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Greater Boston’s 16 million-square-foot lab construction pipeline used to represent an exclamation point punctuating the strength of the region’s burgeoning life science industry.

Today the dozens of lab buildings rising from Boston to Route 128 and beyond are the biggest question marks in the local commercial real estate market. Their lease-up successes or failures will influence the shape of future projects, potentially reviving multifamily construction or even prompting developers to reconsider out-of-favor sectors such as offices and hotels.

“For 18 to 24 months, people were taking the multifamily component out of projects and making room for labs,” said Tucker White, Northeast regional manager of market intelligence for brokerage Avison Young in Boston. “The inverse is starting to happen now.”

That’s the decision developer Ben Rogan made in pivoting from labs to housing as his firm prepares to seek approval for a 155-unit apartment complex at 45-51 Broadway in Somerville.

Rogan’s Medford-based Highland Development signed an option to acquire the property in 2021, when lab demand was peaking amid a record $15 billion that venture capital firms poured into Massachusetts life science companies. Before market forces shifted, Rogan originally envisioned a 165,000-square-foot lab building replacing the truck repair business occupying the property.

“By the time we were ready to get in front of the Planning Board, the lab market was dead, so we decided to go back to our original proposal,” he said.

Prospects for lab developers to attract anchor tenants have dwindled hand-in-hand with declines in industry funding. During the third quarter of 2023, local venture capital awards totaled $1.4 billion, according to CBRE, and the largest lease deal was Astellas Pharma’s 63,000-square-foot deal at Cambridge Crossing.

Massport officials this month gave Lincoln Property Co. a two-year extension to close on a $123 million lease for the 650,000-square-foot Seaport Circle lab project at 701 Congress St. in Boston. The developer cited slowing lab tenant demand and rising interest rates in requesting the extra time to complete financing. Image courtesy of Arrowstreet and Moody Nolan

Seaport Circle Paused

The 16 million-square-foot Greater Boston lab construction pipeline moves forward at a time when tenants are actively seeking just 1.6 million square feet of space, according to Newmark research.

The supply glut is pronounced in Boston’s Seaport District. Nearly 23 percent of the 3.4 million-square-foot lab market is available and another 2.2 million square feet is under construction, Newmark reported this week.

The Seaport emerged as a competitor to Cambridge’s established tech cluster in the past decade, as biotechs seeking expansion widened their horizons and developers snapped up industrial parcels and surface parking for office-lab projects.

While still commanding high rents – with average asking rents of $108 per square foot in the third quarter – the Seaport hasn’t been immune to the downturn.

With ample competition from projects already nearing completion, Lincoln Property Co. has adjusted the timeline for its 650,000-square-foot Seaport Circle tower at 701 Congress St.

Massport, which owns the property, this month granted the developer a two-year extension of the original closing date in February 2024. Lincoln Property Co. offered to pay $123 million to lease the 701 Congress St. site for 99 years, winning the nod from the Massport board of directors in January 2021.

Lincoln Property Co. cited the lab market slowdown and escalating interest rates in requesting the extension, Massport Chief Development Officer Andrew Hargens said.

And in Natick, Bulfinch Cos. officially dropped its proposed lab conversion at the former Neiman Marcus department store, leasing the former anchor space to Bosse Sports Training for a 21-court pickleball complex, 100-seat restaurant, two bars and a fitness center.

Pessimism about office leasing in the hybrid work era previously tipped the scales further toward developers’ preference for lab projects, including office-to-lab conversions at properties such as 55 Summer St. in Downtown Crossing and 12 Farnsworth St. in Fort Point.

But some developers may rethink conversion projects that haven’t yet broken ground, even if they’ve secured construction financing, Avison Young’s White predicts, banking on a revival of urban office demand. And the Boston Planning & Development Agency this fall will begin accepting applications from office landlords to receive property tax breaks up to 75 percent for 29 years for multifamily housing conversions, adding an incentive to look beyond labs for alternative uses.

Steve Adams

Long-Term Strategy in Assembly

Another developer is taking the long view that labs are the best bet for sites located near established and growing life science clusters.

Adam Burns is sticking with a life science strategy for a site in the expanding Assembly Square development cluster, but with a focus on attracting smaller biotechs to an incubator environment. An auto repair shop property at 45 Mystic Ave. is proposed for redevelopment as a 10-story, 51,120-square-foot lab tower.

Burns is partnering with Boston Lab Services, a Burlignton-based provider of operations support for biotech companies, on the project which has an estimated completion date of late 2026.

While acknowledging the glut of short-term lab projects, Burns said life science is the best long-term bet for the property. The site is located just south of the 11.5-acre Home Depot property acquired by Cabot, Cabot & Forbes in August for $142 million for redevelopment, and nearly 1 million square feet of office-lab space is under construction at Greystar’s nearby 74M lab tower and BioMed Realty’s Assembly Innovation Park.

“Assembly Square is a great market for life science,” Burns said. “There’s a lot of innovation happening as that area continues to grow, it’s transit-oriented and just off the highway, and density is the logical choice for that area.”

Editor’s note: This report has been updated to correct the spelling of Highland Development President Ben Rogan’s last name.