Q2-2018-BiotechReport

Q2

MID CAMBRIDGE LAB

2018

TOTAL INVENTORY (SF) 5,260,009

TOTAL VACANT (SF) 25,000

TOTAL VACANCY RATE

Q2 NET ABSORPTION (SF)

YTD NET ABSORPTION (SF)

0.5%

3,019

22,424

Mid Cambridge

TRENDS • Positive net absorption pushed vacancies down to a paltry 0.5% in Mid Cambridge. They have declined by 380 basis points over the year. There is less than 30,000 square feet of vacant space here, and all of it is in the sublease market. 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-$70/SF. Look for fundamentals to remain tight and upward pressure on lease rates in the near- term forecast. • Similarly to East Cambridge, available space is quickly snapped up in Mid Cambridge. Takeda Pharmaceuticals was successful in leasing ARIAD’s former space at 26 Landsdowne Street, which is currently under renovation. Last quarter, Beam Therapeutics inked a deal for 38,203 square feet in the building. Fulcrum Therapeutics took down 28,731 square feet recently here as well. Other major leases signed this year 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. The sheer lack of available space in Mid Cambridge will likely limit leasing activity and absorption in the near term. • Funding momentum is strong among Mid Cambridge life science companies. In the second quarter alone, Evelo Biosciences, Scholar Rock and Neon Therapeutics raised $260 million in their second-quarter initial public offerings. Unum Therapeutics, Mersana Therapeutics and Spero Therapeutics also filed IPOs within the last 12-18 months. A handful of major VC investments took place recently as well. Most recently, Beam Therapeutics raised $65 million in a Series A round, while Casma Therapeutics raised $55 million in a Series C round. • 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. Tenants like Agios Pharmaceuticals, Blueprint Medicines, and Abbvie maintain operations along the Sidney Street corridor. As of the second quarter, there were two availabilities here totaling just below 24,000 square feet of lab space. 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 recently renewed and expanded its leases at 64 and 75 Sidney Street; highlighting the area’s desirability among tenants. • Lease rates remain near peak levels in the Mid Cambridge lab market, but observations are limited due to the lack of available spaces. As a result, rents ended the second quarter in the mid-$70-per-square-foot range. 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. While peak growth is likely behind us, look for modest gains in the near future. 2017 2017 2017 2018 2018

Vacancy VACANCY

25%

20%

15%

10%

5%

5-Year Historical Average = 8.2%

0%

2013

2014

2015

2016

2017

2018

RENTS ents

$90

$80

$70

$60

$50

$40

$30

$20

$10

$0

2014

2015

2016

2017

NOTABLE TRANSACTIONS Notable Transactions

Voyager Therapeutics

Voyager Therapeutics

Agios Pharma

Astellas

10K SF

15K SF

20K SF

25K SF

30K SF

6