Options: How long are you locked in? Shorter lease terms offer flexibility but may come at a premium. Renewal options can give you leverage—if you negotiate them up front.
• Tenant Improvements (TI): Labs almost always need customization. Who pays for build-outs, and who owns those improvements when the lease ends? Make sure you understand the TI allowance, approval process, and what happens to your investment if you leave.
• Maintenance and Repairs: Clarify who’s responsible for what. Landlords often handle structural elements, but HVAC, specialty plumbing, and lab-specific systems may be your responsibility. Surprise repair bills can wreck a budget.
• Compliance and Permits: Many leases require you to maintain compliance with local, state, and federal regulations. If your science or process changes, will you need new permits—and who’s responsible for securing them?
• Subleasing and Assignment: Can you sublease part of your space or assign the lease if your company pivots or is acquired? Restrictions here can limit your flexibility and exit options.
• Restoration and Decommissioning: At lease end, are you required to return the space to “original condition”? For labs, this can mean expensive decommissioning, hazardous material removal, or even demolition of improvements you paid for.

Understanding these terms—and how they play out in real-world scenarios—can save you from costly surprises down the line.

Common Pitfalls and How to Avoid Them

Even experienced teams can get tripped up by lab lease agreements. Here are some of the most common mistakes, and how to sidestep them before they become expensive problems:

• Underestimating Build-Out Time and Cost: Lab space almost always needs customization, and tenant improvement projects routinely run over budget and behind schedule. Build in a buffer—both in your timeline and your budget—and push for clear milestones and landlord accountability before you sign.
• Ignoring Restoration Clauses: Many operators are blindsided by end-of-lease obligations. Returning a lab to “original condition” can mean removing all improvements, decontaminating the space, and paying for hazardous waste disposal. Negotiate these terms up front and get clarity on what’s expected.
• Overlooking Maintenance Responsibilities: Don’t assume the landlord covers everything. HVAC, specialty plumbing, and lab-specific equipment often fall on the tenant. Spell out who pays for what, and factor those costs into your operating budget. This way, you know how to handle unexpected downtime.
• Committing to the Wrong Term Length: Locking into a long-term lease can backfire if your science pivots, you outgrow the space, or hit a funding snag. On the flip side, too short a term can mean higher rates and less negotiating power. Match your lease term to your business milestones, not just your wishful thinking.
• Missing Sublease or Assignment Restrictions: If you can’t sublease or assign your space, you’re stuck if your company’s direction changes or you need to downsize. Push for flexibility here—it’s a key risk management lever.
• Failing to Plan for Compliance Changes: Regulatory requirements evolve, and your science may too. Make sure your lease allows for upgrades or modifications needed to stay compliant, and clarify who pays for them.

Avoiding these pitfalls means more than reading the fine print—it’s about pressure-testing your assumptions and building in flexibility wherever you can to your lab operations.

Practical Tips for Managing Your Lab Lease

Once the ink is dry, your lease becomes part of your daily operations. Staying proactive can save you time, money, and stress down the line. Here’s how to keep your lease working for you:

• Track Key Dates and Obligations: Set reminders for increases in the total cost of monthly payments, and keep on top of renewal windows and notice periods. Missing a deadline can cost you leverage—or trigger automatic renewals you didn’t want.
• Document All Improvements and Changes: Keep detailed records (with photos and receipts) of every modification, upgrade, or repair. This documentation is crucial for end-of-lease negotiations and can help avoid disputes over restoration or decommissioning.
• Review Compliance Regularly: Regulations change, and so does your science. Schedule periodic reviews to ensure your facility, permits, and operations remain up to code—and that your lease allows for any necessary upgrades.
• Communicate Early with Your Landlord: If you anticipate changes in your space needs, compliance requirements, or operational footprint, let your landlord know early. Proactive communication can open doors to flexibility or renegotiation.
• Budget for the Unexpected: Set aside contingency funds for unplanned repairs, compliance upgrades, or restoration costs. Surprises are inevitable in lab space—plan for them now, not when you’re up against a deadline.

Managing your lease well isn’t just about avoiding problems—it’s about long-term goals. Properly managing these things can ensure your space continues to support your science and your growth.

Understanding Lab Space Types and Their Impact on Lease Agreements

Not all lab spaces are created equal—and the type you choose will shape your lease terms, build-out costs, compliance obligations, and operational flexibility. The most common distinction? Wet labs vs. dry labs.

• Wet Labs: These are designed for experiments involving chemicals, biological agents, or liquids. Expect higher infrastructure demands: plumbing, fume hoods, HVAC, chemical-resistant surfaces, and robust safety systems. Wet lab leases often come with stricter compliance clauses, longer build-out timelines, and higher restoration requirements at lease end. If your work involves reagents, live cultures, or chemical synthesis, a wet lab is non-negotiable.
• Dry Labs: Built for computational, theoretical, or analytical work, dry labs focus on power, secure IT infrastructure, and environmental controls. Plumbing and chemical safety systems are minimal or unnecessary, making these spaces faster and cheaper to customize and maintain. Lease agreements for dry labs tend to be simpler, with fewer compliance and restoration hurdles.
• Hybrid and Specialized Spaces: Some facilities offer hybrid models or purpose-built suites (e.g., GMP, vivarium, or cleanrooms). These spaces come with even more specialized lease clauses—think validation, environmental monitoring, and strict decommissioning requirements.

Why it matters:

Choosing the right lab type impacts everything from your upfront costs and operational timeline to your compliance risk and ability to scale. Wet labs are harder to reconfigure and more expensive to restore, while dry labs offer flexibility but may not meet future experimental needs. Make sure your lease reflects the realities of your science—not just your current headcount.

Insurance Requirements and Liability in Lab Leases

Lab leases come with a web of insurance requirements—miss a detail and you could be exposed to significant financial and operational risk. Here’s what you need to know:

• Commercial General Liability Insurance: Nearly every lab lease mandates this, typically with coverage of at least $1 million per occurrence and $2 million aggregate. It covers bodily injury or property damage claims that could arise from your operations. Landlords often require to be named as an additional insured.
• Property Insurance: You’re usually responsible for insuring your own equipment, inventory, and leasehold improvements. This covers losses from fire, theft, vandalism, and other perils. The coverage amount should be enough to fully replace your assets in the event of a total loss.
• Business Interruption Insurance: This protects your cash flow if operations are disrupted by a covered event, helping to pay ongoing expenses and employee wages until you’re back up and running.
• Workers’ Compensation Insurance: Required by law in most states, this covers medical expenses and lost wages for employees injured on the job.
• Automobile and Pollution Liability (if applicable): If you operate mobile labs or handle hazardous materials, you may need business auto and pollution liability insurance to cover additional risks.
• Proof and Notification: Landlords will require certificates of insurance and advance notice if coverage changes or is canceled. Failure to maintain required insurance can trigger lease defaults or even eviction.

Operator insight:

Don’t treat insurance as a box to check. Review your lease’s insurance section with your broker and legal counsel. Make sure coverage limits, named insureds, and policy details align with both your operational risks and your landlord’s requirements. Skimping here can leave you exposed to losses that could threaten your entire business.

The Bottom Line

A lab lease agreement isn’t just paperwork—it’s a long-term operational commitment that shapes your science, your budget, and your risk profile. The fine print matters. Miss a key clause, and you could end up overpaying, under-equipped, or facing a costly exit when your needs change.

Treat your lease like any other critical asset: pressure-test every assumption, track your obligations, and revisit your terms as your company grows. Don’t sign anything you don’t fully understand, and don’t be afraid to push for flexibility, clarity, and protections that match the realities of your business.

Lab leases are complex, but with the right preparation and a clear-eyed approach, you can turn your space into a true asset—not a liability.

Need lab equipment for your new space? At Excedr we provide equipment leasing options tailored for biotechs and life science companies. We’ve helped labs outfit their space for 15 years, from acquiring a few key instruments to outfitting entire lab space. Get in touch to learn more.