News
Boston's Brainy Boom
July 31, 2012
| Billions of dollars in CRE projects here relate to life science, now a top global sector and a mainstay of the regional economy. Over 250 CRE pros delayed their beach getaways (so you know it must've been important) last Friday to hear two expert panels discuss the industry at Bisnow's Life Sciences Summit. | |
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| Panel one: RW Sullivan Engineering president Paul Sullivan(moderator), Forest City COO Peter Calkins, Suffolk Construction VP Chuck Pappalardo, and Beal Co president Robert Beal. Life science development has so much momentum that the construction industry has to bulk up after recession consolidation, Chuck says—some subs are so short-staffed that he has to call and urge them to respond when bids are due. The boom, meanwhile, is bringing back users that faded: microelectronics and nanotechnology. (James Bond stuff.) As space is absorbed, he wonders if Cambridge and Boston's high rents will push companies to the ‘burbs. | |
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| Robert, whose company has been investing in life science since ’77, says the industry is so dominant that it's safeguarded the metro area against the slow economy, making it the most stable US CRE market after DC. Political changes in Cambridge have also aided industry growth; in the '90s, it was the “People’s Republic,” but now city councilors call his company to encourage development. After pioneering life science developments in Cambridge and nearby suburbs, Robert now hopes to attract the industry to Quincy where The Beal Co is partnering in a massive downtown redevelopment. | |
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| Is Cambridge really the world’s top life science market? Peter says it's no contest (thanks, MIT and Harvard, for more than just robots and Facebook). Capital markets have become comfortable lending to this specialized CRE sector, and life insurance companies are providing permanent financing, at historically low rates. Construction money is also available for strong projects with good tenants. Demand at Forest City’s 1.4M SF University Park is as strong as ever. When a space has come available, it has generally leased within a month, and at higher rates with moderate TI. | |
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| Our second panel: Arrowstreet president Jim Batchelor(moderator), Mass Life Sciences Center's Pamela Norton, Novartis’ Jeff Lockwood, and BioMed Realty’s Tim Stoll. Jeff says that the $60B/year Swiss pharmaceutical company relocated its research HQ to Cambridge 10 years ago because, “it’s where the brains are,” (which bodes well were zombie housing). Cambridge has given Novartis an edge in long-term research that stocks the product pipeline and also helps recruiting. | |
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| When Tim looks for a site or a property, he wants it to be as “close to the epicenter of the cluster ”—aka MIT—as possible. While there have been large leases like Aveo Pharmaceuticals’ recent 126k SF at 650 Kendall St, the last dozen or so deals have been less than 15k SF. Often, tenants are startups driven by VC funding, and several have leased-up BioMed Realty’s Fresh Pond Research Park in Cambridge’s Alewife district. Tim says that BioMed has invested in infrastructure—ample power, air, loading, and clear heights—that all of these tenants want. | |
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| Pamela says that the state-funded Life Sciences Center is going “gangbusters” in an effort to attract large-scale manufacturing to the region. Although companies often look for lower-cost locations, complicated drug therapies may call for Mass' brain power to take a product through commercial production. The state is intellectually in a class by itself but does face competition from NYC in generating private money. Another challenge: providing more small life science spaces. The Center recently helped SONY DADC find an office for one person, which Pamela says wasn't easy. Everyone agrees that the continuation of federal funding is critical for the industry, medicine, and health care to flourish. |
