Q4-2017-Biotech-Beat
Q4
BIOTECH BEAT M E T R O B O S T O N
2017
CAMBRIDGE LAB CONTINUES TO DOMINATE
INSIDE STATISTICS...
BOSTON / SUBURBAN LAB
CAMBRIDGE LAB
303 Congress Street Boston, MA 617.457.3400 303 Congress Street | Boston, MA 02210 | 617.457.3400 www.NAIHunnema .com www.naihunneman.com
1
Q4
2017
DIRECT VACANCY
SUBLEASE VACANCY
12-MONTH ABSORPTION
LEASING ACTIVITY
ASKING RENT
BIOTECH OVERVIEW
Another Year of Positive Growth
The Greater Boston lab market experienced another impressive year of growth; posting nearly 650,000 square feet in net absorption and an eighth straight quarter of sub-5% vacancies. Cambridge continues to dominate activity, accounting for the lion’s share of absorption over the past 12 months. While demand continues to outstrip supply, space constraints are limiting absorption gains and weighing on leasing activity. Expansions and relocations are still happening throughout Greater Boston though, with lab users in Cambridge focusing on full-floor commitments. Looking ahead to 2018 we see several themes maintaining prominence. Cambridge’s lab market will remain incredibly tight. Tenants looking to expand have few options and will continue to explore new construction or availabilities in Boston and the Suburbs. Leasing has been brisk in these new developments, which bodes well for net absorption. Cambridge’s overheated lab market and a seemingly insatiable demand from the ever- growing biotech industry are directly benefiting relief valve locations like the Seaport and Brighton. Developers continue to pivot from office to lab construction as users seek out larger footprints and/or cheaper alternatives to Kendall
Square. At Boston Landing’s growing tech hub in Brighton, NB Development recently landed Mass Innovation Labs, Roche Diagnostics, and Proteostasis Therapeutics. Mass Innovation Labs is also anchoring the first phase of Related Beal’s iSQ development at 6 Tide Street in the Seaport. In Watertown, Boylston Properties continues to expand its roster of lab tenants at the recently constructed LINX building. Macrolide Pharmaceuticals represents the most recent tenant to sign on here. In the foreseeable future, many developers will continue to market new space to both office and lab users, allowing more biotech clusters to evolve outside of Cambridge. In response to outsized demand, construction activity has hit a two-year high in Greater Boston. In West Cambridge, The Davis Companies is underway on the conversion of 35 Cambridgepark Drive into a 220,000-square-foot lab building, which will deliver in mid-2018. King Street Properties has proposed a 120,000-square-foot facility adjacent to 87 Cambridgepark Drive in West Cambridge as well. Alexandria Real Estate will deliver a 165,000-square-foot lab building at 399 Binney Street in Kendall Square — anchored by Rubius Therapeutics — later this year. Construction has begun on Cambridge
Crossing’s first phase; a 430,000-square- foot office and lab building, which become Philips NV new North American headquarters upon completion. Projects are also moving forward in Boston and the Suburbs. King Street Properties is underway on another speculative lab building at 828 Winter Street in Waltham and is planning a 200,000-square-foot addition to the Hayden Research Campus in Lexington. The groundbreaking of the first phase of Related Beal’s iSQ development is bringing 125,000 square feet of lab to the Seaport. A rash of Massachusetts-based biotech companies held initial public offerings in 2017. A dozen firms raised roughly $1 billion during the year, representing a 56% increase from last year when only nine firms held IPOs and a 15% increase from 2015. Cambridge-based Ackea Therapeutics ($125 million), Waltham-based Deciphera Pharmaceuticals ($128 million), and Boston-based Rhythm Pharmaceuticals ($120 million) represents some of the largest offerings of the past year. This recent activity, coupled with steady venture capital funding in Massachusetts life science industry, bodes well for growth going forward.
TOTAL VACANCY RATE
Q4 NET ABSORPTION (SF)
ASKING RENT NNN ($/SF)
UNDER CONSTRUCTION (SF)
DIRECT VACANCY
3.9%
3.5%
60,044
$50.45
2,261,500
IPO Filings: 12
VC Funding: 55
Mass Life Science Index: 47.8%
Biopharma Job Postings: -15.4%
NIH Funding: $580
Year-Over-Year Increase (September 2017)
Per Capita FY 2017
MA-Based Biotech Companies YTD $1 Billion Value
MA-Based Biotech Companies $2.3 Billion Funding
Increase from December 2016 Year-Over-Year
2
BOSTON / SUBURBAN LAB
TOTAL INVENTORY (SF)
TOTAL VACANT (SF)
TOTAL VACANCY RATE
Q4 NET ABSORPTION (SF)
YTD NET ABSORPTION (SF)
ASKING RENT NNN ($/SF)
Boston
5,705,748
331,706
5.8%
3,849
8,412
$59.59
Suburban
7,147,040
637,195
8.9%
23,656
132,346
$37.87
TOTAL
12,852,788
968,901
7.5%
27,505
140,758
$46.20
10%
250,000
Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017
200,000
8%
150,000
6% VACANCY AND NET ABSORPTION
TRENDS
100,000
250,000
10%
50,000
Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 • Biotech clusters continue to grow outside of Cambridge, with recent tenant demand targeting Boston Landing in Brighton, the Seaport, Watertown, and Bedford. • Mass Innovation Labs is betting big on Greater Boston; adding three new locations. Outside of Cambridge, the life science incubator recently inked a deal to anchor Related Beal’s Innovation Square development at 6 Tide Street in the Seaport and leased two floors in Boston Landing’s Auerbach Center on Guest Street. • With a tenant in hand, Related Beal has finally broken ground on the first phase of its 360,000-square-foot Innovation Square project in the Seaport. The 125,000-square-foot building is expected to deliver in early 2019. • The completion of MilliporeSigma’s new facility in Burlington, which includes lab and manufacturing space as well as its ninth M Lab Collaboration Center, brought several hundred life science jobs to the area. • Demand for new lab construction in the suburbs is heating up. LINX in Watertown landed two new tenants this quarter: AddGene and Macrolide Pharmaceuticals. Homology Medicines represents the first major user at Longfellow Real Estate Partners’ recently converted 1 Patriots Park in Bedford, and Visterra is taking down 27,000 square feet at Alexandria’s latest redevelopment project at 275 Second Avenue in Waltham.
4%
200,000
0
8%
2%
150,000
-50,000
6%
100,000
0%
-100,000
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Q1 2016
Q2 2016
Q3 2016
Q4 2016
Q1 2017
Q2 2017
Q3 2017
Q4 2017
50,000
4%
Boston Net Absorption
Suburban Net Absorption
Boston Vacancy
Suburban Vacancy
0
2%
-50,000
-100,000
0%
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Q1 2016
Q2 2016
Q3 2016
Q4 2016
Q1 2017
Q2 2017
Q3 2017
Q4 2017
Boston Net Absorption
Suburban NetAbsorption
Boston Vacancy
Suburban Vacancy
Rents RENTS
$0 $10 $20 $30 $40 $50 $60 $70 $80
Rents
$0 $10 $20 $30 $40 $50 $60 $70 $80
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Q1 2016
Q2 2016
Q3 2016
Q4 2016
Q1 2017
Q2 2017
Q3 2017
Q4 2017
Boston Suburban
Q4 2014 RECENT CONSTRUCTION Q1 2015 Q2 2015 Q3 2015 Q4 2015
NOTABLE TRANSACTIONS
Q1 2016
Q2 2016
Q3 2016
Q4 2016
Q1 2017
Q2 2017
Q3 2017
Q4 2017
0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000
TENANT
ADDRESS
SIZE
SUBMARKET
TYPE
Boston Suburban
Mass Innovation Labs
40 Guest Street, Brighton
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
83,707 Boston
Expansion
Recent Construction
Homology Medicines
1 Patriots Park, Bedford
Route 128 Nortwest
Expansion/ Relocation
67,000
400,000 450,000
Recent Construction
Concert Pharmaceuticals Mass Innovation Labs
65 Hayden Avenue, Lexington
Route 128 Northwest
Expansion/ Relocation
55,522
400, 00 45 , 00
6 Tide Street, Boston
54,000 Boston
Expansion
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Q1 2016
Q2 2016
Q3 2016
Q4 2016
Q1 2017
Q2 2017
Q3 2017
Q4 2017
Q1 2018
Q2 2018
Q3 2018
Q4 2018
Leased Available
Route 128 West
Expansion/ Relocation
AddGene
LINX, Watertown
39,300
www.naihunneman.com
303 Congress Street Boston, MA 617.457.3400
3
Q4
CAMBRIDGE LAB
2017
TOTAL INVENTORY (SF)
TOTAL VACANT (SF)
TOTAL VACANCY RATE
Q4 NET ABSORPTION (SF)
YTD NET ABSORPTION (SF)
ASKING RENT NNN ($/SF)
East Cambridge
9,311,288
18,053
0.2%
(9,517)
558,494
$80.00
Mid Cambridge
5,262,211
47,424
0.9%
52,383
(16,167)
$76.77
West Cambridge
783,180
72,632
9.3%
(10,327)
(35,132)
$57.80
TOTAL
15,356,679
138,109
0.9%
32,539
507,195
$72.06
Vacancy and Net Absorption
Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017
12%
1,175,000
TRENDS
VACANCY AND NET ABSORPTION Vacancy and Net Absorption
10%
975,000
• Year-to-date absorption of more than 500,000 square feet helped push vacancies below 1% in the Cambridge lab market. Demand, driven in part by strong venture funding and a rash of IPOs, remains frothy here. The lack of space in Kendall Square is staggering, with vacancies in East Cambridge at just 0.2% in the fourth quarter. • Mass Innovation Labs executed three new leases in the fourth quarter; including a 52,000-square-foot deal at 21 Erie Street in BioMed Realty’s Sidney Research Campus. • Rubius Therapeutics expanded again as well. After executing a sublease at 99 Erie Street last quarter, the firm plans to anchor Alexandria’s project at 399 Binney Street when it delivers later this year. • Agios Pharmaceuticals is increasing its Cambridge footprint significantly; expanding near Central Square. The biotech company signed a new lease for 27,000 square feet at 64 Sidney Street and expanded/extended its lease at 88 Sidney Street. • Synlogic inked a deal for a new 41,000-square-foot headquarters at 301 Binney Street, which will triple its space and bring the firm closer to Kendall Square. • New biotech companies continue to launch in the ever-tight Cambridge market. Most recently, UK-based RxCelerate established its U.S. operations at One Broadway. Janpix nabbed $22MM in funding and has also opened an office at One Broadway. • Moderna is giving back a full floor at 320 Bent Street and Ensemble Therapeutics recently shuttered its doors at 99 Erie Street. While Novartis also put 100,000 square feet on the sublease market, a large chunk of this space is already committed; highlighting just how hot the Cambridge lab market is. 21 Erie 200 Cambridgepark 325 Vassar Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017
12%
1,175,000
8%
775,000
10%
975,000
6%
575,000
8%
775,000
4%
375,000
6%
575,000
2%
175,000
4%
375,000
0%
-25,000
2%
175,000
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Q1 2016 Q1 2016
Q2 2016
Q3 2016
Q4 2016
Q1 2017
Q2 2017
Q3 2017
Q4 2017
0%
-25,000
Net Absorption
Vacancy Q1 2017
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Q2 2016
Q3 2016
Q4 2016
Q2 2017
Q3 2017
Q4 2017
Net Absorption
Vacancy
Recent Construction RECENT CONSTRUCTION Recent Construction
1,200,000
1,200,000
1,000,000
1,000,000
800,000
800,000
600,000
600,000
400,000
400,000
200,000
200,000
0
0
Q1 2015
Q3 2015
Q1 2016
Q3 2016 Q3
Q1 2017
Q3 2017
Q1 2018
Q3 2018
Q1 2019
Q3 2019
Q1 2015
Q3 2015
Q1 2016
Q1 2017
Q3 2017
Q1 2018
Q3 2018
Q1 2019
Q3 2019
Leased Available sed Available
CONTIGUOUS BLOCKS
3
2
Contiguous Blocks
Contiguous Blocks 1
No. of Blocks
0
15,000 SF-25,000 SF
25,000 SF-50,000 SF
50,000 SF+
4
CAMBRIDGE LAB
ASKING RENTS
ASKING RENT ($/SF)
ASKING RENT ($/SF)
CLASS A
CLASS B
East Cambridge
East Cambridge
Mid $80's NNN
Mid $80's NNN
Mid Cambridge
Mid Cambridge
High $70's NNN
High $70's NNN
Mid $60's NNN
West Cambridge
West Cambridge
Mid $60's NNN
East Cambridge - Rents East Cambridge - Rents EAST CAMBRIDGE - RENTS $90
TRENDS
$90
$0 $10 $20 $30 $40 $50 $60 $70 $80
• Brammer Bio completed renovations on its 66,000-square-foot drug manufacturing facility (formerly Biogen space) in Kendall Square, which is now producing leading edge gene therapies. The firm also took over Biogen’s former distribution center in Somerville. • Limited availabilities and few rent observations have created some volatility in Cambridge’s recent rent data, which is not indicative of market health. Asking rents are still sky-high in East Cambridge, reaching $80/SF in the fourth quarter, and lease rates on the new construction, which are not included in current calculations, are above average as well. • Traditionally a relief valve for nearby East Cambridge, Sidney Street has evolved into a top-tier lab cluster in Mid-Cambridge. Anchored by BioMed Realty’s Sidney Research Campus, this corridor is home to 1.1 million square feet of lab space and tenants like Agios Pharmaceuticals, Blueprint Medicines and AbbVie, Inc. As of the fourth quarter, there are no availabilities here. 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. • New lab developments are starting to lease up in Cambridge. Close to 60% of the nearly 1.8 million square feet of lab space currently under construction Cambridge is already preleased. With very few options available, tenants looking to expand in Cambridge will likely turn to new construction for their space needs. Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q4 4 1 2 15 2 0 3 15 4 5 1 2 3 4 6 1 2 2 3 Q4 2017
$20 $30 $40 $50 $60 $70 $80
$0 10
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Q1 2016
Q2 2016
Q3 2016
Q4 2016
Q1 2017
Q2 2017
Q3 2017
Q4 2017 Q4 2017
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Q1 2016
Q2 2016
Q3 2016
Q4 2016
Q1 2017
Q2 2017
Q3 2017
Mid Cambridge - Rents Mid Cambridge - Rents ID AMBRIDGE - RENTS
$10 $20 $30 $40 $50 $60 $70 $80 $90
$0 $10 $20 $30 $40 $50 $60 $70 $80 $90
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Q1 2016
Q2 2016
Q3 2016
Q4 2016
Q1 2017
Q2 2017
Q3 2017 Q3 2017
Q4 2017 Q4 2017
$0
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Q1 2016
Q2 2016
Q3 2016
Q4 2016
Q1 2017
Q2 2017
West Cambridge - Rents EST CAMBRIDGE - RENTS
NOTABLE TRANSACTIONS
TENANT
ADDRESS
SIZE
SUBMARKET
TYPE
$70
Agios Pharmaceuticals
Expansion/ Extension
88 Sidney Street
146,030 Mid Cambridge
$60
Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017
$50
Mass Innovation Labs
21 Erie Street
51,900 Mid Cambridge Expansion
$40
$30
Merck
320 Bent Street
46,418 East Cambridge Renewal
$20
$10
Rubius Therapeutics
Expansion/ Relocation
399 Binney Street
45,000 East Cambridge
$0
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Q1 2016
Q2 2016
Q3 2016
Q4 2016
Q1 2017
Q2 2017
Q3 2017
Q4 2017
Agios Pharmaceuticals
64 Sidney Street
27,083 Mid Cambridge Expansion
www.naihunneman.com
303 Congress Street Boston, MA 617.457.3400
5
Q4
M E T R O
B O S T O N
MARKET RE CAP
2017
BIOTECH / LAB STATISTICS
TOTAL INVENTORY (SF)
UNDER CONSTRUCTION (SF)
DIRECT VACANT (SF)
SUBLEASE VACANT (SF)
TOTAL VACANCY RATE
Q4 NET ABSORPTION (SF)
YTD NET ABSORPTION (SF)
ASKING RENT NNN ($/SF)
BOSTON TOTAL
5,705,748
214,400
328,750
2,956
5.8%
3,849
8,412
$59.59
East Cambridge
9,311,288
1,577,716
18,053
-
0.2%
(9,517)
558,494
$80.00
Mid Cambridge
5,262,211
-
47,424
-
0.9%
52,383
(16,167)
$76.77
West Cambridge
783,180
219,474
69,632
3,000
9.3%
(10,327)
(35,132)
$57.80
CAMBRIDGE TOTAL
15,356,679
1,797,190
135,109
3,000
0.9%
32,539
507,195
$72.06
Route 128 North
1,134,676
-
66,414
15,443
7.2%
(14,485)
(16,482)
$32.35
Route 128 Northwest
2,261,210
-
172,888
18,859
8.5%
(16,859)
79,798
$35.23
Route 128 West
2,004,383
249,910
178,559
11,540
9.5%
-
59,767
$53.40
Route 495 North
757,329
-
28,609
-
3.8%
55,000
26,391
$24.00
South
276,159
-
-
-
0.0%
-
-
$24.00
West
713,283
-
82,869
62,014
20.3%
-
(17,128)
$19.16
SUBURBAN TOTAL
7,147,040
249,910
529,339
107,856
8.9%
23,656
132,346
$37.87
MARKET TOTAL
28,209,467
2,261,500
993,198
113,812
3.9%
60,044
647,953
$50.45
MARKET COVERAGE
6
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M E T R O
B O S T O N
CONTACTS
Corporate
PETER EVANS 617.457.3402 pevans@naihunneman.com JASON ROTH 617.457.3405 jroth@naihunneman.com TREY AGNEW Executive Vice President 617.457.3363 tagnew@naihunneman.com CATHY MINNERLY Executive Vice President 617.457.3334 cminnerly@naihunneman.com LEEANNE RIZZO Senior Vice President 617.457.3371 lrizzo@naihunneman.com PATRICK GRADY Associate 617.457.3278 pgrady@naihunneman.com DAVID N. ROSS Executive Vice President 617.457.3392 dross@naihunneman.com ANDREW KAEYER Executive Vice President 617.457.3207 akaeyer@naihunneman.com ELLIOTT WHITE Assistant Vice President 617.457.3355 ewhite@naihunneman.com DAVID E. FINNEGAN Vice President, Marketing Services 617.457.3238 dfinnegan@naihunneman.com STUART PRATT, SIOR, CCIM Chairman 617.457.3333 spratt@naihunneman.com
COLIN GORDON 617.457.3265 cgordon@naihunneman.com MAX PAWK 617.457.3345 mpawk@naihunneman.com JAMES BOUDROT, CCIM, SIOR Executive Vice President 617.457.3328 jboudrot@naihunneman.com CHRISTOPHER A. CURLEY Executive Vice President 617.457.3211 ccurley@naihunneman.com LIZ BERTHELETTE Director of Research 617.457.3306 lberthelette@naihunneman.com OVAR OSVOLD Vice President 617.457.3222 oosvold@naihunneman.com CORMAC SULLIVAN Associate 617.457.3319 csullivan@naihunneman.com CARL CHRISTIE Executive Vice President 617.457.3394 cchristie@naihunneman.com DAN MCGEE Assistant Vice President 617.457.3266 dmcgee@naihunneman.com IAN S. MCKINLEY Senior Associate 617.457.3404 imckinley@naihunneman.com STEPHEN M. PROZINSKI COO & Co-Managing Principal 617.457.3370 sprozinski@naihunneman.com
PETER W. EVANS Executive Vice President & 617.457.3402 pevans@naihunneman.com HEATHER CHAPMAN Graphics Manager 617.457.3256 lberthelette@naihunneman.com
Co-Managing Principal
LEAH MARKHAM Graphic Designer 617.457.3253 lmarkham@naihunneman.com
Urban Advisory Group
MATTHEW DAVIS 617.457.3305 mdavis@naihunneman.com
Suburban Leasing & Sales
F. MICHAEL DIGIANO Executive Vice President 617.457.3410 mdigiano@naihunneman.com DAVID GILKIE, CCIM, SIOR Senior Vice President 617.457.3202 dgilkie@naihunneman.com MICHAEL ALLEN Assistant Vice President 617.457.3276 mallen@naihunneman.com
STEVE JAMES Executive Vice President 617.457.3263 sjames@naihunneman.com NED HALLORAN Senior Vice President 617.457.3372 nhalloran@naihunneman.com SEAN HANNIGAN Associate 617.457.3252 shannigan@naihunneman.com
Capital Markets
ROBERT TITO Executive Vice President 617.457.3231 rtito@naihunneman.com
MARK HALL Executive Vice President 617.457.3412 mhall@naihunneman.com HENRY LIEBER Assistant Vice President 617.457.3383 hlieber@naihunneman.com
GINA BARROSO Assistant Vice President 617.457.3261 gbarroso@naihunneman.com
www.naihunneman.com
303 Congress Street Boston, MA 617.457.3400
7
Q4
BIOTECH BEAT M E T R O B O S T O N
2017
BOSTON / SUBURBAN LAB
CAMBRIDGE LAB
METHODOLOGY SOURCE: Co-Star, NAI Hunneman Commercial Company. PREPARED: January, 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.
303 Congress Street | Boston, MA 02210 | 617.457.3400 www.NAIHunneman.com
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