cambridge office & lab market report
TRANSCRIPT
CAMBRIDGE OFFICE & LAB MARKET REPORT
FOURTH QUARTER 2019
BIG RENTS AND LOW VACANCY ACROSS THE BOARDLong considered one of the nation’s most historical and steadfast cities, Greater Boston has undergone
an evolution over the past decade and become one of the world’s most dynamic gateway cities and top
tier investment markets. A global icon for its outstanding research universities, medical centers and
technological advancement, Greater Boston’s expansion has been fueled by its diverse economy and
record setting venture capital and NIH funding.
Not only has the local population grown at a rate well above the national average, but the job market
has kept pace with the state’s unemployment rate measuring below three percent. The marked
increase in both population and job growth can largely be attributed to over 40% of students from local
universities and colleges that are electing to remain in Boston following graduation. Not surprisingly,
Greater Boston’s workforce has become one of the nation’s most youthful, with 35% of its workers
between the ages of 20 and 34 compared to the national average of only 20%.
The region’s strengthening demographics and economy have promoted a transformative phase across
the state that has ushered in new retail, residential and infrastructure development that has not been
achieved in decades. Looking forward, expect durable market conditions and a diversified economy to
guide the region’s commercial real estate market to a strong performance over the next several years.
2.9%NOVEMBER
MASSACHUSETTS UNEMPLOYMENT
3.5%NOVEMBER NATIONAL
UNEMPLOYMENT
$11.5BGREATER BOSTON
VC FUNDING (2018)
#1NATIONALLY
R&D FUNDING PER CAPITA
MARKET TRENDS
GLOBAL DESTINATIONWorld leader in medical innovation and
technology advancement
TECHNOLOGY & INNOVATION HUB
Fortune 500 leaders and 1,900 homegrown startups
LIFE SCIENCE SECTOR SURGESHuge demand from National and
International companies
WHERE IS THE RELIEF?Small and medium size users face
historic competition
MARKET RATES KEEP RISING
Demand out-pacing supply,no relief for price sensitive users
COWORKING SPACE DISRUPTING MARKET
Tenants like flexibility and shorter term commitments
INVESTMENT SALES PRICING CLIMBING
Properties are setting record pricing
$28.00
$34.00
$40.00
$46.00
$52.00
$58.00
$64.00
$70.00
$76.00
$82.00
$88.00
Average Asking Rate
201920182017201620152014201320122011201020092008200720060%
2%
4%
6%
8%
10%
12%
14%
16%
18%
Direct Vacancy (%)
$20.00
$25.00
$30.00
$35.00
$40.00
$45.00
$50.00
$55.00
$60.00
$65.00
$70.00
$75.00
Average Asking Rate
201920182017201620152014201320122011201020092008200720060%
2%
4%
6%
8%
10%
12%
14%
16%
18%
Direct Vacancy (%)
OFFICE CLASS AASKING RATE VS. DIRECT VACANCY
OFFICE CLASS BASKING RATE VS. DIRECT VACANCY
DIRECT VACANCY RATE BY SUBMARKET
0% 1% 2% 3% 4% 5% 6% 7% 8%
East - Lab
Mid - Lab
East - O�ce
Mid - O�ce
West - O�ce
West - Lab
VACANCY
3.2%
CAMBRIDGE OFFICE STATS AT A GLANCE
SUBLEASE
3.3%ABSORPTION
(158,000) sf
ASKING RATE
$80.72/sfAVAILABILITY
7.5%CONSTRUCTION
2.8MM sf
WEST CAMBRIDGE
OFFICE $54.09/SF
LAB $73.94/SF NNN
MID CAMBRIDGE
OFFICE $73.71/SF
LAB $85.25/SF NNN
EAST CAMBRIDGE
OFFICE $92.85/SF
LAB $92.95/SF NNN
CLASS A & B OFFICE
#3.0% DIRECT VACANCY
#4.2% SUBLEASE AVAILABILITY
#8.2% TOTAL AVAILABILITY
(105,250) SF 12-MONTH ABSORPTION
#$85.68/SF AVERAGE ASKING RATE
• Akamai took occupancy of its brand new 480,000 square foot
property at 145 Broadway following approximately two years
of construction lead by the Boston Properties development
team. Google has subleased 145,000 square feet from Akamai
at its former neighboring 150 Broadway location. Meanwhile,
construction commenced at 325 Main Street where Boston
Properties is building a 385,000 square foot tower for Google
which they plan to occupy before the end of 2022. The timing
of the large tenants worked perfectly and allowed for a highly
orchestrated musical chairs operation with limited disruption
and downtime for both tenant and landlord.
• At MIT’s 238 Main Street development, Beam Therapeutics
recently committed to 127,000 square feet of premium office
space. The property which is currently under construction in the
heart of Kendall Square has already leased 64,000 square feet to
Bayer. Both tenants are expected to take occupancy in the third
quarter of 2021 when construction is complete.
• An MIT-affiliated tech incubator firm will expand to an
underused university-owned building outside Central Square
at 750 Main Street. The aptly named “Engine” will span over
200,000 square feet of shared office, fabrication, and lab
space. The space will help retain burgeoning companies within
Cambridge by affording opportunities and availability for tenants
under 10,000 square feet who otherwise face extreme obstacles
finding quality space in the hotly contested market.
• The investment sales market continued churning with quality
over quantity ringing true. Just two years after purchasing
the 625 Mount Auburn street for $44.5 million, The Davis
Companies divested the asset to Paradigm Properties for $57.5
million. The property, located on the outskirts of Cambridge
towards Watertown, has room for rents to run and the omni
present lab conversion potential. Market rumors suggest that
Divco West has selected a buyer for 955 Massachusetts Avenue
and that pricing will approach $100 million or over $1,100 per
square foot for the 100% office building outside Central Square.
ADDRESS SUBMARKET TENANT SF
120 Brookline Street Mid Cambridge Wistia 25,000
245 First Street East Cambridge Regus 18,500
675 Massachusetts Avenue Mid Cambridge Litmus 15,600
One Alewife Center West Cambridge Onshape 15,300
955 Massachusetts Avenue Mid Cambridge Liquidspace 5,150
NOTABLE RECENT LEASES
CLASS A & B OFFICE
$25.00
$32.00
$39.00
$46.00
$53.00
$60.00
$67.00
$74.00
$81.00
$88.00
$95.00
20192018201720162015201420132012201120102009200820070.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
2019201820172016201520142013201220112010200920082007
AVERAGE DIRECT VACANCY BY SUBMARKET
AVERAGE ASKING RATE BY SUBMARKET
West Mid East
OFFICE & LAB DEVELOPMENT PIPELINE
250 WATER Lab
314 MAIN STREET Office
222 JACOBS STREET Office
238 MAIN STREET Lab
400/500 CAMBRIDGE DISCOVERY Lab
325 MAIN STREET Office
350 DAWES Office
450 DAWES Lab
CLASS A & B LAB
#0.6% DIRECT VACANCY
#1.2% SUBLEASE AVAILABILITY
#2.7% TOTAL AVAILABILITY
#115,050 SF 12-MONTH ABSORPTION
#$89.81/SF AVERAGE ASKING RATE (NNN)
• In one of the region’s largest annual transactions, The ARC (35
Cambridgepark Drive), was purchased by Healthpeak and King
Street Properties. The newly developed 224,000 square foot
lab facility in West Cambridge conveyed for $332.5 million or a
staggering $1,485 per square foot. The building is 100 percent
leased to Syros Pharmaceuticals, Ribon Therapeutics, Codiak,
Glympse Bio, and Eisai. The property, which leased up in under
a year, has seen rents move from the mid $60’s NNN to the mid
$80’s NNN today.
• On the other side of the train tracks from Cambridgepark
Drive, the Quadrangle neighborhood, consisting of properties
bound by Concord, Blanchard and Fawcett Street experienced
an active second half of 2019. Mirroring their success at The
ARC, the Davis Companies and Invesco leased up an empty 75
Moulton Street to Invaio Sciences and more recently secured
Civetta Therapeutics for 30,000 square feet at the newly
converted office to lab property at 10 Wilson Road. Hoping
to draft off the success of Davis and Invesco, Cabot Cabot &
Forbes are seeking the development rights for up to one million
square feet in the same neighborhood. The proposal will likely
require the installation of a pedestrian footbridge to connect
the Alewife MBTA station, however the location of the bridge
remains unclear.
• While available lab space remains scarce across Greater Boston,
an even more specific space type designed for animal research
(vivariums), is extremely rare due to its high cost and heavily
regulated permitting process. Shared space provider, SmartLabs,
has recently leased 16,000 square feet at 301 Binney Street and
will renovate an already existing animal research facility into
state of the art space. The new location will allow emerging and
later-stage biotech companies access to the highly desirable
space without having to commit their own capital and time
to construct similar facilities within the confines of their own
laboratories.
• Hoping to bring much needed relief to the market, a handful of
projects within Cambridge and the immediately surrounding
Inner Suburban locations have recently commenced
construction. At Cambridge Crossing, while construction
churned along for Sanofi’s new facility, the DivcoWest team has
moved forward on a speculative basis with 250 Water Street
which will deliver roughly 400,000 square feet of commercial
space during 2022.
ADDRESS SUBMARKET TENANT SF
20 Sidney Street Mid Cambridge Millennium Pharmaceuticals 50,000
Cambridge Discovery Park West Cambridge Arbor Biotechnologies 36,000
10 Wilson Road West Cambridge Civetta Therapeutics 29,900
Cambridge Discovery Park West Cambridge Simcere Innovation 26,300
301 Binney Street East Cambridge SmartLabs 16,000
320 Bent Street East Cambridge Momenta Pharmaceuticals 15,500
NOTABLE RECENT LEASES
CLASS A & B LAB
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
201920182017201620152014201320122011201020092008
AVERAGE DIRECT VACANCY BY SUBMARKET
AVERAGE ASKING RATE BY SUBMARKET
West Mid East
$25.00
$32.00
$39.00
$46.00
$53.00
$60.00
$67.00
$74.00
$81.00
$88.00
$95.00
201920182017201620152014201320122011201020092008
BEHIND THE SCENES WHATS DRIVING DEMAND?
130,000
PEOPLE WORK IN CAMBRIDGE
11
OF FORBES’ 25 LARGEST TECH COMPANIES RESIDE IN CAMBRIDGE
$1.4m
MEDIAN PRICE FOR SINGLE-FAMILY HOME
VC FUNDING GREATER BOSTON
VC FUNDING PER CAPITA
CAMBRIDGE RESIDENTS HAVE A BACHELORS DEGREE OR HIGHER
$122,000
AVERAGE ANNUAL SALARYTECHNOLOGYINCUBATORS
FUNDING PER CAPITA FOR 20+ YEARS
DEMAND OUTPACING
SUPPLY
NEW ENGINES
OFFICE & LAB REPORT STATS
OFFICETotal
Inventory (SF)Direct
VacancySublease
AvailabilityTotal
Availability Quarterly
Absorption (SF)12 Month
Absorption (SF)Average
Asking Rate
TOTAL A & BTOTAL A & B
Cambridge 11,117,200 3.2% 3.3% 7.5% (63,050) (157,550) $80.72
East Cambridge 6,051,350 2.7% 3.3% 6.7% (38,650) (107,300) $92.85
Mid Cambridge 3,135,700 3.0% 1.9% 5.4% (19,750) (29,650) $73.71
West Cambridge 1,930,150 4.7% 5.7% 13.4% (4,650) (20,550) $54.09
CLASS A
Cambridge 7,360,450 3.0% 4.2% 8.2% (35,600) (105,300) $85.68
East Cambridge 5,032,500 2.6% 3.5% 6.6% (22,100) (74,400) $93.71
Mid Cambridge 1,224,500 1.4% 3.0% 4.3% (10,200) (4,150) $76.25
West Cambridge 1,103,450 6.4% 8.8% 19.7% (3,250) (26,750) $59.50
CLASS B
Cambridge 3,756,700 3.5% 1.5% 6.0% (27,450) (52,250) $71.02
East Cambridge 1,018,850 3.6% 2.0% 6.8% (16,500) (32,900) $88.60
Mid Cambridge 1,911,200 4.0% 1.2% 6.0% (9,500) (25,550) $72.08
West Cambridge 826,650 2.5% 1.5% 4.9% (1,350) 6,150 $46.88
LABTotal
Inventory (SF)Direct
VacancySublease
AvailabilityTotal
Availability Quarterly
Absorption (SF)12 Month
Absorption (SF)Average
Asking Rate
TOTAL A & B
Cambridge 14,662,550 0.6% 1.2% 2.7% 600 115,000 $89.81
East Cambridge 9,660,700 0.3% 0.8% 1.5% (26,650) (26,650) $92.95
Mid Cambridge 4,336,800 0.4% 0.6% 1.9% - 2,550 $85.25
West Cambridge 665,000 6.5% 12.0% 24.2% 27,300 139,150 $73.94
CLASS A
Cambridge 12,174,400 0.3% 0.7% 1.4% (26,650) (26,650) $91.03
East Cambridge 9,005,750 0.3% 0.8% 1.7% (26,650) (26,650) $93.20
Mid Cambridge 3,039,550 0.2% 0.0% 0.2% - - $85.00
West Cambridge 129,100 0.0% 8.1% 8.1% - - $82.00
CLASS B
Cambridge 2,488,100 0.5% 2.0% 5.6% - 7,500 $83.82
East Cambridge 654,950 0.0% 0.0% 0.0% - - $89.50
Mid Cambridge 1,297,250 0.9% 1.9% 6.0% - 2,500 $85.83
West Cambridge 535,600 0.0% 4.6% 11.5% - 5,000 $72.00
Lincoln Property Company | 53 State Street, 8th Floor, Boston, MA | 617.951.4100 | LPCBoston.com
Lincoln Property Company’s Cambridge Office & Lab Report is produced by the Boston Office’s research team in collaboration with our Cambridge Brokerage Group. If you have any questions regarding market conditions and the information found in this report, please contact Ethan Robert.
ETHAN ROBERTDirector of Research 617.951.4160 [email protected]