Q2-2018-BiotechReport

WEST CAMBRIDGE LAB

TOTAL INVENTORY (SF) 787,860

TOTAL VACANT (SF) 55,789

TOTAL VACANCY RATE

Q2 NET ABSORPTION (SF)

YTD NET ABSORPTION (SF)

7.1%

16,843

16,843

West Cambridge

TRENDS • With close to 17,000 square feet of positive absorption in the second quarter, vacancies declined to 7.1% in the West Cambridge lab market. Much of Cambridge’s available lab space is located here, with more than 56,000 square feet of space currently vacant. Fundamentals remain ultra-tight in both East and Mid Cambridge, and West Cambridge remains a key relief valve for these more established life science hubs. Look for continued movement into the market as space constraints and historically high rents push tenants out of Cambridge’s core lab markets. • Japan-based Eisai is relocating operations from Andover to the Alewife Research Center. The new drug discovery lab, totaling more than 48,000 square feet, will anchor The Davis Companies’ 227,000-square-foot 35 Cambridgepark Drive, which is slated to come on line in the third quarter of 2018. Reportedly, the remainder of this building is committed save two floors. • As lab space has become scarce throughout Cambridge, tenants have been willing to move further out from Core Kendall Square and this market. As a result, landlords have been able to push through stronger rent gains over the past few years, with lease rates rising by 30% since the end of 2014. With that said, fewer rent observations have led to some volatility in the data. Rates for space in West Cambridge continue to offer a step discount compared to neighboring submarkets. Existing lab space boasts a mid-to-high-$50s/SF price tag, while asking rents are in the high $60s/SF at 200 Cambridgepark Drive, which is not included in the current stats. While peak growth is likely behind us, look for modest gains in the near future. • Invesco Real Estate recently purchased a four-property portfolio in West Cambridge called the Quad, which encompasses more than 200,000 square feet of office, lab and flex space. The assets changed hands for $73 million or $364/SF, and will likely be repositioned to attract life science tenants to the growing cluster in this submarket. • The majority of Cambridge’s construction remains concentrated in East Cambridge, but West Cambridge could see some more action in the future. The Bulfinch Companies are planning to build out the remaining parcel at the Cambridge Discovery Park. The campus can accommodate up to two additional office/lab buildings totaling 250,000 square feet.

Vacancy and Net Absorption VACANCY AND NET ABSORPTION

100 150

50%

40%

-300 -250 -200 -150 -100 -50 0 50

30%

20%

SF (000s)

10%

0%

-10%

2013

2014

2015

2016

2017

2018

Net Absorption

Vacancy

ASKING RENTS Asking Rents

$60

$50

$40

$30

$20

$10

$0

2014

2015

2016

2017

NOTABLE TRANSACTIONS Notable Transactions

Eisai

Life Biosciences

Hydra BioSciences

Celgene

10K SF

20K SF

30K SF

40K SF

50K SF

7