METRO BOSTON Q1 2018 | BIOTECH REPORT
TOTAL VACANCY RATE
Q1 NET ABSORPTION (SF)
ASKING RENT ($/SF)
UNDER CONSTRUCTION (SF)
3.9%
257,764
$45.00
1,781,695
303 Congress Street | Boston, MA 02210 | 617.457.3400 | www.NAIHunneman.com
1
201 8
Q1
BOSTON / SUBURBAN LAB TOTAL INVENTORY (SF)
TOTAL VACANT (SF)
TOTAL VACANCY RATE
Q1 NET ABSORPTION (SF)
YTD NET ABSORPTION (SF)
Boston
5,705,748
261,927
4.6%
86,379
86,379
Suburban
7,623,620
705,637
9.3%
182,371
182,371
13,329,368
967,564
7.3%
700
TOTAL 600 500 400
SF (000s)
SF (000s)
NET300 ABSORPTION 200 700 100 600 0 500 -100 400 -200 300 -300 200 2013 100
2014
2015 Boston
2016
2017
2018
Suburbs
0 -100 -200 -300 2013
2014
2015 Boston
2016
2017
2018
Suburbs
Future Supply FUTURE SUPPLY
•
Drug manufacturing operations are moving to suburban locales with accessibility to R&D operations in Cambridge. High costs and a non-existent inventory have led firms such as Alnylam and Moderna to establish manufacturing facilities in the Route 128 Corridor. Activity is moving further out to the Route 495 area as well. LakePharma, Inc. recently acquired 35 South Street in Hopkinton and plans to launch a 69,000-square-foot GMP manufacturing facility in the building. King Street Properties is throwing its hat into the ring as well. The Cambridge-based life science real estate owner purchased the former headquarters of the MetroWest Daily News on New York Avenue in Framingham, and is planning to create a life science hub at the site, which could include manufacturing space. Expect this trend to continue as scientists and other R&D employees seek direct access to production operations.
•
Tenants are flocking to the Route 128 West Submarket. With the addition of two new tenants, the LINX in Watertown is fully leased up. Aileron Therapeutics signed a lease for 18,609 square feet, and Kala Pharmaceutics is taking down more than 66,000 square feet in the building. The former is relocating from Waltham, and the latter is moving in from Cambridge. Visterra is also making the jump from Cambridge as the biotech company has outgrown its Kendall Square facility. Visterra executed a lease for 27,000 square feet at a recently converted lab building on Second Avenue in Waltham.
•
The area’s IPO and venture funding landscape remains solid. Boston-based resTORbio recently raised $85 million in its initial public offering, and Bedfordbased Homology Medicine filed a $144 million IPO in March. Regarding venture capital, Finch Therapeutics ($36 million), Partner Therapeutics ($60 million), and Stoke Therapeutics ($40 million) were among several companies located outside of Cambridge that raised funds in the first quarter.
Future Supply
214,910 SF Available
Leased
NOTABLE TRANSACTIONS Notable Transactions Dana-Farber Kala Pharmaceuticals
Available
Leased
Visterra Aileron Therapeutics MicroMedicine 10K SF
30K SF Route 128 West
2
50K SF
70K SF Boston
90K SF
268,750
2013 2014 2014 2014 TRENDS 2014 • Biotech firms continue cluster to outside of Cambridge; benefiting from demand 20152013 for space in relief valve markets like Watertown, Bedford, and Brighton. 2015Waltham, 2013 First quarter net absorption totaled roughly 269,000 square feet in Boston and the 20152014 Suburbs combined, and vacancies declined2015 to 7.3%. The future remains bright for 2014 20162014 life science hubs outside of Cambridge as demand for lab space far outstrips supply. 20162014 While tenant preferences will remain focused on Kendall Square, the lack of space 20162015 and frothy pricing will push growth out along2016 Route 2 and the Route 128 Corridor. 2015 2017 2015 • Longwood Center, the newest lab building 2017 in the2015 Longwood Medical Area, is now fully-occupied just three years after delivery.2016 Dana-Farber Cancer Institute 2016 now occupying more than expanded into another 83,550 square feet this quarter; 2016 half of the building. There are only a handful of large blocks of space left in the 2016 Boston Lab market, with 80 Guest Street and 272017 Drydock Avenue boasting the only availabilities above 30,000 square feet. 2017
144,400 SF
TD Net sorption 86,379 182,371 268,750
268,7502013
EAST CAMBRIDGE LAB
East Cambridge
TOTAL INVENTORY (SF)
TOTAL VACANT (SF)
TOTAL VACANCY RATE
Q1 NET ABSORPTION (SF)
YTD NET ABSORPTION (SF)
9,311,288
48,444
0.5%
(30,391)
(30,391)
Vacancy 600
10%
500 8%
400 300
•
Space is leasing up faster than it can be built. Alexandria Real Estate’s 164,000-square-foot speculative project at 399 Binney Street is almost fully-occupied. Relay Therapeutics and Cellular Ecosystems Therapeutics will join Rubius Therapeutics once the new facility delivers at the end of this year; bringing occupancy to more than 83%. Reportedly a fourth tenant has signed an LOI, which would make the building 100% occupied. Tenants are paying top dollar for this space with base rents in the lowto-mid $80/SF, and TI allowances are roughly $200/SF. Alexandria’s 431,500-squarefoot 100 Binney Street will delivery completely full in the second quarter. While an office user, Philips North America, plans to occupy 80% of the first phase of DivoWest’s Cambridge Crossing development, the building is lab-capable and the remaining space is being marketed towards lab tenants. Lab users are hiring. Alnylam is looking to grow its employee base, particularly in East Cambridge. The pharmaceutical company plans to add up to 200 additional employees in the near term and grow its global workforce to 1,250-1,500 by 2020. Gene-editing biotech, Editas Medicine, has also been boosting headcount as it prepares to launch U.S. clinical trials. Local labor markets are tighter-than-ever, especially for highly-skilled research personnel, but increasing headcounts bodes well for future lab demand.
10% 4% 8% 2% 6% 0%
SF (000s)
SF (000s)
600 100 500 0 400 -100 300 -200 2013 200
2014
2015 Net Absorption
100
2016
2017
2018
Vacancy
4%
0
2%
-100 -200
0% 2013
2014
2015
2016
Net Absorption
2017
2018
Vacancy
CONSTRUCTION Construction Trends TRENDS 900 800 700 600
Construction Trends
SF (000s)
•
Vacancies in Cambridge’s premiere lab market are still essentially zero. Although rates inched up to 0.5% in the first quarter of 2018, there is less than 50,000 square feet of vacant space in East Cambridge. As has been the trend over the last two years, any available space is quickly leased up here — in many cases through off-market deals. 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 nearterm. While overall rent growth has slowed, lease rates on higher-end space are now in the low-$90s on a per-square-foot basis.
200
500
400900 300800 200700 100600 SF (000s)
•
6%
Vacancy VACANCY
TRENDS
0500 2013 400
2014
2015
2016
Leased
300
2017
2018
2017
2018
Available
200
NOTABLE 100 TRANSACTIONS Notable Transactions 0
•
Takeda Pharmaceuticals’ potential takeover of Shire may make waves in the local lab market. While there is little overlap in real estate footprints between the two companies, there could be some fallout if the deal were to move forward. In addition to its large presence in Lexington, Shire has re-established its Kendall Square presence within the past year. The pharmaceutical giant inked a deal for 343,000 square feet at 500 Kendall Street and subleased 223,000 square feet at 125 Binney Street. Takeda maintains a presence at 35 Landsdowne Street in Mid Cambridge, occupying the entire 202,000-square-foot building.
2013 Relay Therapeutics
2014
2015 Leased
2016 Available
Cellular Ecosystems Gemini Therapeutics Eli Lilly & Co. Avrobio
•
Funding momentum is strong among East Cambridge life science companies. Surface Oncology and Solid Biosciences raised $100 million and $153 million in their initial public offerings, respectively. Several major VC investments took place this quarter as 2018, there is less than 50,000 well. Moderna Therapeutics raised a whopping $500 million, while Generation Bio fand sed up here — in many cases TCR2 Therapeutics both inraised $100 millionforecast. or moreExpect in thetenants first quarter. deals. There doesn't seem to be any clouds East Cambridge's to struggle to find space to accommodate their
term. While rent growth has slowed lease rates on higher-
10K SF
20K SF
30K SF
40K SF
50K SF
3
201 8
Q1
VC Funding by City KEY: VC FUNDING
BY CITY
$1.03 B $1.03B Bto -$1.72 $1.72
B
LIFE SCIEN
BLOOM
MOR
SINCE
$210 B $210MMto -$1.03 $1.03
$70MMto-$210 $210M M $70 $20MMto-$70 $70M M $20 $20MM 00to- $20
B
REACH
FD
DR APPR
(201
4
N C E FUNDING FDA Approvals 50
MBERG MASS LIFE SCIENCE INDEX
45
RE THAN DOUBLED
40 35
E BOTTOMING IN EARLY 2012;
FDA DRUG APPROVALS
30
HING A PEAK IN EARLY 2018.
25 20 15
DA
RUG ROVALS
Life Science 10 $1,020,265,000 $1,090,350,000 5 $834,680,000 0 $2,152,600,000 2005 2006 $1,510,700,000 $2,588,000,000 $1,631,600,000
250
2007
2008
$1.02 $1.09 $0.83 $2.15 2009 $1.51 $2.59 $1.63
Total $2,566,844,000 $1,546,579,000 $2,417,630,000 $1,327,280,000 $2,552,995,000 $1,718,315,000 $3,703,510,000 $1,550,910,000 2010 2011 2012 2013 2014 $2,651,810,000 $1,141,110,000 $3,977,925,000 $1,389,925,000 $2,438,000,000 $806,400,000
$1.55 $1.33 $1.72 $1.55 2015 2016 $1.14 $1.39 $0.81
2017
MA Venture Capital Funding
109%
$4.5
1-2017)
$4.0
148
$3.5
MA VC FUNDING
$3.0 $2.5
FROM MASSACHUSETTS COMPANIES
$2.0 $1.5 65% 58%
$1.0
67%
57%
$0.5
40%
45%
2012
2013
33%
$0.0 2014
2015
Life Science Funding
2016
2017
YTD
Total Funding
MA LIFE SCIENCE
MA Life Science IPOs
IPOs
YTD 2017 2016 2015 2014 2013 2012 $0
$200
$400
$600
$800
(In Millions)
$1,000
$1,200
$1,400
$1,600
$1,800 5
201 8
Q1 Mid Cambridge
MID CAMBRIDGE LAB TOTAL INVENTORY (SF)
TOTAL VACANT (SF)
TOTAL VACANCY RATE
Q1 NET ABSORPTION (SF)
YTD NET ABSORPTION (SF)
5,262,211
28,019
0.5%
19,405
19,405
Vacancy 25%
20%
15%
VACANCY Vacancy
TRENDS
10% 25% 5% 20%
•
Positive net absorption pushed vacancies down to a paltry 0.5% in Mid Cambridge; declining by 40 basis points over the quarter and 100 basis points over the year. With a handful of mid-sized leases signed this quarter, there is less than 30,000 square feet of vacant space in this submarket. 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, asking rents remained elevated in the mid-to-high-$70/SF. Look for fundamentals to remain tight and higher lease rates in the near-term forecast.
•
Similar to East Cambridge, available space is quickly snapped up in Mid Cambridge. Takeda Pharmaceuticals has been successful in leasing up ARIAD’s former space at 26 Landsdowne Street, which is currently under renovation. Most recently, Beam Therapeutics inked a deal for 38,203 square feet in the building. Fulcrum Therapeutics took down 28,731 square feet recently as well. Other major leases signed this quarter include Abbvie’s 42,313-square-foot expansion at 200 Sidney Street, Mersana Therapeutics’ 34,324-square-foot deal at 840 Memorial Drive and Spero Therapeutics extension and expansion at 675 Massachusetts Avenue.
•
Solid IPO activity taking place among Mid Cambridge biotechs over the last 12-18 months is driving strong leasing. Evelo Biosciences recently filed to raise $100 million and Unum Therapeutics raised $69 million in its initial public offering. Aileron Therapeutics ($73 million), Mersana Therapeutics ($92 million), and Spero Therapeutics ($92 million) have signed2017 leases recently; after filing IPOs last year. 2017 Continued IPO activity in the local life science 2017 arena ultimately bodes well for future lab demand here. 2018
•
Traditionally a relief valve for nearby East Cambridge, Sidney Street has evolved 2017 into a top-tier lab cluster in Mid-Cambridge. Anchored by BioMed Realty’s Sidney 2017 Research Campus, this corridor is home 2017 to 1.1 million square feet of lab space and tenants like Agios Pharmaceuticals,2018 Blueprint Medicines, and Abbvie. As of the first quarter, there was only one availability here. Addgene is subleasing close to 18,000 square feet at 75 Sidney in anticipation of its move to LINX in Watertown. This represents a marked change from just three years ago when vacancies were in the 30-40% range following Vertex’s relocation to the Seaport. Voyager Therapeutics also renewed and expanded by more than 10,000 square feet in 75 Sidney Street in the first quarter; highlighting the area’s desirability among tenants.
•
Rents continue to climb in the Mid Cambridge lab market. 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. Since the end of 2014, average asking rents increased by 42%. While peak growth is likely behind us, look for modest gains in the near future.
5-Year Historical Average = 8.5%
0% 15% 2013
2014
2015
2016
2017
2018
10%
5%
5-Year Historical Average = 8.5%
0% 2013
2014
2015
2016
2017
2018
Rents RENTS $90 $80
e a se 42% Incr
$70 $60
Rents $50 $90
$40
$80
e a se 42% Incr
$30
$70
$20
$60
$10
$50
$0
$40 2014
2015
2016
2017
$30
NOTABLE TRANSACTIONS $20 Notable Transactions $10
Abbvie $0
2014
2015
2016
2017
Beam Therapeutics Mersana Therapeutics Voyager Therapeutics Spero Therapeutics 10K SF
20K SF
e quarter6 and 100 basis points over the year. market. Tenants looking to expand here will th has slowed, asking rents remained elevated
30K SF
40K SF
50K SF
WEST CAMBRIDGE LAB TOTAL VACANT (SF)
TOTAL VACANCY RATE
Q1 NET ABSORPTION (SF)
YTD NET ABSORPTION (SF)
787,860
72,632
9.2%
-
-
•
With little leasing or absorption taking place during the first quarter, vacancies remained unchanged, at 9.2%, in the West Cambridge lab market. Much of Cambridge’s available lab space is located here, with more than 70,000 square feet of space currently vacant. The delivery of the 227,000-square-foot 35 Cambridgepark Drive will add another large block of space to the available inventory here. With that said, 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 market as space constraints and historically-high rents push tenants out of Cambridge’s core lab markets.
150
50 150
40% 50%
1000 -50 50
30% 40% 20%
-100 0 -150 -50 -200 -100 -250 -150 -300 -200 2013
Celgene continues to expand its presence in the West Cambridge Submarket. Most recently, the biopharmaceutical company leased another 20,000 square feet at 200 Cambridgepark Drive — bringing the firm’s occupancy to roughly 127,000 square feet (more than half of the building). Celgene has also been on a shopping spree recently. Earlier this year the firm acquired Waltham-based Juno Therapeutics for $9 billion, which followed the acquisition of Impact Biomedicines for several billion dollars.
30% 10% 0%
2015
Rents continue to climb in the West Cambridge lab market. 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 31% since the end of 2014. Despite this growth, rates for space in West Cambridge offer a steep discount compared to neighboring submarkets. Existing lab space boasts a mid-to-high-$50s/SF price tag, while asking rents are in the high $60s/SF 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.
•
While venture capital has been comparatively less active in West Cambridge, a handful of funding events took place over the last several months. Most recently, Cytier Therapeutics raised $29 million in a Series B round, and Ultivue also closed a Series B round; raising $20 million. Late last year, Aura Biosciences raised another $30 million while LifeMine Therapeutics closed a $55 million Series A round.
2017
2018
0%
Vacancy
-300
-10% 2014
2015
2016
Net Absorption
2017
2018
Vacancy
ASKING RENTS Asking Rents $60
e a se 31% Incr
Asking Rents $50
e a se 31% Incr
$50 $30 $40 $20 $30 $10 $20 $0 2014
2015
2016
2017
$10
CONTIGUOUS BLOCKS Contiguous Blocks $0
1
•
2016
Net Absorption
$60 $40
•
20%
10% -10% 2014
-250 2013
•
50%
VACANCY AND NET ABSORPTION 100 SF (000s)
TRENDS
SF (000s)
West Cambridge
TOTAL INVENTORY (SF)
2014
2015
2016
2017
1 1 2
The majority of Cambridge’s construction remains concentrated in East Cambridge, but West Cambridge could see some more action in the future. 0K SF The Bulfinch Companies is planning to build out the remaining parcel at the Park. The campus can accommodate up9.2%, to twoinadditional ion taking placeCambridge during the Discovery first quarter, vacancies remained unchanged, at the West Cambridge lab market. Much of office/lab buildings square feet. currently vacant. The delivery of the 227,000-square-foot 35 ace is located here, with more thantotaling 70,000250,000 square feet of space
other large block of space to the available inventory here. With that said, fundamentals remain ultra-tight in both East and ambridge remains a key relief valve for these more established life science hubs. Look for continued movement into the
10K SF
20K SF
30K SF
40K SF
7
201 8
Q1
TOTAL INVENTORY (SF)
M
E
T
R
O
B
O
S
T
O
BIOTECH RECAP
UNDER CONSTRUCTION (SF)
DIRECT VACANT (SF)
SUBLEASE VACANT (SF)
TOTAL VACANCY RATE
Q1 YTD NET NET ABSORPTION (SF) ABSORPTION (SF)
BOSTON TOTAL
5,705,748
214,400
239,809
22,118
4.6%
86,379
86,379
East Cambridge
9,311,288
1,195,500
25,439
23,005
0.5%
(30,391)
(30,391)
Mid Cambridge
5,262,211
-
28,019
-
0.5%
19,405
19,405
787,860
226,885
69,632
3,000
9.2%
-
-
15,361,359
1,422,385
123,090
26,005
1.0%
(10,986)
(10,986)
Route 128 North
1,134,676
-
32,688
10,243
3.8%
38,926
38,926
Route 128 Northwest
2,261,210
-
172,888
18,859
8.5%
-
-
Route 128 West
2,123,558
144,910
199,374
6,000
9.7%
(15,275)
(15,275)
Route 495 North
849,329
-
120,702
-
14.2%
(92,093)
(92,093)
South
276,159
-
-
-
0.0%
-
-
West
978,688
-
82,869
62,014
14.8%
250,813
250,813
7,623,620
144,910
608,521
97,116
9.3%
182,371
182,371
28,690,727
1,781,695
971,420
145,239
3.9%
257,764
257,764
West Cambridge CAMBRIDGE TOTAL
SUBURBAN TOTAL MARKET TOTAL
N
METHODOLOGY SOURCE: Co-Star, NAI Hunneman Commercial Company. PREPARED: March 2018.
LIZ BERTHELETTE | Director of Research 617.457.3306 |
[email protected]
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.
