Office and Lab Pipeline Hits Cyclical High

Nordblom Co. and CIM Group last month broke ground on a 235,000-square-foot speculative office tower at 321 Harrison Ave. in the South End. Image courtesy of SMMA Architects

The fundamentals in Greater Boston’s commercial real estate markets are among the best they have ever been, and developers have taken notice. The region’s construction pipeline has swelled to more than 8 million square feet of office and lab space as of the second quarter of 2019. 

While this represents a cyclical high for the metro area, the propensity to build has yet to wane. With outsized demand, limited availabilities and ever-rising rents – particularly in the urban core – the region is primed for additional construction. 

Urbanization trends have kept a steady stream of tenants moving into downtown Boston while fevered growth in the local life science industry has left available lab space nearly nonexistent. As a result, the Boston and Cambridge markets account for 70 percent of office and lab square feet currently under construction. 

Recent groundbreakings include the State Street Corp.-anchored One Congress, which is the largest office tower to begin construction in downtown Boston since 2000, and MassMutual’s 310,000-square-foot Seaport headquarters. Planned projects include Google’s new 318,000-square-foot headquarters at 325 Main St. in East Cambridge, Oxford Properties’ 625,000-square-foot 125 Lincoln St. near Chinatown and Samuels & Assoc.’s 325,000-square-foot office tower air rights project at 1001 Boylston St. in the Back Bay. 

Spreading to the Urban Edge 

Due to the scarcity of developable sites in key urban markets, both office and lab developers are getting more creative and increasingly pursuing opportunities outside of traditional business districts, like the South End, South Boston, Somerville and Allston-Brighton.  

Catamount Management is planning to add 500,000 square feet of new office and lab space to Hood Park in Charlestown over the next two to three years, while construction has finally begun on the 235,000-square-foot 321 Harrison Ave. in the South End.  

Following the success of nearby Assembly Row in Somerville, Cresset Group and Novaya are planning a 1 million-square-foot office and lab development dubbed Xmbly. US2 is close to breaking ground on a 175,000 square foot lab building as part of the eventual 2.4-million-square-foot Union Square redevelopment also in Somerville.  

Nordblom Co.’s The Beat, located at the former Boston Globe headquarters in Dorchester, and The Abbey Group’s redevelopment of the former Flower Exchange site in the South End round out some of the largest projects taking place just outside of the urban core. 

Liz Berthelette

Catering to Life Science Demand 

New lab clusters are growing in fringe locations as well. King Street Properties is planning NEXUS at the Allston Innovation Corridor, which will include roughly 600,000 square feet of biotech and residential space.  

Developers have also honed in on South Boston, particularly the A Street corridor, as Boston’s latest life science hub. The area is teeming with proposed lab developments. Alexandria Real Estate and Anchor Line Partners are planning a 210,000-square-foot life science facility at 99 A Street.  

Alexandria, with National Development, has also acquired the future General Electric headquarters site and an adjacent site permitted for a 293,000 square feet of lab space as well as a parking garage at 10 Necco St. The latter will likely result in a redevelopment of the property.  

Related Beal purchased a 6.5-acre site near the MBTA’s Broadway station from Procter & Gamble recently as well. The site represents another potential large-scale development for this neighborhood and will likely be marketed to lab and/or office users.  

Jonathan Sullivan

Suffice it to say, every major project in Boston’s fringe markets will have a substantial lab component or is being constructed as lab product. 

Although supply growth is ramping up in the Boston market, development is more measured than in previous building booms. Pre-commitments have been rather healthy this cycle, with roughly 63 percent of the total square footage under way across the metro area preleased as of the second quarter of 2019. Large users looking for new space in the coming years will struggle to find options, particularly in Boston and Cambridge. 

Strong office and lab fundamentals continue to drive development activity in Greater Boston. As projects continue to move through the planning process, look for steady levels of construction in the market’s near-term outlook. 

Liz Berthelette is research director and Jonathan Sullivan is research manager at Newmark Knight Frank in Boston.