These are strange times in the Cambridge lab market: Leasing velocity has been at a virtual standstill for the past 10 months, and the market doesn’t show any demand capable of reviving it anytime soon. Brokers describe a glut of available space, relative to demand, and landlords are warily eyeing sublease space. Asking rents are falling, and tenants brimming with cash and confidence can find great deals.

“When there’s plenty of space and not a lot of demand, only one thing happens with the price,” said Adam Subber, a vice president with tenant brokers CresaPartners. “It drops.”

At the same time, the tenants in the market are chasing a deceptively small slice of available space. Availability is at 17 percent and rising, according to data from Jones Lang LaSalle. Colliers Meredith & Grew counts more than 1.2 million square feet of open lab space. But, according to brokers, more than half of Cambridge’s available lab space is either obsolete or prohibitively expensive, rendering it difficult, if not impossible, to lease in the current economic climate.

“Value’s the name of the game,” said Peter Bekarian, a senior vice president at Jones Lang LaSalle.

Tenants are fleeing to cheap quality space, and two losers are emerging.

One is Cambridge’s stock of older lab space, which makes up more than a quarter of all available space. Many, last rehabbed 10 to 20 years ago, are clustered around Albany, Binney, and Rogers streets. There are also significant blocks of open space at 640 Memorial Drive. At a recent industry briefing, Joe Flaherty, an executive vice president at Colliers Meredith & Grew, labeled such older lab spaces as obsolete and “unleasable.”

“Those brick-and-beam buildings were some other use, and they were converted to office, and then to lab,” Subber said. “The infrastructure is of varying vintage and usefulness, and the tenant improvement costs are very high.”

“You can always go in and recondition things,” said Bekarian, adding that such rehab work – running anywhere between $100 and $140 per square foot – is “highly capital intensive,” and “financially less feasible” for cash-strapped tenants and landlords.

Another broker was more blunt: “Landlords don’t have a bottomless pit of money.”

Buildings on the other end of the spectrum haven’t fared much better. BioMed Realty’s massive, 420,000-square-foot building at 301 Binney St. has upwards of 300,000 square feet in shell space sitting empty. And BioMed is preparing to deliver another 278,000 square foot shell at 650 East Kendall St. later this year. That building has had no pre-leasing activity. BioMed had been targeting a single large tenant for 650 East Kendall, but is now said to be willing to subdivide the building.

Both BioMed properties carry high costs to entry – a long-term lease commitment, with rents in the high $50s or low $60s. Just last year, BioMed was quoting rents in the neighborhood of $65. Both buildings need significant tenant improvement investments before they’ll be ready for occupancy, and both are chasing large tenants – a market that, essentially, doesn’t exist in Cambridge today. Nearly all the players seeking space in Cambridge are small users with space requirements between 5,000 and 20,000 square feet.

“There’s very little meaningful demand in the market,” Flaherty said. Colliers is only tracking three tenants in the market for more than 20,000 square feet: Vertex, Novartis and the Forsyth Institute. Cushman & Wakefield says they’re tracking eight firms in the city with requirements of more than 50,000 square feet, though industry insiders believe the bulk of those firms are either making a show of testing the market to pressure their current landlords, or looking to move two or three years down the line.

“650 East Kendall looks great, but right now they’ve got their work cut out for them,” Bekarian said. “The cost basis is so high, based on what they paid for the dirt, that they have to try to preserve high coupon rates. I’m not saying it’s impossible, because there will always be a wild card. Last recession, Novartis took half a million square feet of shell. You can’t rule that out.”

On The Horizon

And there’s more construction coming – at least on paper. Alexandria Real Estate Equities is seeking permits for a $1-billion project that would deliver 1.6 million square feet of lab space, as well as residential. Alexandria, however, recently put on hold a 60,000-square-foot office-to-lab conversion project at 215 First St., citing market conditions.

Owners of buildings that fall between those two classes – expensive shell space and graying, tired labs – are best positioned to, if not make a killing, at least survive the downturn in decent shape. The smaller users in the market are less capitalized than the region’s biotech giants, and far less able, or willing, to take on space that’s in need of significant work – to say nothing of commissioning custom-built campuses in Weston. That’s especially true since venture capital firms, the traditional lifeblood of tech-intensive startups, are finding themselves constrained on a number of fronts. As such, brokers predict a flight to existing, relatively modern space.

Sublease availability has been trending upward in both the Class-A and Class-B markets. In particular, subleases represent nearly two-thirds of available Class-A space, according to data from Jones Lang LaSalle. Last October, PerkinElmer put 25,000 square feet of lab sublease space at 245 First St. on the market. In December, BioPure offered up 24,000 square feet at 11 Hurley St.. And two weeks ago, Schering-Plough put up 33,000 square feet at 245 First St.. Schering, which acquired local firm Organon BioSciences in November 2007, is moving Organon’s researchers out of 245 First, and into their labs at 320 Bent St..

“Historically,” Subber said, “tenants have had two choices: new space that’s very expensive, or second-generation space. These subleases, they’re putting up good lab space at steep discounts. The space is pretty new. We haven’t had that for users between 10,000 and 35,000 square feet.” He added, “There will be plenty of daylight between the published rate and what tenants sign for.”

Brokers also expect the Beal Cos. labs at One Kendall Square to fare well. It’s Class B, but modern. It requires minimal tenant improvements, and it’s cheap. Asking prices have fallen well into the $30s, according to several brokers.

“It’s not as glamorous, but it works,” said Bekarian. “And right now, if it works, you’re taking it. You’ll take a 3- to 5-year deal, keep working, and take it from there.”