It is a well-established fact that, in the current economic climate, the best-educated metropolitan areas in the country will be best suited to thrive. Since it takes talent to grow a business in challenging times, metros boasting innovative, human capital–intensive industries will more often succeed in a slow-growth environment. The Boston metro area is a prime example. With neighboring Cambridge – home to two of the world’s most revered universities in Harvard and the Massachusetts Institute of Technology – the local office market is uniquely positioned to prosper.
A mecca for the global biotech industry, Cambridge brings together three of Massachusetts’ strongest economic drivers: education, healthcare, and technology. And developers have taken notice.
The biotech scene in Cambridge is as vibrant as ever and, along with the San Francisco Bay Area, is one of the top two biotech/high tech centers in the country and arguably the entire world. Despite some metros’ ad campaigns positioning themselves as biotech/high tech centers, all other U.S. metros trail these two metros in biotech employment by a wide margin. The tenant roster in Cambridge is a who’s who of biotech firms: Novartis, Biogen, Genzyme, Vertex Pharmaceuticals, Millennium Pharmaceuticals, Pfizer, Ironwood Pharmaceuticals,and Amgen. Private sector firms have been zeroing in on Cambridge’s Kendall Square, and MIT in particular, to be able to tap into a deep talent pool and collaborate with thought leaders and researchers across industries. MIT’s tradition of applied science is one of the key reasons behind the success of the school, and why the high tech industry thrives in Kendall Square.
All this is helping to cause a divergence between the Cambridge office market and the national one. Across much of the country, office construction is subdued, but that is certainly not the case in Cambridge. There is currently 2.7 million square feet of office and lab space under construction in the city–a whopping 10.5 of the current inventory. For a mature, Northeast metropolitan area such as Boston, that type of development is almost unheard of. Pfizer and Novartis are anchoring projects underway that are being led by MIT, while Biogen is taking space in two under-construction projects from Boston Properties and Alexandria Real Estate, as its leadership decided to move operations from the suburbs back to the city. Combined, the firms are driving nearly 1.4 million square feet of construction. Also expanding in Cambridge is the Broad Institute, a collaborative genome-research center, which brings together scientists from across the research spectrum. Developers and investors have so much faith in Cambridge that Skanska is putting the finishing touches on a 123,000 square-foot speculative office/lab building on Second Street. Financing remains challenging across the country, and very few developers are willing to go forward with spec supply today, so that project, along with a similarly sized speculative project out in nearby Burlington, highlights the strength of the broader Boston office market.
The continued clustering of tenants and talent around Kendall Square is a boon for the local economy and landlords across property types, as these high-end jobs fuel demand for apartments (several are underway in Cambridge) and retail spending, and support jobs across a variety of sectors, from restaurants to law firms to accountants. This concentration has created a unique and important economic driver that other submarkets cannot compete with. City planners and economic development agencies across the country have taken notice and are aiming to create similar environments. The Seaport District in the Boston CBD is an example. Vertex Pharmaceuticals will be moving out of its Cambridgeport space for its new 1.1 million square foot campus there. It is unclear if this move will lure other biotech tenants too, but regardless of whether others follow, Cambridge’s unique advantages will keep it a top choice for tech and biotech firms.
Aaron Jodka is manager of U.S. Market Research at PPR, a CoStar Group company and a member of the Urban Land Institute (ULI). ULI, Boston District Council has more than 1,100 members comprised of developers, architects, analysts and financers.
