MIT’s Kendall Square Initiative would replace five parking lots and five buildings off Main Street with 1.8 million square feet of high-tech offices, labs, retail space and apartments.

When it trades in its lab goggles for a developer’s hardhat, the Massachusetts Institute of Technology is no different from any other investor looking for the highest return.

In Cambridge’s Kendall Square, home to Greater Boston’s highest commercial rents and scarcest vacancies, MIT sees better uses for 8 acres of prime real estate it owns than the current jumble of parking lots and aging classroom buildings, labs and graduate housing. The final phase of permitting has begun for 1.8 million square feet of offices, labs retail shops and apartments.

The project gives MIT an opportunity to cash in on the booming Kendall Square market, where average lab rents have hit $85 per square foot.

“It’s going to be the most expensive space in Cambridge. It could be in excess of $100 per square foot,” predicted John Osten, a managing partner with JLL.

Large Users Dominate Pipeline

As Kendall Square has attained new peaks as a global tech and life science hub, office vacancy rates have fallen to 3.6 percent in the 6.4-million-square-foot East Cambridge market, according to Cushman & Wakefield’s MarketBeat report.

Lab space is even tighter, with a 2.7 percent vacancy rate at the end of the second quarter. Average gross rental rates were nearly $70 per square foot for office space and $85 for lab space.

There are currently only three options in the neighborhood for companies looking for more than 20,000 square feet, according to Boston-based brokerage Cresa. That has set up competition from other submarkets, primarily low-rise space in downtown Boston, for early-stage companies that want to be near the MBTA’s Red Line.

But the prospect for three large new office and lab buildings in Kendall Square isn’t expected to loosen up the market significantly. Companies’ space requirements exceed availabilities in Kendall Square by a 4-to-1 ratio, and large credit tenants will lease MIT’s space well before it’s completed, JLL’s Osten predicts.

So tight is the market, some industry leaders have leased space in a defensive strategy to lock down real estate well into the next decade.

In July, Pfizer Inc. announced it leased 180,000 square feet at MIT’s 610 Main St. and will relocate 400 researchers in its cardiovascular, metabolic and endocrine disease and neuroscience research units from elsewhere in Cambridge. But for now, it will sublease half of its new space to smaller companies.

Google recently expanded by 50,000 square feet at its 300,000-square-foot campus at Boston Properties’ Kendall Square complex, but had signed an option for the space two years earlier.

And most of Kendall Square’s 2-million-square-foot development pipeline is already spoken for in the form of build-to-suit projects. In June, Bristol-Myers Squibb leased 400,000 square feet at Alexandria Real Estate Equities’ 100 Binney St. site.

There’s Still No ‘There’ There

The mixed-use design of the $1.2-billion MIT project is a repudiation of the redevelopment schemes of the 1970s, when Boston Properties built a series of suburban-style office and lab buildings in the heart of Kendall Square. The development pattern set the tone in the neighborhood, and the surrounding streets lacked vitality for decades.

“When I first brought up the idea of restaurants five years ago, people said, ‘There was a restaurant there 10 years ago and it didn’t work,” Cambridge City Councilor Leland Cheung recalled. “It’s a little difficult in that there’s still no ‘there’ there.”

The MIT project reflects a master plan and new zoning approved by the city in 2013. It embraces the tenets of pedestrian-friendly designs, vibrant open spaces and a mix of commercial, residential and public uses designed to create a 24-7 urban environment.

Steven Marsh, head of MIT Management Investment Management Co., declined an interview request. In documents submitted to Cambridge officials in July, MIT laid out some of its rationale for the project.

“Despite the excitement of the creative intellectual developments in and around Kendall Square, the physical environment is still not reflective of a world class institution, leading innovation cluster, or vibrant city square,” MIT wrote. “Kendall Square is experiencing a burgeoning sense of excitement and identity but still requires the addition of fundamental amenities such as basic retail services and places to entertain, meet, and assemble that are critical to a successful urban interactive place.”

Housing was a contentious issue when the master plan was debated by city councilors. Advocates argued that MIT should help ease the local housing affordability crisis. The final proposal calls for a 300-unit apartment building including 50 affordable units, along with a 330,000-square-foot building containing 450 units of graduate housing, replacing the 201-unit existing tower.

“I really thought MIT needed to do more to house its own students, and we got them to radically increase their commitment from where they started,” Cheung said.

The project is subject to final approval by the Cambridge planning board this fall. Boston-based Leggat McCall Properties and Redgate are MIT’s project managers.

Lyme Properties Set An Example

In the late 1990s, former Cambridge City Councilor David Clem’s Lyme Properties offered a model for the future of Kendall Square when it redeveloped 10 acres for a mixed-use project spanning six blocks anchored by Genzyme and Vertex Pharmaceuticals.

In contrast to the monolithic laboratory buildings that dominated the neighborhood, the design incorporated park space, two public squares, cafes and a skating rink.

“To me, it established the DNA of what Cambridge is trying to achieve now, which is to make this more of a neighborhood for people,” said Ken Greenberg, a Toronto urban planner who advised the developers on the project. “Lyme Properties [told us that] the kind of top-level scientists they wanted to recruit and retain do not want to be in a science park. They want to be in a vital neighborhood. There was a huge emphasis on parks and green connections. You want opportunities for people of all ages to be comfortable in a neighborhood.”

Waiting In The Wings

Three other development sites could change the face of East Cambridge in the coming years.

Boston Properties and the Cambridge Redevelopment Authority have proposed rezoning several parcels north of Broadway to allow 600,000 square feet of commercial development and 400,000 square feet of residential buildings. The measure requires city council approval.

The federal government is moving forward with divestment of the Volpe National Transportation Systems Center, a 14-acre campus at 55 Broadway, with plans to solicit mixed-use proposals from private developers. In anticipation of the redevelopment opportunity, Cambridge city councilors have begun reviewing proposed zoning that would double the maximum building height on the site to 500 feet.

Finally, the recent acquisition of NorthPoint – the long-delayed development site near the Charlestown border – throws a new wrinkle into the submarket. San Francisco-based DivcoWest paid $291 million to acquire 42-acre parcel from Canyon Partners Real Estate LLC, which had owned the property since 2010. The new owners have indicated that they want to get construction under way soon. The parcel is approved for 2.1 million square feet of commercial space.

“As soon as they get a shovel in the ground, I think they’re going to have commitments,” JLL’s Osten said. “Divco is a very strong sponsor and it brings a lot of credibility to that site.”