market report… · 2018-10-30 · biotech industry has had a banner year for initial public...

303 CONGRESS STREET | BOSTON, MA 02210 | 617.457.3400 | HUNNEMANRE.COM

METRO BOSTON BIOTECH MARKET REPORT

THIRD QUARTER | 2018

2 | METRO BOSTON BIOTECH | Q3 2018

BOSTON BIOTECH MARKET OVERVIEW

In it’s 16th-consecutive quarter of positive absorption, the Greater Boston lab

market absorbed another 225,075 square feet. Year-to-date, net absorption

has already surpassed one million square feet. As a result, vacancies fell to

just 2.8% in the third quarter of 2018. Comparatively, metrowide vacancy rates

were hovering in the 8.0%-9.0% range just five years ago. The market shows no

signs of stopping, especially in the over-heated Cambridge markets. Scant lab

availabilities and strong levels of new demand have led developers to kick off

more speculative construction in Cambridge. With demand growth continuing

to spread throughout the wider marketplace, life science clusters are gaining

traction outside of Kendall Square as well.

The local life science venture capital and IPO markets remain frothy. Year-to-

date, Massachusetts-based life science firms have raised close to $3.2 billion

in venture capital funding. This represents the highest annual funding total

since 2012. Not surprisingly, much of the capital is flowing to Cambridge,

which accounted for 67% of total life science venture funding year-to-date. The

biotech industry has had a banner year for initial public offerings, with Rubius

Therapeutics and Kiniksa Pharmaceuticals completing large IPOs recently.

Biotech incubators continue to grow in importance throughout the Greater

Boston lab market, and the suburbs are starting to see some more action from

these types of operators. ABI-LAB Biotech Incubator recently broke ground on a

65,000-square-foot expansion on Strathmore Road in Natick. The facility, which

is slated to open in late 2019 and house 40-50 companies, will be located near

their current operations. At 100 Beaver Street in Waltham, Adnexus (acquired

by Bristol-Myers Squibb) is vacating nearly 48,000 square feet and Alexandria

Real Estate Equities is planning to build a lab hotel/incubator to house smaller

biotech companies. Lofty pricing on lab space throughout the region, especially

in Cambridge, makes incubator space an attractive option for smaller startups.

The biotech industry remains a key economic driver for Massachusetts.

According to recent data from MassBio, statewide biopharma employment

grew by 28% and biotech R&D employment increased by 35% over the last

10 years. Accordingly, headcounts are surging at major players like Takeda

Pharmaceuticals and Alnylam Pharmaceuticals. The competition to fill biotech

jobs remains fierce as job openings continue to outpace available workers. As a

result, life science companies are becoming increasingly generous with salaries

and benefits in order to attract talent. Continued growth in this industry bodes

well for the Bay State, but the ultra-tight labor market could result in some

potential headwinds on the horizon.

2.8%

TOTAL VACANCY RATE

225,075Q3 NET ABSORPTION

(SF)

$37.61 ASKING RENT

($/SF)

1,649,395 UNDER CONSTRUCTION

(SF)


BOSTON/SUBURBAN LAB

NET ABSORPTION

VACANCY RATE

TOTAL INVENTORY(SF)

TOTAL VACANT(SF) TOTAL VACANCY RATE Q3 NET ABSORPTION

(SF)YTD NET ABSORPTION

(SF)

Boston 5,773,263 79,398 1.4% 76,305 358,308

Suburban 7,781,693 600,896 7.7% 142,327 287,112

Total 13,554,956 680,294 5.0% 218,632 645,420

• Biotech firms continue to cluster outside of Cambridge. This has increased

demand for space in relief valve markets like Watertown, Waltham,

Bedford, Brighton and Framingham. Third-quarter net absorption totaled

218,632 square feet in Boston and the suburbs combined, and vacancies

declined to 5.0%. The future remains bright for life science hubs outside of

Cambridge as demand for lab space far outstrips supply, and developers

are responding to these needs. While tenant preferences will remain

focused on Kendall Square, the lack of space and frothy pricing will push

growth out along Route 2 and the Route 128 Corridor, and into Boston.

• Suburban Boston has established itself as a key life science hub. The

suburbs accounted for more than half of the third-quarter net absorption,

with year-to-date net absorption nearing 300,000 square feet. Move-ins

from Concert Pharmceuticals and Kaleido Biosciences at 65 Hayden

Avenue, Lexington and Homology Medicines at 1 Patriots Park, Bedford

drove much of this activity in the third quarter. Moderna recently opened

its new biomanufacturing facility in Norwood, while King Street Properties

continues to build out its multi-tenant facility in Framingham. Life science

incubators are expanding in Natick and Waltham and ElevateBio is

reportedly inking a deal for 100,000 square feet at 200 Post, Waltham.

• Tenant demand is growing in Boston as well. Puretech Health agreed to

lease the remaining 51,000 square feet of space at Related Beal’s iSQ in

the Seaport. The firm will likely consolidate its office space at 501 Boylston

Street in the Back Bay and lab space at 245 First Street in Cambridge.

Related Beal is also planning to convert much of the available space at 451

D Street, also in the Seaport, to lab as demand intensifies. Swiss-based

SOPHiA GENETICS recently opened its US headquarters at One Boston

Place with plans to grow its employee count to 50 within a year.

• A significant amount of new construction is on the horizon. Developers are

actively planning life science projects in areas such as Allston, Dorchester,

Somerville, the South End and Waltham. As demand continues to spread

throughout the marketplace, look for more development in fringe and

suburban markets.

2013 2014 2015 2016 2017 2018

SQU

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ET(t

hous

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s)

700

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100

0

-100

-200

-300

BOSTON SUBURBS

FUTURE SUPPLY

144,909 SF

254,000 SF

LEASED AVAILABLE

2013 2014 2015 2016 2017 2018

0%

2%

4%

6%

8%

12%

10%

SUBURBSBOSTON


EAST CAMBRIDGE LAB

NET ABSORPTION

AVAILABLE SPACE

LAB DELIVERIES

TOTAL INVENTORY(SF)


(SF)

YTD NET ABSORPTION

(SF)

East Cambridge 9,654,607 40,338 0.4% 23,776 409,215

• Cambridge’s premiere lab market is hotter than ever, with vacancies

inching down to 0.4% in the third quarter of 2018. As has been the trend

over the last two years, any available space is quickly leased here — in

many cases through off-market deals. As a result, availabilities are even

lower, at just 0.2% in the third quarter. There doesn’t seem to be any clouds

in East Cambridge’s forecast. Expect tenants to struggle to find space to

accommodate their growth as tight fundamentals and higher rents will

continue to characterize this market in the near-term. Look for developers

to respond with new construction in order to meet this outsized demand.

• Consistent tenant demand has supported new construction in East

Cambridge. Alexandria Real Estate’s 164,000-square-foot development at

399 Binney Street will deliver fully-leased in the coming quarters. With the

first phase of DivcoWest’s commercial development at Cambridge Crossing

fully-committed, the firm has broken ground on another 500,000-square-

foot speculative building on the campus.

• Tenants are turning to new construction amidst the lack of available existing

space in East Cambridge. Goldfinch Bio committed to the remaining office

and lab space at 250 North Street at Cambridge Crossing. The ARC at 35

Cambridgepark Drive also landed another new tenant. Ribon Therapeutics

executed a lease for 26,989 square feet in the building, which is slated to

come on line later this year. Despite this lack of existing space, some deals

are getting done. Generation Bio signed a lease for 72,000 square feet at

301 Binney Street. The firm will backfill space being vacated by Living Proof

and Momenta Pharmaceuticals.

• Organic growth from major Kendall Square tenants will bolster lab demand

going forward. Sanofi-Genzyme is reportedly in the market for another

400,000 square feet, and is said to be looking at MIT’s Mass & Main project

as well as Cambridge Crossing. Alnylam Pharmaceuticals is also looking to

triple it’s East Cambridge footprint by 2020.

• A potential wildcard for the East Cambridge lab market surrounds Takeda’s

acquisition of Shire. The build-out of Shire’s 500 Kendall Street facility has

reportedly ceased. While there is a possibility the space could come back on

the market, Takeda recently announced plans to relocate its headquarters

and up to 1,000 employees from Deerfield, IL to Boston.

900

600

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SQU

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20132012 2014 2015 2016 2017 2018

DIRECT SUBLEASE

600

500

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-100

-200

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and

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2013 2014 2015 2016 2017 2018

10%

8%

6%

4%

2%

0%

NET ABSORPTION VACANCY

2013 2014 2015 2016 2017 2018 2019 2020 2021

600

500

400

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100

0

SQU

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LEASED AVAILABLE


MID CAMBRIDGE LAB

TOTAL VACANCY • While negative net absorption pushed vacancies up to 0.9% in Mid

Cambridge during the third quarter, fundamentals remains tight in this

submarket. There is less than 50,000 square feet of vacant space here,

and all of it is in the sublease market. Tenants looking to expand here

will struggle to find space, especially given that new construction is

concentrated elsewhere in Cambridge. While rent growth has slowed and

observations are scant, asking rents ended the third quarter in the low-$70-

per-square-foot range. Look for fundamentals to remain tight and upward

pressure on lease rates in the near-term forecast.

• Similarly to East Cambridge, available space is quickly snapped up in

Mid Cambridge. Blueprint Medicines is expanding at 45 Sidney Street;

leasing close to 40,000 square feet formerly occupied by Novartis. Cadent

Therapeutics subleased 6,784 square feet at 60 Hamilton Street as well

during the third quarter. The sheer lack of available space in Mid Cambridge

will likely limit leasing activity and absorption in the near term.

• Funding momentum is strong among Mid Cambridge life science

companies. In 2018, several firms raised millions in their initial public

offerings. Combined, Evelo Biosciences, Scholar Rock, Cue Biopharma and

Neon Therapeutics raised a total of $326 million. In the largest life science

IPO of the year, Rubius Therapeutics, raised $240 million in its recent IPO.

This represents a record high in the Massachusetts biotech industry, and

points to invesetors’ appetites for risk. A handful of major VC investments

took place recently in Mid Cambridge as well. Most recently, KSQ

Therapeutics raised $80 million in a Series C round, Akrevia Therapeutics

landed $30 million in a Series A round and Rootpath raised $7 million in

a Seed round. Beam Therapeutics recently raised $65 million in a Series A

round, while Casma Therapeutics raised $55 million in a Series C round as

well.

• Lease rates remain near peak levels in the Mid Cambridge lab market, but

observations are limited due to the lack of available spaces. Historically

there has been a much larger delta between lease rates in this submarket

and East Cambridge. As space has become scarce and Mid Cambridge’s

status has grown, landlords have been able to push through outsized rent

gains here. While peak growth is likely behind us, look for modest gains in

the near future.

TOTAL INVENTORY(SF)


(SF)

YTD NET ABSORPTION

(SF)

Mid Cambridge 5,257,813 45,342 0.9% (20,342) 2,082

NET ABSORPTION

AVAILABLE SPACE

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

2013 2014 2015 2016 2017 2018

5-YEAR HISTORICAL AVERAGE VACANCY RATES

SQU

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1000

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-400

-200

0

2013 2014 2015 2016 2017 2018

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20132012 2014 2015 2016 2017 2018

DIRECT SUBLEASE


WEST CAMBRIDGE LAB

NET ABSORPTION • With close to 20,000 square feet of positive absorption year-to-date in 2018,

vacancies declined to 6.7% during the third quarter in the West Cambridge

lab market. Much of Cambridge’s available lab space is located here, with

more than 52,000 square feet of space currently vacant. Fundamentals

remain ultra-tight in both East and Mid Cambridge, and West Cambridge

remains a key relief valve for these more established life science hubs.

Look for continued movement into the West Cambridge market as space

constraints and historically high rents push tenants out of Cambridge’s

core lab markets.

• The Davis Companies landed its second life science tenant at its Alewife

Research Center development in West Cambridge. Ribon Therapeutics will

join Japan-based Eisai at the 227,000-square-foot 35 Cambridgepark Drive,

which is slated to come on line later this year. The firm will relocate from its

current headquarters in Lexington. The 26,989-square-foot lease brings the

building’s occupancy to 36%. Given that this building represents one the

largest lab availabilities in Cambridge, other users are likely taking a hard

look at this property.

• As lab space has become scarce throughout Cambridge, tenants have

been willing to move further out from Core Kendall Square and into this

market. As a result, landlords have been able to push through stronger rent

gains over the past few years, with lease rates rising by 40% since the end

of 2014. With that said, fewer rent observations have led to some volatility

in the data. Rates for space in West Cambridge continue to offer a solid

discount compared to neighboring submarkets. Existing lab space boasts

a mid-$50s to mid-$60s-per-square-foot price tag, while asking rents are

in the high-$60s-per-square-foot at 35 Cambridgepark Drive, which is not

included in the current stats. While peak growth is likely behind us, look for

modest gains in the near future.

• The majority of Cambridge’s construction remains concentrated in East

Cambridge, but West Cambridge will likely see more action in the future.

The Bulfinch Companies recently broke ground on the remaining parcel

at the Cambridge Discovery Park. The 250,000 square foot office and

lab building is being constructed on a speculative basis. Look for older,

outdated office and Flex/R&D properties, like the Quad, to be repositioned

to attract life sciences tenants as well.

TOTAL INVENTORY(SF)


(SF)

YTD NET ABSORPTION

(SF)

West Cambridge 787,860 52,780 6.7% 3,009 19,852

HIGHEST ASKING RENTS

AVAILABILITY VS. VACANCY

1000

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2013 2014 2015 2016 2017 2018

2014 2015 2016 2017 2018

70

80

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$/SF

-10%

0%

10%

20%

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AVAILABILITYVACANCY

20132012 2014 2015 2016 2017 2018


105 BROADWAYCAMBRIDGE

60 HAMILTON STREETCAMBRIDGE

19 PRESIDENTIAL WAYWOBURN

12 GILL STREETWOBURN

Company Brammer Bio Company Cadent Therapeutics Company Ultragenyx Pharma Company Aldai Nortye

Size 22,270 SF Size 6,784 SF Size 6,455 SF Size 4,500 SF

Submarket East Cambridge Submarket Mid Cambridge Submarket Route 128 North Submarket Route 128 North

300 THIRD STREETCAMBRIDGE

301 BINNEY STREETCAMBRIDGE

250 NORTH STREETCAMBRIDGE

6 TIDE STREETBOSTON

Company Alnylam Pharmaceuticals Company Generation Bio Company Goldfinch Bio Company Puretech Health


Submarket East Cambridge Submarket East Cambridge Submarket East Cambridge Submarket Boston

45 SIDNEY STREETCAMBRIDGE

25 HARTWELL AVENUELEXINGTON

100 TECHNOLOGY SQUARECAMBRIDGE

35 CAMBRIDGEPARK DRIVECAMBRIDGE

Company Blueprint Medicines Company Fresenius Medical Company Semma Therapeutics Company Ribon Therapeutics


Submarket Mid Cambridge Submarket Route 128 Northwest Submarket East Cambridge Submarket West Cambridge

NOTABLE TRANSACTIONS


RESEARCH SPOTLIGHT

LEXINGTON

ARLINGTONMEDFORD

WINCHESTER

WOBURN STONEHAM

MELROSE

MALDEN

EVERETT

SOMVERVILLE

CAMBRIDGE

BOSTON

WATERTOWN

BELMONT

WALTHAM

2018 LIFE SCIENCE INITIAL PUBLIC OFFERINGS

PUBLIC OFFERINGS (IN MILLIONS)

$65—$85

$85—$100

$100—$122

$122—$153

$153—$240

VC FUNDING MASSACHUSETTS BLOOMBERG BIOTECH INDEX

$2,500

$2,000

$1,500

$1,000

$500

$0

2012 2013 2014 2015 2016 2017 2018

CAMBRIDGE REST OF STATE

$(m

illio

ns)

0

50

100

150

200

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300

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450

2014 2015 2016 2017 2018

CHELSEA


BIOTECH RECAP

TOTAL INVENTORY

(SF)

UNDER CONSTRUCTION

(SF)

DIRECT VACANT

(SF)

SUBLEASE VACANT

(SF)

TOTAL VACANCY

RATE

Q3 NET ABSORPTION

(SF)

YTD NET ABSORPTION

(SF)

Boston Total 5,773,263 125,000 62,798 16,600 1.4% 76,305 358,308

East Cambridge 9,654,607 1,023,600 31,671 8,667 0.4% 23,776 409,215

Mid Cambridge 5,257,813 - - 45,342 0.9% (20,342) 2,082

West Cambridge 787,860 226,885 52,780 - 6.7% 3,009 19,852

Cambridge Total 15,700,280 1,250,485 84,451 54,009 0.9% 6,443 431,149

Route 128 North 1,272,349 - 23,098 15,279 3.0% 745 43,480

Route 128 Northwest 2,261,210 - 175,788 - 7.8% 89,340 15,959

Route 128 West 2,143,958 144,910 73,366 - 3.4% 20,407 116,733

Route 495 North 849,329 - 215,302 - 25.3% - (186,693)

South 276,159 - 10,038 - 3.6% (6,281) (10,038)

West 978,688 129,000 26,011 62,014 9.0% 38,116 307,671

Suburban Total 7,781,693 273,910 523,603 77,293 7.7% 142,327 287,112

Market Total 29,255,236 1,649,395 670,852 147,902 2.8% 225,075 1,076,569

10 | METRO BOSTON BIOTECH | Q3 2018303 CONGRESS STREET | BOSTON, MA 02210 | 617.457.3400 | HUNNEMANRE.COM

METHODOLOGY

Source: Co-Star, Hunneman. Prepared: September 2018.

Disclaimer: The above data is from sources deemed to be generally reliable, but no warranty is made as to the accuracy of the data nor its usefulness for any particular purpose.

Average Rental Rates are asking rents on direct space. Vacant space includes both direct and sublease space.

LIZ BERTHELETTEDirector of Research

[email protected]

JOEY BIASIResearch Analyst

[email protected]

market report… · 2018-10-30 · biotech industry has had a banner year for initial public...

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