Originally published by the Boston Herald on December 7, 2021
Demand for Boston-area lab space is surging, but the supply is scant, leading to soaring rents, according to a new report.
Demand is far outpacing available space in the Boston area, with a record number of large biotech and drug companies seeking 100,000 square feet amid a global race for new drug development, according to the report from CBRE, a Dallas-based commercial real estate services and investment firm.
“The Boston lab market is expanding at an unprecedented pace,” said Jonathan Varholak, the firm’s vice chairman. “With over $9.3 billion of venture capital funding having flowed into Boston area life science firms in the first three quarters of this year, demand from startups is at an all-time high. We’re seeing record-setting rents and historically low vacancies as a result.”
The vacancy rate for existing lab and research and development space is just 1.1% in the Boston-Cambridge market, as average asking rents soar, jumping 7.5% to $94.62 per square foot in September compared to March 2021.
In Boston and Cambridge, where vacancy is 0.1% and 0.3% respectively, the average asking rents are now $100.00 per square foot in Boston and $112.79 in Cambridge, according to CBRE. The leasing of lab space has been pushed into the suburbs, including Watertown and Route 128 West.
“As we see in housing, space is scarce,” said Joe Boncore, CEO of the industry group MassBio. “But as we add more space to the economy, we expect the price of lab space to level off.”
Ten million square feet of lab space is under construction in the Boston area, which includes 9.3 million square feet of “spec” construction, where developers broke ground with no tenants signed at the time, the report said. Six million square feet is expected to deliver by the end of next year, and 3.2 million square feet is being converted from other uses such as office or warehouse space.
In Boston, life sciences employment has grown faster than the U.S average over the past 15 years, although Boston has only about a sixth of the life sciences employment as Middlesex County, including Cambridge, Waltham, Lexington, among others. Yet Boston has grown more rapidly over the past year: 7.5% vs. 5.2%, according to CBRE.
“Life sciences labs quickly have become a highly sought-after property type for both tenants and investors,” said Ian Anderson, CBRE’s Americas Head of Office Research. “This intense demand for lab space is the natural result of a global push for new medicines begetting strong funding and hiring in the life sciences sector.”
Global demand for vaccines for COVID-19 and viruses like it has led to initial public offerings for life sciences companies in the on pace for a record year, raising roughly $13 billion, according to CBRE.