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The East Cambridge office/lab market, with Kendall Square at its center, is outperforming the region for a few good reasons: MIT,Harvard, and the Longwood Medical Area. These institutions have helped transform the area from a withering industrial neighborhood to a global tech and healthcare magnet.
We recently took a tour of the submarket, which has an availability rate of 9.8% versus 15.8% for the entire metro area. In part, that's because of new Class A lab/office buildings like 675 West Kendall St., above. Built in ?02, Richards Barry Joyce?s Steve Purpura tells us it has no vacancies, and although average asking rents are a relatively high $55 NNN, it's at MIT?s back door, surrounded by top-tier neighbors like Microsoft, Google, Novartis, and Genzyme. Steve says the biotech company that wants more than 5k SF has only three choices in all of Cambridge, meaning ?the market is tight? despite an overall lab availability of 22.8%.
The high vacancy rate reflects many pre-WWII buildings and a couple of new spec lab buildings like the nearly 300k SF 650 E. Kendall St. that we snapped above. Completed late '09, it's vacant because of the economy, and owner BioMed Realty likely is holding out for a blue chip tenan t looking for a HQ, says Jones Lang LaSalle's John Osten. He tells us BioMed is probably hoping for a rent of $60/SF or more, which makes sense because although more lab projects are permitted, ?no one has put a shovel in the ground.? On average, lab asking rents of $49.97 have been pretty steady through the recession. Through the end of Q2 this year, John says net absorption of 100k SF beats 20k SF in 2009, and is in line with the historic average.
UGL Equis? Bob Clearly and Derek Losi in front of Cambridge Center
Good economy or bad, Cambridge is known for having some of the nation's highest barriers-to-entry for new construction, says UGL Equis? Bob Clearly and Derek Losi, above, in front of Cambridge Center. Adds Bob, ?The city has almost infamous restrictions on development.? As a result, few new offices have been built for 10 years, and older-but-updated properties from the '80s and '90s have lured top-tier tenants. In Kendall Square, a few big owners dominate: RREEF at 101 Main St., Boston Properties at Cambridge Center, and EOP/Blackstone at One Memorial Drive.
UGL Equis' Derek Losi and Bob Clearly
We snapped Derek and Bob in front of One Memorial, developed in 1985 by The Congress Group and owned by EOP/Blackstone. It's just a brisk walk across the Charles to Back Bay, with easy access to I-93 or the Pike. Its other side faces into Kendall Square where there's a T stop, restaurants, and clubs. Nearby is Central Square and MIT?s University Park, filled with biotech and pharma. Blackstone recently upgraded the lobby. Bob says Microsoft occupies about 190k SF, and is looking for another 100k SF. At this point, the 353k SF, 17-story building is full. ?That sends a strong message about Cambridge and its intellectual capital,? he says