Boston's Lab Developers Are Falling Out Of Love With Spec Suites

During the boom years of the Boston life sciences industry, speculatively built-out suites were a go-to tool for developers to attract tenants to new lab space. These move-in-ready suites attracted small and midsized companies looking to grow without the costs and hassle of building out their own space.

However, the calculus has shifted with an oversupply of lab space, CRE panelists at Bisnow's Boston Biotech Summit said last week. Spec suites can end up being a costly risk for landlords in a market where vacancies are high. 

These days, building out a spec suite is often no longer the end of the story, Longfellow Managing Director Kenneth Nolan said at the panel discussion, held at Cannon Hill Partners' Boynton Gateway development in Somerville.

Nolan said that when the market was hot in the early days of the pandemic, spec suites were taken as is. Since then, tenants have leveraged the market and are requesting costly modifications to suites.

"Now that there are more options, tenants tend to be a lot more picky, and they want it to be exactly to their specifications," Nolan said. "The landlord needs to accommodate in order to gain that occupancy."

The economic argument for spec suites is to spend a bit more upfront to spend less attracting tenants or modifying spaces later, panelists said. 

Building out spec labs doesn’t come cheap. Cannon Hill Partners Vice President Mike Loughlin said some of these suites cost roughly $400 to $500 per SF to install, making them far more expensive than the average suite. If that additional cost ends in a request for modifications, spec suites don’t often pencil.

"We've sat back and decided until we see this market with some velocity and some demand proof, right now, we're going to not deliver another spec suite, and we would rather save those dollars," Loughlin said.

At the end of the third quarter, the Greater Boston lab market had more than 30 recently completed buildings that are unoccupied, according to Colliers. Given market conditions, Colliers analysts said developers are reluctant to invest in spec suites. 

Of the 3M SF of lab construction in progress in the metro area, “a clear majority is either build-to-suit in or has some preleasing in place,” the Colliers report says.

In Cambridge, examples of buildings in progress with significant preleasing include 585 Third St. with 550K SF leased to Takeda, 75 Broadway with some 600K SF leased to Biogen, and 290 Binney with some 570K SF leased to AstraZeneca. 

What a biotech tenant wants has also shifted, Berkeley Investments Director of Asset Management Dan McGrath said. Many are seeking to sublease.

McGrath estimated there are roughly 70 to 80 available spec suites across Greater Boston. With the oversupply in the market, he said that although these spaces are attractive for tenants, they may require additional funding to be effective.

"When you have a lot of the other properties with those spaces, it can be you want to make sure that you're putting funds into something that will be accretive to value," McGrath said. 

While spec suites now appear less popular for Boston-based projects, they are in no danger of extinction. Across the country, developers have spent big bucks to attract tenants to lab space, including adding move-in-ready suites.

In Washington, an entity linked to investment firm KKR spent roughly $7M on spec suites totaling more than 35K SF in its 211K SF 330 Yale in 2024, the Puget Sound Business Journal reported. In San Diego, JLL expects built-out suites will continue to see high demand.

Locally, some developers have seen success as well.

In May 2024, San Diego-based Breakthrough Properties secured three leases totaling 35K SF at its office-to-lab project One Canal by Breakthrough. All three tenants took spec suites in the building, the Boston Business Journal reported.

And The Davis Cos. has used spec suites in developments including 66 Galen St. and 101 Smith Place, which both announced leases in the last couple of years. The Galen Street lab saw the largest reduction in vacancy over the last quarter, leasing 155K SF and reaching 95% occupancy in November, The Boston Globe reported.