If There’s Available Land In Boston, It’s Likely Getting Pitched As A Lab Development
Cambridge’s Kendall Square is the tightest lab market in the U.S., yet companies are still managing to elbow their way into much-coveted blocks of space.
“Anyone from 75K to 500K SF are able to find spaces, and we continually print leases in a market that has no availability,” BioMed Realty Trust Senior Director Morgan Weinstein said. “Patience and agility pay off when you have credit.”
The East Cambridge lab vacancy story for several quarters has been that there is none. The demand for labs has been so high that offices have been converted to lab space, making Cambridge a lab-dominant market and pushing some of the city’s tech tenants, like Amazon, across the river to Boston when they wanted to expand. But the Kendall squeeze isn’t deterring companies on the prowl.
Akamai Technologies will take all of Boston Properties’ 450K SF, 19-story building under construction at 145 Broadway, despite weighing the idea of moving out of Cambridge. Boeing scooped up 100K SF at 314 Main St. — which recently broke ground — for lab space to develop autonomous aircraft. Biotechnology company Sanofi Genzyme is also in the market for 400K SF in East Cambridge, the Boston Globe reports.
While there is chatter in Greater Boston’s real estate community of what could emerge as a life science relief valve submarket, Weinstein, who is speaking at Bisnow’s Future of Cambridge & Life Sciences event Oct. 25, said the nature of the industry means space can quickly come available in events like a failed drug trial.
Thirty-three percent of BioMed’s leases are with tenants that don’t make it past the halfway mark of the rental agreement. When lackluster demand caused one drug company to scale back operations at one of BioMed’s buildings in Kendall, Weinstein said another was waiting in the wings to take over the lease.
The deep pool of tenant demand has sent prices flying in East Cambridge, with some rents reaching the low $100s/SF. BioMed made headlines in August for buying an acre at 585 Third St. for $50.5M.
“Finding dirt is hard, and winning dirt is even harder,” Weinstein said.
Lower-cost alternatives in Allston, Somerville and the Seaport are angling to woo younger companies that might want a value opportunity, but there is still unwavering tenant interest in Kendall. Even if there isn’t room for a large-scale office, companies like Bayer Pharmaceuticals open smaller innovation centers just to have a neighborhood presence.
Bayer operates its Bayer LifeHub at 610 Main St., where only about 10 to 12 employees use it as their primary business location.
“It’s really about the talent — not just from academic institutions, but from management teams and translational folks who are here,” Bayer Pharmaceuticals Vice President of Venture Investments Jak Knowles said. “Greater Boston is benefiting from a network effect.”
Harvard and MIT, and the talent the two universities provide, are frequently cited as why companies are drawn to Greater Boston, but a brainy workforce is only one factor in making the region the top life science cluster in the world. While it is home to the largest concentration of life science researchers in the U.S., Greater Boston has also seen venture capital funding to its life science companies increase by more than 279% since 2014, according to a JLL report.
Unity Along The Red Line
Eleven of the world’s 15 largest biotech companies have a presence in Cambridge, and it has led to pressure to build more space. But with only 6.5 square miles of land, the city’s space constraints have meant some firms have to look elsewhere. Philips North America is moving from Andover to Cambridge Crossing, a 45-acre DivcoWest development where the Cambridge, Boston and Somerville borders meet near the Lechmere MBTA Green Line station.
Other companies are moving to emerging life science clusters like the Seaport and Boston Landing, and many in Greater Boston’s real estate community point to Harvard’s continued development of its Allston campus as possibly the next Kendall Square.
One Cambridge leader isn’t threatened by other municipalities pitching themselves as relief valves to Kendall Square. She encourages it.
“We believe it’s really important to support our neighboring communities,” Cambridge Director of Economic Development Lisa Hemmerle said. “We’re not making any more land, but we certainly want to create more opportunity.”
Cambridge launched the Life Sciences Corridor initiative in 2014 with Boston, Somerville, Quincy and Braintree. Partners HealthCare moving out of Boston to Assembly Row in Somerville and Vertex Pharmaceuticals ditching Cambridge for the Seaport could have been bones of civic contention in the past.
The Life Sciences Corridor plan signaled a change in attitude and promotes regional partnership in bringing more life science companies to the cities along the MBTA Red Line subway.
The regional approach could be a shot in the arm in bringing more life science activity to a Boston neighborhood known more for its trendy restaurants and boutique shopping than its R&D.
The Abbey Group’s proposed 1.6M SF Exchange South End development on Albany Street is expected to cater to tech and life science tenants. The development is near Boston Medical Center, and, with the possibility of growing to 2.6M SF, Exchange South End could eventually have more lab product than the Seaport.
“The whole region is trying to grapple with how tight Cambridge is and trying to accommodate a lot of different growing companies with changing needs,” JLL Vice President and Director of Research Lisa Strope said. “I think the South End is the latest frontier of where a bunch of companies can look to for growth opportunities.”
Shepley Bulfinch principal Luke Voiland has observed the rise of multiple life science and innovation clusters in Greater Boston. His firm designed the Pagliuca Harvard Life Lab, a specialty incubator in Allston Landing. The neighborhood is only 1.5 miles from Kendall Square, and its network of incubators, labs and Harvard academic buildings has Voiland bullish on it emerging as a life science complement to Kendall Square.
While the life science industry used to operate by hiring the best scientists, putting them in a lab and seeing what they created, the model of today relies heavily on collaboration and the surrounding environment. But Voiland still sees why Kendall remains so popular
“It’s about how close, dense and connected you are,” he said. “Places like Kendall will always have an advantage.”
Hear Weinstein, Knowles, Hemmerle, Strope, Voiland and others Oct. 25 at Bisnow’s Future of Cambridge & Life Sciences event at the Hyatt Regency Cambridge.