Life science companies are one of the core economic sectors which make up the Greater Boston commercial real estate market – accounting for 18.4 million square feet of space and more than 70,000 overall employees.
On a national basis, the life sciences sector has grown tremendously in recent years – with employment expanding 4.5 percent from 2010 to 2018 (compared with 1.7 percent with the economy as a whole).
The majority of lab space in the region – 10.2M sf (approximately 54 percent) – is located within the city of Cambridge. There, particularly in and around Kendall Square, venture capital funding has continued to push the market.
“It’s apparent from the report that the Boston/Cambridge market is the epicenter of the life science world,” said Robert Richards, Executive Vice Chair at Cushman & Wakefield’s Boston office and the firm’s life sciences lead. “The market has access to some of the brightest minds in the world. C-level executives are looking to attract these types of difference makers to their organizations. This is what’s fueling a lot of the growth in the Boston/Cambridge market. We’re at the bottom of the first inning when it comes to growth because, with the aging baby boomer population, the need for disease solutions is not going away anytime soon.”
Nationwide, venture capital funding targeting life science has steadily grown since 2010, with Boston ranking as the #1 metro for VC funding between 2010 and 2018 at $15.5 billion. In 2018 alone, nine life science firms in the Boston area completed funding rounds of more than $100 million, led by Moderna Therapeutics’ $500M Series G round.
With that level of funding support driving demand for space, vacancy rates in Cambridge have been pushed down to 0.7% – the lowest in the nation. Looking back to Q4 2008, that vacancy rate was 12.2 percent.
The lack of availability– combined with average asking rents of $88.00 NNN/SF for lab space – has created the demand for multiple new developments in Cambridge – from Cambridge Crossing in East Cambridge to additional assets near Alewife.
It’s also spurred interest in life science centers outside of Cambridge, such as Watertown, Somerville, and the Seaport, while also pushing suburban rents upward.
The value of that expansion has also been validated by continued investor demand for lab assets. In 2018, Clarion purchased 490 Arsenal Street in Watertown (also known as Linx) – fully leased to three life science tenants – for more than $900 per square foot. In the Longwood Medical Area, 4 Blackfan Circle -anchored by Brigham & Women’s Hospital and the Dana-Farber Cancer Institute – sold for more than $1,400 per square foot.
The life science market will expand even further in the coming years, with nearly 4 million square feet of additional lab-ready space set to deliver by the end of 2021 and an additional 6+ million square feet on the drawing board in various stages beyond that.
That continued activity will help ensure that the Boston market remains at the epicenter of life science development and innovation for years to come.
As Vice President of Research in Boston, Ashley Lane assists with research and market analysis for the Boston market. Helping to support the firm’s professionals, Ashley gathers and helps analyze data to provide quantitative and qualitative reports of various industry trends as well as individual projects.