Q1-2018-BiotechReport

Q1

MID CAMBRIDGE LAB

2018

TOTAL INVENTORY (SF)

TOTAL VACANT (SF)

TOTAL VACANCY RATE

Q1 NET ABSORPTION (SF)

YTD NET ABSORPTION (SF)

Mid Cambridge

5,262,211

28,019

0.5%

19,405

19,405

Vacancy

25%

20%

15%

Vacancy VACANCY

2017 2017 2017 2018 • 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 and tenants like Agios Pharmaceuticals, Blueprint Medicines, and Abbvie. As of the first quarter, there was only one availability here. Addgene is subleasing close to 18,000 square feet at 75 Sidney in anticipation of its move to LINX in Watertown. 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 renewed and expanded by more than 10,000 square feet in 75 Sidney Street in the first quarter; highlighting the area’s desirability among tenants. • Rents continue to climb in the Mid Cambridge lab market. 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. Since the end of 2014, average asking rents increased by 42%. While peak growth is likely behind us, look for modest gains in the near future. TRENDS • Positive net absorption pushed vacancies down to a paltry 0.5% in Mid Cambridge; declining by 40 basis points over the quarter and 100 basis points over the year. With a handful of mid-sized leases signed this quarter, there is less than 30,000 square feet of vacant space in this submarket. 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-to-high-$70/SF. Look for fundamentals to remain tight and higher lease rates in the near-term forecast. • Similar to East Cambridge, available space is quickly snapped up in Mid Cambridge. Takeda Pharmaceuticals has been successful in leasing up ARIAD’s former space at 26 Landsdowne Street, which is currently under renovation. Most recently, Beam Therapeutics inked a deal for 38,203 square feet in the building. Fulcrum Therapeutics took down 28,731 square feet recently as well. Other major leases signed this quarter 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. • Solid IPO activity taking place among Mid Cambridge biotechs over the last 12-18 months is driving strong leasing. Evelo Biosciences recently filed to raise $100 million and Unum Therapeutics raised $69 million in its initial public offering. Aileron Therapeutics ($73 million), Mersana Therapeutics ($92 million), and Spero Therapeutics ($92 million) have signed leases recently; after filing IPOs last year. Continued IPO activity in the local life science arena ultimately bodes well for future lab demand here. 2017 2017 2017 2018

10%

25%

5%

20%

5-Year Historical Average = 8.5%

0%

15%

2013

2014

2015

2016

2017

2018

10%

5%

5-Year Historical Average = 8.5%

0%

2013

2014

2015

2016

2017

2018

RENTS Rents

$90

$80

42% Increase

$70

Rents $60

$50

$90

$40

$80

$30

42% Increase

$70

$20

$60

$10

$50

$0

$40

2014

2015

2016

2017

$30

$20 NOTABLE TRANSACTIONS Notable Transactions

$10

Abbvie

$0

2014

2015

2016

2017

Beam Therapeutics

Mersana Therapeutics

Voyager Therapeutics

Spero Therapeutics

10K SF

20K SF

30K SF

40K SF

50K SF

6 quarter and 100 basis points over the year. arket. Tenants looking to expand here will h has slowed, asking rents remained elevated