Q1-2018-BiotechReport

EAST CAMBRIDGE LAB

TOTAL INVENTORY (SF)

TOTAL VACANT (SF)

TOTAL VACANCY RATE

Q1 NET ABSORPTION (SF)

YTD NET ABSORPTION (SF)

East Cambridge

9,311,288

48,444

0.5%

(30,391)

(30,391)

Vacancy

600

10%

500

8%

400

300

6%

Vacancy VACANCY

TRENDS • Vacancies in Cambridge’s premiere lab market are still essentially zero. Although rates inched up to 0.5% in the first quarter of 2018, there is less than 50,000 square feet of vacant space in East Cambridge. As has been the trend over the last two years, any available space is quickly leased up 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. While overall rent growth has slowed, lease rates on higher-end space are now in the low-$90s on a per-square-foot basis. • Space is leasing up faster than it can be built. Alexandria Real Estate’s 164,000-square-foot speculative project at 399 Binney Street is almost fully-occupied. Relay Therapeutics and Cellular Ecosystems Therapeutics will join Rubius Therapeutics once the new facility delivers at the end of this year; bringing occupancy to more than 83%. Reportedly a fourth tenant has signed an LOI, which would make the building 100% occupied. 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. Alexandria’s 431,500-square- foot 100 Binney Street will delivery completely full in the second quarter. While an office user, Philips North America, plans to occupy 80% of the first phase of DivoWest’s Cambridge Crossing development, the building is lab-capable and the remaining space is being marketed towards lab tenants. • Lab users are hiring. Alnylam is looking to grow its employee base, particularly in East Cambridge. The pharmaceutical company plans to add up to 200 additional employees in the near term and grow its global workforce to 1,250-1,500 by 2020. Gene-editing biotech, Editas Medicine, has also been boosting headcount as it prepares to launch U.S. clinical trials. Local labor markets are tighter-than-ever, especially for highly-skilled research personnel, but increasing headcounts bodes well for future lab demand. • Takeda Pharmaceuticals’ potential takeover of Shire may make waves in the local lab market. While there is little overlap in real estate footprints between the two companies, there could be some fallout if the deal were to move forward. In addition to its large presence in Lexington, Shire has re-established its Kendall Square presence within the past year. The pharmaceutical giant inked a deal for 343,000 square feet at 500 Kendall Street and subleased 223,000 square feet at 125 Binney Street. Takeda maintains a presence at 35 Landsdowne Street in Mid Cambridge, occupying the entire 202,000-square-foot building. • Funding momentum is strong among East Cambridge life science companies. Surface Oncology and Solid Biosciences raised $100 million and $153 million in their initial public offerings, respectively. Several major VC investments took place this quarter as well. Moderna Therapeutics raised a whopping $500 million, while Generation Bio and TCR2 Therapeutics both raised $100 million or more in the first quarter.

200

600

10% 4%

100 SF (000s)

500

0

8% 2%

400

-100

300

6% 0%

-200

2013

2014

2015

2016

2017

2018

200

Net Absorption

Vacancy

4%

100 SF (000s)

0

2%

-100

-200

0%

2013

2014

2015

2016

2017

2018

Net Absorption

Vacancy

CONSTRUCTION TRENDS Construction Trends

0 100 200 300 400 500 600 700 800 900

Construction Trends

0 100 200 300 400 500 600 700 800 900

SF (000s)

2013

2014

2015

2016

2017

2018

SF (000s)

Leased Available

NOTABLE TRANSACTIONS Notable Transactions

2013 Relay Therapeutics

2014

2015

2016

2017

2018

Leased Available

Cellular Ecosystems

Gemini Therapeutics

Eli Lilly & Co.

Avrobio

10K SF

20K SF

30K SF

40K SF

50K SF

f 2018, there is less than 50,000 sed up here— in many cases deals. There doesn't seem to be any clouds in East Cambridge's forecast. Expect tenants to struggle to find space to accommodate their term. While rent growth has slowed lease rates on higher-

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