Q2-2018-BiotechReport

Q2

BOSTON / SUBURBAN LAB

2018

TOTAL INVENTORY (SF) 5,773,263

TOTAL VACANT (SF)

TOTAL VACANCY RATE

Q2 NET ABSORPTION (SF)

YTD NET ABSORPTION (SF)

155,703

2.7%

195,624

282,003

Boston

7,709,620

639,344

8.3%

66,296

248,664

Suburban

TOTAL

13,482,883

795,047

5.9%

261,930

530,667

2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 TRENDS • Biotech firms continue to cluster outside of Cambridge. This has benefited demand for space in relief valve markets like Watertown, Waltham, Bedford, and Brighton. Second quarter net absorption totaled 261,930 square feet in Boston and the suburbs combined, and vacancies declined to 5.9%. The future remains bright for life science hubs outside of Cambridge as demand for lab space far outstrips supply. 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. • Move-ins from Dana-Faber Cancer Institute at 360 Longwood Avenue (83,550 SF) and Proteostasis Therapeutics at 80 Guest Street (29,836 SF) and the completion of the fully-occupied 40 Guest Street drove much of this quarter’s absorption in the Boston lab market. In the suburbs, Aileron took occupancy at the LINX in Watertown, and Visterra relocated to 275 Second Avenue in Waltham. Such robust activity points to growing lab clusters beyond the Cambridge borders. • Massachusetts’ Metrowest region continues to expand its prominence as a life science hub. Marlborough-based CeQur is planning to grow its footprint following the acquisition of a diabetes device from Johnson & Johnson, while Alira Health is planning to double its lab space at 1 Grant Street in Natick (reaching 13,000 SF). WuXi Biologics announced plans for its first U.S. facility, which will encompass 70,000-100,000 square feet at the Worcester Biomanufacturing Park. LakePharma, Inc., Replimune, and Astellas recently announced expansion plans in this region as well. • 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 Therapeutics to establish manufacturing facilities in the Route 128 Corridor. In fact, Moderna will opened its 200,000-square-foot Norwood-based manufacturing facility in the third quarter of 2018. 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. They plan to create a life science hub at the site with Replimune Group anchoring the project. Expect this trend to continue as scientists and other R&D employees desire direct access to production operations. • M&A activity remains healthy in Boston and the suburbs. Otsuka Pharmaceuticals announced plans to acquire Waltham-based Visterra for $430 million in an all-cash deal. That said, Visterra’s operations will remain in Waltham. New Jersey-based Catalent is acquiring Boston-based Juniper Pharmaceuticals, and will maintain the 7,000-square-foot Boston office at 33 Arch Street. Bio-Techne Coporation plans to acquire the Waltham-based Exosome Diagnostics for $250 million in cash as well.

Net Absorption NET ABSORPTION

100 200 300 400 500 600 700

SF (000s)

-300 -200 -100 0

2013

2014

2015

2016

2017

2018

Boston Suburbs

FUTURE SUPPLY Future Supply

55,000 SF

55,000 SF

214,910 SF 214,910 SF

Available

Leased

CONTIGUOUS BLOCKS Contiguous Blocks

1

3

2

5

18

0K SF

25K SF

50K SF

75K SF

100K SF

2