J.P. Morgan (JPM, Financials) downgraded Alexandria Real Estate Equities (ARE, Financials) to neutral from overweight, citing weak leasing demand in the life sciences sector.

The downgrading draws attention to the challenges brought about by an overstock of houses in major areas such as Boston and South San Francisco, which analysts believe will take time to absorb.

For 2024, 2025, and 2026 the bank updated its funds from operations per share forecasts down. Reduced profit estimates, according to analyst Anthony Paolone, are mostly caused by slower core growth, lease expirations that can cause temporary vacancies, and growing ground rent charges. Paolone also underlined as another element influencing financial performance a decline in development contributions.

Paolone pointed out that some respite against the lessening leasing environment might come from the expected drop in administrative and general expenditures for 2024. He also mentioned Alexandria Real Estate's difficult near term growth projection and the requirement of clearly defining a plan to boost FFO per share development in the next years. At its next investor day, management is supposed to take up these concerns. Still, the resurgence in life sciences demand might take some time even with a road plan for recovery.

J.P. Morgan changed its FFO per share projections for Alexandria Real Estate from $9.47 from $9.49 for 2024, to $9.35 from $9.67 for 2025, and to $9.60 from $9.82 for 2026.