Greystar’s 74M lab tower in Assembly Square could become home to part of Mass General Brigham’s sprawling operations. Photo by James Sanna | Banker & Tradesman Staff
Developers launched dozens of lab projects with the hopes that life science industry growth tendrils would extend deep throughout eastern Massachusetts: from inner-city Boston neighborhoods to Gateway Cities and outer suburbs’ office parks.
The historic lab-building boom – and subsequent glut – has largely played out, according to industry research and brokers. Some lenders are cutting their losses, and landlords are looking to alternative industries such as medical clinics, R&D and tech offices to fill vacancies.
“There is certainly a segment of the market – especially in secondary and tertiary markets – that are never going to be lab buildings,” said Robert Richards, executive managing director at JLL in Boston. “Whether it’s tough tech, robotics, or medical offices, there is definitely a segment of the market that is smartly focusing on that right now. There is demand.”
Alexandria Real Estate Equities, the nation’s largest lab landlord, demonstrated its willingness to look beyond life science uses in a major deal completed in June.
Wilmington-based Onto Innovation leased nearly 160,000 square feet at 3000 Minuteman Road in Andover for its new headquarters, in a deal that included starting base rent of $17 per square foot. By contrast, average asking suburban lab rents still exceed $71 per square foot, according to CBRE research, despite a 29 percent vacancy rate.
Developers limiting their options to life science tenants would take years to fill the vacant lab buildings. Local brokerages are tracking up to 16.6 million square feet of vacant lab space across the region, while CBRE is tracking just 2.45 million square feet of lab space requirements.
Office Deal Reported at 74M
With few big space requirements in the market, one of the region’s most prominent vacant lab buildings appears to be headed for use as medical offices.
Three real estate industry sources confirmed that Mass General Brigham has committed to a substantial block of space at 74M, the 465,000 square-foot office-lab tower developed by Greystar in Somerville’s Assembly Square.
The project, a joint venture with a Canadian pension fund, broke ground in 2022 and was completed in 2024. A message was left with Mass General Brigham seeking comment.
BXP President Doug Linde predicts that AI-focused life science companies and traditional office users will occupy some of the vacant lab inventory.
“There’s just a ton of quote-unquote, bespoke lab-ready buildings that are sitting out in the [Greater Boston] marketplace that are going to just have to wait their turn for a customer to show up that actually wants that particular location in order for them to achieve the value that’s going on,” Linde said in a conference call with stock analysts discussing BXP’s second-quarter earnings. “In some cases, those tenants or those building owners are making a decision that they’re no longer going to wait.”
Meanwhile, the lab construction pipeline has dwindled to 2.1 million square feet, according to CBRE research. The last lab project built on speculation without a tenant, Alexandria’s 660,034 square-foot 421 Park in Boston’s Fenway, reached completion in June.
Lenders took possession of 321 Harrison Ave. in Boston’s South End, where BioMed Realty had hoped to expand life science industry presence, as lab leasing failed to materialize. Photo courtesy of Tishman Speyer
More Distressed Transactions Likely
Some lenders have taken back possession of properties that were envisioned as the leading edge of new life science clusters, such as BioMed Realty’s 321 Harrison Ave. and 1000 Washington St. in Boston’s South End.
The property includes a 235,000 square-foot lab building completed in 2022, and a 242,000 square-foot office building that was slated for a lab conversion following the departure of remaining office tenants.
A partnership of KKR Real Estate Finance Trust and AllianceBernstein took ownership of the buildings in June and assumed the $322.6 million mortgage. Tishman Speyer is now leading the property’s leasing and management.
“More of the distress and lender-forced dispositions are likely to occur. There is a lot of space in new buildings that have been delivered in recent quarters, and at some point it becomes untenable to wait,” said Jeffrey Myers, Colliers’ research director in Boston.
Construction of Alexandria Real Estate Equities’ 421 Park Drive (left) in Boston’s Fenway wrapped up in June, representing the last lab project built on speculation in Greater Boston without a tenant. Image courtesy of Alexandria Real Estate Equities
Smaller Lab Tenants Dominate Market
For landlords that have the financial ability to hold out for higher rent lab users, the options are increasing.
Lab demand is rising for the first time since 2022, but most of the space requirements are by smaller early-stage companies. JLL is tracking 49 companies looking for lab space, a majority in the 25,000 square foot and under category.
Steve Adams
Many are gravitating toward established industry clusters in Cambridge and Watertown.
Cambridge notched positive absorption of 194,000 square feet in the second quarter, according to CBRE. Suburban markets had over 176,000 square feet of negative absorption, while Boston registered a slight decline in absorption that left vacancies at 34.2 percent.
But even Cambridge landlords have been forced to sweeten the financial pot. Average asking rents have declined by approximately 25 percent from the market peak, according to Colliers data. Tenant allowances have doubled from 2022 levels, with landlords now offering $325 to $400 per square foot on long-term leases in new buildings.
And landlords are increasingly willing to sign lease deals as short as three years with minimal upfront payments by tenants, JLL’s Richards said.
“That’s a trend that’s going to continue for three to five years minimum,” he said.
