Sometimes we just want to say, “Enough already, Kendall Square and East Cambridge. We get it.”
In the next couple of years, the neighborhood is slated to get eight shiny, new office and lab developments and one total rehabilitation project. All are or will soon be underway, and they total roughly 1.9 million square feet.
On top of that, MIT is planning to expand in a huge way, hoping to add about 1.1 million square feet of new space at eight locations in Kendall Square.
Want more? The level of interest from tenants large and small, from local universities to foreign firms, is a never-ending story.
But there are factors that are slowly changing the story, and face, of Kendall Square and East Cambridge – and they’re being driven by the large, more mature pharmaceutical and life sciences users in the area.
Some of those large users, like Biogen Idec, are past the point of research and development, and are reaching the clinical stage. As a result, they need less laboratory and research space, and instead are in dire need of office space to accommodate sales teams and other administrative portions of their workforce.
Adjusted Requirements
This growing trend of more mature firms is pushing more of the area’s real estate to be redeveloped into office space.
There are two projects in the works to support Biogen’s move back to Cambridge from its Weston campus. Both were originally planned as laboratory space, sources told
Banker & Tradesman.
One is a 190,000-square-foot building at Boston Properties’ 17 Cambridge Center. The other is a six-story, 307,000-square-foot office property being developed by Alexandria Real Estate Equities at 225 Binney St.
Biogen’s building represents the first step in the creation of the 1.73 million-square-foot Alexandria Center, a mix of office, lab, entertainment space and housing.
“As biotech companies mature, the ratio of office space to total space tends to become higher,” said Tom Andrews, senior vice president for Alexandria and the driving force behind the firm’s Cambridge acquisitions and development efforts. “More mature companies need more office space, particularly once they are in clinic and in anticipation of marketing drugs for sale. Their workforce is more office-based at that point. What that means for the future is that … some buildings designed as lab will probably have a higher percentage of office than anticipated.”
According to industry sources, Ironwood Pharmaceuticals could also be planning a similar venture in the near future. There is a great deal of speculation in the market that soon the company, currently housed in about 165,000 square feet at 301 Binney St., will be looking for a build-to-suit opportunity in the area – largely because their current digs aren’t able to fully support the company.
The drug maker would likely be in the market for about 300,000 square feet of space in East Cambridge if and when that happens, according to industry insiders.
Coming and Going
But companies have also been known to simply leave the biotech and venture capital cluster that is Kendall Square as their operations mature and outgrow the tight confines of East Cambridge. Early last year, biotech firm Alkermes left the area in a move to a new 100,000-square-foot headquarters at 852 Winter St. in Waltham.
Vertex did the same thing as Alkermes when it agreed to move into 1.1 million square feet of office and lab space at Fan Pier on the South Boston Waterfront. It will eventually vacate some 660,000 square feet in Cambridge when its operations move to Boston.
In addition to that, in 2014, Colliers anticipates two large users will shed 230,000 square feet of space in East Cambridge. The firm would not confirm those tenants.
“[Alkermes was] in a traditional Kendall Square setup, with about 65 percent lab space and 35 percent office space,” said Joseph Flaherty, executive vice president for Colliers International in Boston. “They grew so much in the clinical stage that they needed just 25 percent lab and 75 percent office. There are others in the Cambridge market now going through the same thing, and the new Novartis buildings might be one of them, as well as Biogen.”
So rather than watch lucrative tenants leave, Flaherty said, landlords and developers will soon have no choice but to bow to popular demand for more office space.
“The effect it’ll have is, on most of the sites in Kendall that owners have planned to build biotech lab research buildings, if [Sanofi Aventis] or Genzyme or Vertex types of users show up and want or need an office building and want to be in a spot near MIT, the landlord will build them offices and will get premium rents for it,” Flaherty continued. “Those tenants will pay the price to be there.”
Still, local commercial real estate statisticians said they doubt the trend will have a big effect on the market. Simply put, the area will always be a hotspot for emerging companies looking for lab space. One company moving out creates an opportunity for another to move in. Such is life in Kendall Square.
In fact, the Cambridge lab market absorbs about 327,000 square feet of lab space annually, according to Brendan Carroll, senior vice president of research for Richard Barry Joyce & Partners.
“A certain amount of space expected to become vacated in 2014 is not of concern to any landlord in Cambridge at this point, and it’s nothing beyond a short-term concern,” Carroll told Banker & Tradesman. “That’s not anything that keeps any Cambridge landlord awake at night.”
