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66 Galen St., Watertown | Image courtesy of Elkus Manfredi Architects
A projected 18 million square feet of lab space is scheduled for completion in Greater Boston in 2023, potentially tempering the skyrocketing rent increases being driven by the life science industry’s space demand.
The life science real estate market remains severely constrained with vacancies under 5 percent in core markets such as Cambridge and recent rival Watertown. Asking Watertown lab rents are approximately $94 per square foot on a triple-net basis, comparable to levels seen in Kendall Square just 18 months ago, said Evan Gallagher, executive vice president for Colliers Boston.
“The lack of supply is causing pricing to skyrocket,” Gallagher said. “It’s just incredible to see the rent growth.”
At a market forum sponsored by NAIOP-Massachusetts, brokers said the pandemic has doubled the demand for lab and life science manufacturing projects throughout eastern Massachusetts. Companies have absorbed 2.3 million square feet of GMP facilities in the last 18 months and are looking for an additional 2.4 million square feet, with projects under way at Devens and the former Worcester State Hospital property and more proposed in Marlborough.
Colliers is tracking approximately 9 million square feet in lab and biomanufacturing requirements in eastern Massachusetts, an offshoot of the strong infusion of investment in the region’s industry this year. The $11.8 billion invested in Greater Boston life science companies since Jan. 1 already exceeds the $10.2 billion received in all of 2020, according to industry research.
Companies specializing in diagnostic equipment such as home testing kits and vaccine-related manufacturing processes are receiving a large portion of the new funding, Gallagher said.
The decision by major institutional investors such as Blackstone to increase their life science acquisition strategy has had implications for other developers seeking to carve out a niche in the sector, said Kerry Hawkins, a senior director of capital markets for JLL.
“A lot of stabilized product is going to a handful of really organized institutional investors,” Hawkins said. “Investors are learning if they can’t buy it, they need to build it.”
