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Watertown Landlord Keeps Up With Skyrocketing Rents In Tenant Switch, Lease Expansion

A Watertown landlord secured a new 66K SF lease extension from one of its lab tenants, locking in a higher rent more in line with market rates for the space after paying the previous tenant $2M to leave.

C4 Therapeutics and Kala Pharmaceuticals at 490 Arsenal Way in Watertown.

Biopharmaceutical tenant C4 Therapeutics agreed to 10 more years at Clarion Partners' 490 Arsenal Way, according to Securities and Exchange Commission filings. C4 Therapeutics, which develops oncology medicines, will pay $105M over the lease for its headquarters at its current 45K SF and new 66K SF space, paying a higher rent rate at the new space.

The landlord last month agreed to pay commercial eye medicine developer Kala Pharmaceuticals $2M to vacate 66K SF at 490 Arsenal Way four years before its lease expired, pending Clarion’s new agreement with C4 Therapeutics. 

Clarion Partners and C4 Therapeutics didn't respond to requests for comment, while brokers Cushman & Wakefield for the landlord and CBRE for the tenant declined to comment Thursday.

Kala was paying rents scheduled to top out at $65.19 per SF by 2026, according to SEC filings, far below the neighborhood's average life sciences rents — which skyrocketed to $92.95 per SF, according to CBRE, since Kala signed its lease in 2017. C4 Therapeutics will pay $91 per SF in its first year at the new 66K SF space. The tenant will see its rent obligation for its current 45K SF space jump from $61.53 per SF in 2028 to $108 per SF once the extension begins. C4 Therapeutics also has one five-year lease extension option.

Boylston Properties sold its 185K SF LINX building at 490 Arsenal Way and the adjacent 480 Arsenal St. for $157M to Clarion Partners in 2018. Average asking rents for lab space have exploded since Clarion Partners’ purchase, with rates in the Route 128 West submarket growing 34.5% in the past two years to an average of nearly $82 per SF, according to CBRE research. In Watertown and West Cambridge, average asking rents today sit at $92.95 per SF.

Clarion Partners will return a $2M security deposit to Kala alongside its $2M termination payment, according to a termination agreement. Kala is downsizing its office footprint to save money after a recent acquisition, its chief financial officer said last month, and it is outsourcing its lab work and retaining a small Arlington office space.