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Photo courtesy of Boylston Properties
As a downturn in lab space demand throws doubt on future development prospects, fully leased properties appear to offer a safer haven for lenders.
In Watertown, a 9-story lab tower at Arsenal Yards received $150 million in permanent financing in a deal that closed just six months after its completion. Milwaukee-based Northwestern Mutual provided the five-year fixed-rate loan for 100 Forge, replacing a $101 million construction mortgage from Bank OZK that was issued in 2021.
Boston-based developer Boylston Properties locked in a 5.5 percent interest rate in March and closed on the loan early this month, President Mark Deschenes said.
“We specifically targeted getting in the market in the first quarter, understanding so many people were out of the market late last year and there would be allocations available,” Deschenes said.
Boylston Properties and J.P. Morgan Global Alternatives partnered on the 165,600-square-foot lab tower which opened in December.
The building was 100 percent leased prior to completion to five venture capital-backed tenants: Curie Therapeutics, Abata Therapeutics, Remix Therapeutics, Vigil Neuroscience and Affini-T Therapeutics.
Established life science industry clusters including Watertown appear to be best-positioned to ride out the recent decline in companies’ space requirements, according to commercial brokers.
Tenant demand spiked in 2021 as Massachusetts biotechs benefited from a surge of venture capital investment, but has declined following a series of Federal Reserve interest rate hikes. Companies are in the market for 1 million square feet of lab space in Greater Boston, according to Newmark data, down from 6.5 million square feet in 2021. Those that are still looking for space are favoring areas with a substantial industry presence, Newmark brokers said at a NAIOP Massachusetts forum this month.
“There’s been a flight to quality,” Boylston Properties’ Deschenes said. “Labs have always been about clustering and having adjacent space for these companies to expand into. They’re always thinking about their expansion plans, and trying to keep their employees from having to relocate.”
100 Forge is one of three life science buildings at Arsenal Yards leased to 10 companies.
