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)
3 | METRO BOSTON BIOTECH | Q3 2018
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
AR
E FE
ET(t
hous
and
s)
700
600
500
400
300
200
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
4 | METRO BOSTON BIOTECH | Q3 2018
EAST CAMBRIDGE LAB
NET ABSORPTION
AVAILABLE SPACE
LAB DELIVERIES
TOTAL INVENTORY(SF)
TOTAL VACANT(SF) TOTAL VACANCY RATE Q3 NET ABSORPTION
(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
700
800
500
400
300
200
100
0
SQU
AR
E FE
ET(t
hous
and
s)
20132012 2014 2015 2016 2017 2018
DIRECT SUBLEASE
600
500
400
300
200
100
0
-100
-200
SQU
AR
E FE
ET(t
hous
and
s)
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
300
200
100
0
SQU
AR
E FE
ET(t
hous
and
s)
LEASED AVAILABLE
5 | METRO BOSTON BIOTECH | Q3 2018
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)
TOTAL VACANT(SF) TOTAL VACANCY RATE Q3 NET ABSORPTION
(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
AR
E FE
ET(t
hous
and
s)
800
1000
600
400
200
-400
-200
0
2013 2014 2015 2016 2017 2018
600
700
800
500
400
300
200
100
0
SQU
AR
E FE
ET(t
hous
and
s)
20132012 2014 2015 2016 2017 2018
DIRECT SUBLEASE
6 | METRO BOSTON BIOTECH | Q3 2018
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)
TOTAL VACANT(SF) TOTAL VACANCY RATE Q3 NET ABSORPTION
(SF)
YTD NET ABSORPTION
(SF)
West Cambridge 787,860 52,780 6.7% 3,009 19,852
HIGHEST ASKING RENTS
AVAILABILITY VS. VACANCY
1000
200
400
600
800
-400
-200
0
SQU
AR
E FE
ET(t
hous
and
s)
2013 2014 2015 2016 2017 2018
2014 2015 2016 2017 2018
70
80
60
50
40
30
20
10
0
$/SF
-10%
0%
10%
20%
30%
40%
50%
AVAILABILITYVACANCY
20132012 2014 2015 2016 2017 2018
7 | METRO BOSTON BIOTECH | Q3 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
Size 132,924 SF Size 72,000 SF Size 58,700 SF Size 50,900 SF
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
Size 39,383 SF Size 33,339 SF Size 27,000 SF Size 26,989 SF
Submarket Mid Cambridge Submarket Route 128 Northwest Submarket East Cambridge Submarket West Cambridge
NOTABLE TRANSACTIONS
8 | METRO BOSTON BIOTECH | Q3 2018
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
250
300
350
400
450
2014 2015 2016 2017 2018
CHELSEA
9 | METRO BOSTON BIOTECH | Q3 2018
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
JOEY BIASIResearch Analyst