Q2-2018-BiotechReport

EAST CAMBRIDGE LAB

TOTAL INVENTORY (SF) 9,911,857

TOTAL VACANT (SF) 64,114

TOTAL VACANCY RATE

Q2 NET ABSORPTION (SF)

YTD NET ABSORPTION (SF)

0.6%

400,527

385,439

East Cambridge

TRENDS • Vacancies in Cambridge’s premiere lab market are essentially zero. Although rates inched up to 0.6% in the second quarter of 2018, there is less than 65,000 square feet of vacant space in East Cambridge. As has been the trend over the last two years, any available space is quickly leased 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 near-term. Lease rates are still rising, with higher-end space now in the low-$90s on a per-square-foot basis. • Consistent tenant demand has supported new construction in East Cambridge. Alexandria Real Estate’s 431,500-square-foot 100 Binney Street came on line this quarter. It is currently fully-occupied. The firm’s 164,000-square-foot development at 399 Binney Street will also deliver fully-leased during the second half of 2018. Tenants are paying top dollar for this space with base rents in the low-to-mid $80/SF, and TI allowances are roughly $200/SF. An office user, Philips North America, plans to occupy 80% of the first phase of DivoWest’s Cambridge Crossing development. With the remainder of the building currently under agreement, site work has begun on a second speculative building, which is scheduled to deliver in early 2021. • Expansions are dominating the East Cambridge Submarket. Ipsen Biosciences, after acquiring drug assets from Merrimack Pharmaceuticals, renewed its 69,500 square feet at 1 Kendall Square. The firm also maintains a location at 650 East Kendall, and recently announced plans to relocate its headquarters from New Jersey to Cambridge. Surface Oncology executed a 33,529-square- foot lease expansion at 50 Hampshire Street, and Magenta Therapeutics, currently located at 50 Hampshire Street, is subleasing more than 69,000 square feet from Novartis at 100 Technology Square. • Co-working for lab users is gaining momentum. Mass Innovation Labs has expanded rapidly throughout Cambridge and Boston, and now Alexandria Real Estate Equities is getting into the game. The company is expanding its Alexandria LaunchLabs and opening a 20,000-square-foot co-working space at 1 Kendall Square in East Cambridge. This move will provide much-needed lab space for biotech startups looking to set up shop in the ultra-tight Kendall Square market. • Funding momentum is strong among East Cambridge life science companies. Magenta Therapeutics and Avrobio raised $100 million and $99 million in their initial public offerings, respectively. Several major VC investments took place during the second quarter as well. Akero Therapeutics raised $100 million in convertible debt, CAMP4 Therapeutics raised $65 million in venture funding, and Constellation Pharmaceuticals grabbed $55 million in a Series C round.

Vacancy VACANCY

10%

600

500

8%

400

300

6%

200

4%

SF (000s)

100

0

2%

-100

-200

0%

2013

2014

2015

2016

2017

2018

Net Absorption

Vacancy

CONSTRUCTION TRENDS Construction Trends

800

700

600

500

400

300 SF (000s)

200

100

0

2013

2014

2015

2016

2017

2018

2019

Leased Available

NOTABLE TRANSACTIONS Notable Transactions

Ipsen Biosciences

Sage Therapeutics Magenta Therapeutics

Surface Oncology

InVivo Therapeutics

5K SF

25K SF

45K SF

65K SF

85K SF

3