THE RACE FOR SCIENCE AND TECHNOLOGY SPACE: Life Sciences in Boston
It’s no secret that the greater Boston area—and Cambridge, in particular—is a national hot spot for life sciences firms. Has the pandemic affected that status? Are there other cities on Boston’s heels? Industry experts Charles Murphy of JB&B and Tim Allen of Colliers discuss Boston’s rise to prominence, what’s happening in the market now, and where the industry could be headed.
Why is Boston such a draw for life sciences firms?
Murphy: It’s a cross section of a couple things, but starts with the quality and density of higher education and medical institutions in the area. Many times the research starts in the schools and hospitals, and life sciences companies branch out from them. This results in an experienced and robust life science community.
Allen: Far and away, the number-one draw is the local talent pool. Boston is global ground zero for life science and we have strong fundamentals that support our lively ecosystem. The life science industry likes to “cluster” in order to be around investors and like companies and institutions.
Are companies still looking to be in the urban core or are they branching out?
Murphy: Research and development is still found in dense urban environments like Kendall Square in Cambridge. As companies evolve and their focus shifts from R&D to manufacturing and biological processing, their program needs change. Recently we’ve seen a growing demand for companies in need of space suitable for viral vectors and cell/gene therapeutics. In the end, the cost for manufacturing spaces in the urban core causes many of these companies to look at the surrounding areas where space is less expensive.
Allen: No question that the life sciences ecosystem drafts off Cambridge, but due to the record low vacancy and high rents, peripheral markets like Watertown, Alewife, and the Seaport have been the biggest beneficiaries. Research operations are usually housed closer to the core to take advantage of the brainpower and collaboration, whereas manufacturing can function further out of the core—being close to research is a “nice to have” more than a requirement. The Greater Boston life science landscape is continuing to grow and has established itself all the way out to the Route 495 belt.
Are there opportunities to build new in the Boston area or is it more about converting space?
Murphy: There’s a lot of new, ground-up construction underway, making speed to market a huge driver. We’re seeing more companies looking at existing buildings, since you can convert portions of a building much faster than building new. If the building has the right bones and infrastructure, you have a leg up.
Allen: Right now, it’s all about speed to market. Demand far outpaces supply, and there are limited available, quality options. Capable and savvy developers who are building out spec suites are capturing the market. These biotechs are growing at a rapid rate, and certain inflection points in their lifecycle could require a larger footprint overnight. We have a ton of new development planned to deliver in two to three years, but there is a huge gap in the market over the short term.
Has the pandemic affected that need for speed?
Murphy: Absolutely. Venture capitalists are investing more and more funds into life science companies. These companies never stopped during the pandemic—they actually ratcheted up.
Allen: Since February of 2020, Boston-based biotechs have raised more than $16B through VC funding and the public markets. We anticipate a lot of dry powder and increased demand post-pandemic. Year over year, fundraising efforts have shown substantial growth, but these are unprecedented numbers.
Where do you see the Boston-area life sciences market headed?
Murphy: The demand for more regional biomanufacturing is higher than ever, so we’re anticipating an uptick in that market sector. We’re also interested in seeing how owners and developers look to repurpose some of their existing building stock. Converting commercial space to medical offices, distribution/fulfillment centers, and certainly life sciences all have the opportunities.
Allen: Just a few years ago, there were only a handful of developers dedicated to life science, and now we can count over 40. When we are tracking a 34Msf lab development pipeline through the next five years, sponsorship and their track record become paramount. The ultimate tipping point for supply comes in late 2024/early 2025 when the bulk of this new product comes online. When we’re talking about doubling the lab inventory in Massachusetts, there is a question of oversupply. It will be interesting to monitor these projects closely through the entitlement process.
What cities might be the next Boston when it comes to life sciences?
Allen: Follow the Amtrak line. Philadelphia has a burgeoning ecosystem and is certainly an area to watch. Real estate is drastically less expensive than Boston or New York, and Philly has many of the fundamentals to support growth. Connecticut is another spot to monitor and has potential on the manufacturing side. Connecticut is a conduit between Boston and New York with an already strong base of biotechs. MassBio has already created a sister group there, BioCT.
Murphy: New York City now has taken steps to facilitate commercial life sciences development from both the funding and regulatory standpoint. They’ve clarified code and zoning requirements to foster more life sciences development. Additionally, the New York City Economic Development Corporation (NYCEDC) has allocated funding for life sciences. Historically, the capital upgrades required to bring a facility up to life science standards has been the biggest hurdle, but with the current commercial market, we see a lot of opportunities to buck that trend. We’re already seeing it with buildings like Deerfield’s CURE and King Street Properties’ Innolabs.