Thomas Andrews
Title: Regional Market Director, Greater Boston, Alexandria Real Estate Equities Inc.
Age: 53
Experience: 25 years
Alexandria Real Estate Equities Inc. bets big on biotech. The Pasadena, Calif.-based REIT invests in life science properties in seven metro areas on the East and West Coasts, but its biggest stake is in Massachusetts. Alexandria owns 4.2 million square feet of office and research space in the Bay State, and Massachusetts accounted for 29 percent of the company’s annualized base rent as of Dec. 31. Its next major project is The Alexandria Center at Kendall Square in Cambridge, which could include up to 1.7 million square feet of build-to-suit biotech space.
Q: How does Alexandria mitigate the risk of biotech and life science companies’ volatility?
A: I’m not sure it’s volatile compared to other industries. Financial services in 2008, that was pretty volatile. Small, early-stage biotech companies may have a lot of volatility, but often we find they have slow and measured growth that is tied to milestones in their scientific progress. Bigger companies in this market are pretty predictable, and they’re signing long-term commitments. They seem to be here for the long run. Over 50 percent of our rental revenue comes from credit-worthy tenants. At least we know their ability to pay the rent is pretty solid.
Q: What changes are you seeing in life science companies’ space requirements and designs?
A:Years ago this market had more early-stage companies. There’s a much higher percentage of more mature companies now and they often have a higher percentage of office space. Once they’re in late-stage clinical trials or commercial stage, they tend to hire sales and marketing teams, and those folks tend to live in office space. There’s a desire for more flexibility and portability within the labs. A lot of the lab furniture casework suppliers are developing more flexible systems to enable companies to rearrange teams. Many office users are going as we have (at Alexandria’s regional offices at 700 Technology Square) to these open-floor plan systems with low cubicles, small meeting rooms and collaboration spaces.
Q: Where does the bulk of biotech development go in Cambridge once Kendall Square is largely built out?
A:The city of Cambridge is considering that issue, because they are aware there continues to be strong demand for space, particularly close to MIT. There’s been some speculation about what happens with the Volpe (National Transportation Systems) Center – I’m not sure the federal government is prepared to move quickly with that. NorthPoint is not too far away and there might be little in-fills around the MIT campus. It is true, there’s not a lot. There’s not an opportunity for a 50-percent increase unless the zoning is changed quite a bit.
Q: How much are rising construction costs affecting the development scene?
A: We’re monitoring it pretty closely. The buildings we have under construction, such as ARIAD Pharmaceuticals (at 75 and 125 Binney St. in Cambridge), we started construction on that over a year ago, so we had done the buyout a little before that. We know prices are somewhat higher now, but we’re not sure just how much. Probably on the order of 5 to 7 percent. We know there’s a lot of construction in Cambridge and Boston, but there’s some variability into the timing of bigger projects.
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