A parable of sorts for the state’s housing struggles could be emerging in the state’s life science sector.
As most people are aware, a huge boom in speculative life science construction is nearing delivery, as Newmark’s Liz Berthelette describes in this week’s CRE Insider. But instead of racing to catch up with rapidly growing biotech firms fueled by boundless venture capital investments, there’s a very real risk these buildings will sit partially empty for a time.
Such is the nature of business – sometimes you make a bad bet, or you move too slowly and miss the market. Something similar could be said about the owners of class B office space downtown for not moving with the times.
But contrary to what you might hear from the person on the street, it doesn’t mean these developers are up creeks without paddles. As Cameron Sperance reports, also in this week’s CRE Insider, several major international drug firms still don’t have Boston outposts and this glut of space will give them plenty of options to choose from. And, as Steve Adams reported in last week’s issue, incubator space and suites for smaller firms offers another seemingly viable alternative to leasing up big chunks of floor space in one go.
Indeed, some of the rapid lease-up in life science buildings in the last three years was driven by desperation. As MassBio head of external affairs Ben Bradford told Sperance: “Companies that might not have been ready for 50,000 square feet took it because they didn’t know if they’d ever seen 25,000 square feet again.”
With less scarcity, as MassBio CEO Kendalle Burlin O’Connell writes in her CRE Insider column, the state’s biotech sector – which is still growing, mind you – will actually likely wind up healthier, even if a few developers have to take haircuts in the process. Yes, rent pressure will probably be lower, but as Burlin O’Connell explains, not having to face a panic-laced market for space means more middle-market biotechs will be able to expand and more investors will have a confidence that their picks will have space to grow, at all.
The state’s housing market bears striking similarities to the leasing market biotechs faced during the pandemic. Whether renting or buying, we’re all chasing too few spaces with the frenetic energy of a small prey animal. And that means the people with the most money get to elbow everyone else out of the way, and drive up the price of houses, condos and apartments in the process.
Imagine, though, that we could create more abundance in the housing market. Studies of metro areas that have upzoned dramatically show the move caused home prices to stabilize across the price spectrum as landowners, developers and owners of existing apartments all came to expect that more supply was coming, reducing their ability to raise prices. The same expectations likely helped buyers and renters avoid overpaying in a panic.
That sounds, to us, like a great stop on the way towards a cheaper housing market overall.
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