Developers Halt Somerville Lab Project, Citing ‘Dramatic Slowdown’ In Demand
Another Somerville lab project has been put on pause due to an oversupply of life sciences space and slow demand in the region.
Developers Leggat McCall Properties and DLJ Real Estate Capital Partners had received a $230M construction loan from Oxford Properties Group in 2022 for the 262K SF project at 15 McGrath Highway.
But this week, the team filed a release of the mortgage with the Middlesex Registry of Deeds and issued a statement about stopping work on the project, Banker & Tradesman first reported.
“Due to the dramatic slowdown in regional lab demand, ownership has decided to pause construction of 15 McGrath until market conditions improve,” Leggat McCall Properties said in a statement to B&T.
The developers aren't the only ones pausing life sciences projects.
In May, Federal Realty Investment Trust filed an extension on its 350 Assembly Row lab project due to an “oversaturation of lab projects in the region.” DivcoWest also sought an extension on its 120-132 Middlesex Ave. development, B&T reported.
In the second quarter, 1.5M SF of new lab space delivered across five projects in Greater Boston, and the unleased space in those buildings accounted for 81% of the increase in vacancy over the quarter, according to CBRE. The firm reported that vacancy rose 260 basis points to 16.3%.
The market has another 8.1M SF actively under construction, which is only 31.5% preleased.
Although the life sciences industry seems to be bouncing back, many companies are still in cost-cutting mode, with 1,810 layoffs taking place in Q2 alone, the Boston Business Journal reported. These measures have been tied to notable drug failures, leading to companies focusing on the science rather than growing their real estate footprints.
